Kyobo Life Insurance: "Affinity's Acquittal Unrelated to Second International Arbitration on Put Option"

[Asia Economy Reporter Minwoo Lee] Kyobo Life Insurance stated that although the Affinity Consortium and Anjin Accounting Corporation recently received a not guilty verdict in the second trial regarding the put option (the right to sell shares at a specific price) dispute, this is unrelated to the previous ruling by the International Chamber of Commerce (ICC) arbitration panel. While a ruling was made that the process of setting the put option price at 410,000 KRW was lawful, Kyobo Life claims this is unrelated to the ICC's decision that Chairman Shin Chang-jae of Kyobo Life Insurance was not obligated to exercise the put option.

On the 6th, Kyobo Life Insurance said, "The not guilty verdict in the second criminal trial for violation of the Certified Public Accountant Act involving Affinity and Anjin personnel does not affect the ongoing second arbitration proceedings regarding the put option by the International Chamber of Commerce (ICC) at all."

Previously, in the first arbitration ruling in September 2021, the ICC determined that Anjin Accounting Corporation’s evaluation report could not serve as the basis for the put option price related to the put option exercised by Affinity in 2018. The ICC ruled that Chairman Shin Chang-jae was not obligated to purchase the put option at the price proposed by Affinity (410,000 KRW per share) or at any other price. The ICC also explicitly stated that the ongoing first trial criminal case concerning violations of the Certified Public Accountant Act by parties related to Affinity and Anjin Accounting Corporation would have no impact on the final arbitration decision.

Kyobo Life Insurance argues that Chairman Shin’s inability to fulfill the put option is due to the shareholder agreement containing one-sided unfavorable poison clauses against him. They claim that the method for determining the Fair Market Value (FMV), which serves as the basis for the put option exercise price, is inherently unfair. According to the contract, if the difference between the FMVs proposed by both parties is within 10%, the average of the two prices is taken as the FMV. If not, Chairman Shin selects one of three appraisal institutions proposed by Affinity, and the price evaluated by that institution becomes the final FMV. Kyobo Life points out that this contract structure inevitably converges to a price level desired by Affinity.

Kyobo Life Insurance explained, "Above all, since the put option must be purchased at the market price prevailing at the time of exercise, it was hard to anticipate Affinity claiming an FMV that was twice the market value as the put option price," adding, "Ultimately, Chairman Shin did not propose a put option price based on legal counsel advice."

Currently, Affinity has filed a second international arbitration in February last year in response to the first arbitration result. Affinity is again demanding payment of the put option price from Chairman Shin based on the put option exercised in October 2018, so the disputed issue remains the same.

A Kyobo Life Insurance official stated, "Despite sufficient evidence related to allegations of improper collusion, the court did not accept it as evidence," and added, "We expect a wise judgment from the Supreme Court depending on whether the prosecution files an appeal."