KH Group's Objection Policy... Are Small Shareholders' Funds Being Frozen?

The suspension of trading for shares of KH Group-affiliated listed companies, which have triggered delisting reasons due to adverse audit opinions, is expected to continue for the time being.

According to the Korea Exchange on the 10th, five companies?IHQ, KH Philux, KH Electronics, KH Construction, and Jangwon Tech?were all designated as management items earlier this month and had their trading suspended after receiving either a refusal of audit opinion or a qualified opinion due to scope limitation on their financial statements for the last fiscal year.

According to the listing regulations of the KOSPI and KOSDAQ markets, listed companies that face delisting reasons due to adverse audit opinions can apply for an objection within a certain period and be granted an improvement period. During this period, the suspension of trading is maintained.

[Image source=Yonhap News]

KH Group stated in a press release yesterday, "We promise that all executives and employees, including the CEO, will focus all efforts on resolving the delisting reasons according to the exchange procedures and resuming stock trading." They plan to file an objection by the 28th of this month.

KH Group added, "We deeply regret and apologize for the unintended situation that occurred," and said, "We will strive to resolve the reasons for the designation as a management item by obtaining an improvement period through the objection process."

Minority shareholders of KH Group’s listed affiliates are expected to have their funds tied up for the time being, as the improvement period is typically granted for one year.

As of the end of last year, minority shareholders held 87.55% of KH Construction’s shares. Jangwon Tech, KH Philux, and KH Electronics hold between 70.93% and 73.86%. IHQ has the lowest at 51%.

With the trading suspension of KH Group-affiliated listed companies, Meritz Securities, which provided funding at the time of the acquisition of Alpensia Resort in Gangwon Province last year, declared loss of benefit of term. It is known to have recovered over 100 billion KRW so far.

Meanwhile, KH Group has been implicated in allegations of bid-rigging related to the Alpensia Resort auction and allegations of remittances to North Korea by Ssangbangwool Group, and group officials are under investigation by prosecutors.