On the 4th, MK Asset, the second largest shareholder of Manho Steel, announced that it would not hesitate to take legal action in protest against the company's unilateral push to hold the general shareholders' meeting and the restriction of voting rights.
Earlier, Manho Steel disclosed that at the regular shareholders' meeting held on the 27th of last month, the proposals for the appointment of directors and auditors suggested by MK Asset, the second largest shareholder, were rejected.
A representative of MK Asset stated, "On the surface, it appears that Manho Steel won the vote battle, but according to attending shareholders and related parties, the actual atmosphere at the shareholders' meeting was at a level of disruption."
He explained, "The company side gathered about 1.28 million votes, and we along with minority shareholders gathered about 1.35 million votes. If the meeting had proceeded normally, all the proposals we suggested would have been approved. However, Manho Steel limited MK Asset's voting rights to 5% on-site based on materials containing baseless false information from a major law firm they appointed." He added, "Since they had no chance of winning the vote battle, it seems their intention was to quietly conclude the meeting that day and proceed to litigation."
The so-called '5% rule' limiting voting rights to 5% by Manho Steel requires that in the case of large shareholding reports, the reporter must report within five days from the day the reason occurs. However, Manho Steel appears to claim that MK Asset violated the regulations by agreeing to joint ownership in advance and missing the disclosure deadline.
Director Bae Jin-su of MK Asset argued, "According to the company's logic, simply receiving delegated voting rights and contacting minority shareholders in advance would require a joint ownership agreement to avoid any flaws." He added, "Conversely, if the same regulations applied to us were applied equally, some listed companies that have acquired shares over several years and have mutual white knight relationships would also be in clear violation of the Capital Markets Act for not having joint ownership agreements."
According to court precedents, if voting rights are to be restricted under the Capital Markets Act, the party seeking to impose the restriction bears the burden of proof, and a high level of evidence is required. Unless Manho Steel presents reasonable grounds for restricting MK Asset's voting rights, the resolution of the shareholders' meeting could potentially be invalidated.
Separately from the shareholders' meeting results, Manho Steel is currently facing allegations of intentional delisting. This is because the financial statements, which had received unqualified opinions under the audits of external auditors appointed by the company over the past several years, were rejected by the designated auditor this year, resulting in a trading suspension.
According to the opinion letter from Induk Accounting Corporation, the designated auditor, signs of accounting fraud were detected over several years, and the company was negligent in submitting appropriate explanatory materials or evidence. Even if the trading suspension was not intended as a defense of management rights, MK Asset explained that the accounting firm that issued unqualified opinions and Manho Steel's management will not be able to avoid lawsuits for damages from minority shareholders.
A shareholder who attended the shareholders' meeting said, "Despite being on the brink of delisting, the CEO did not attend the meeting, citing COVID-19 as an excuse, and the chairman only showed attempts to evade management responsibility for the accounting fraud, providing no explanation on future response measures following the opinion rejection." He added, "As minority shareholders are rallying, we will definitely hold them legally accountable."
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