Truston Asset Management signaled an all-out fight after Taekwang Industrial filed a criminal complaint against it over a shareholder letter questioning whether the company had bypassed its board of directors. "They answered with a criminal complaint what they could have answered with a reply," the asset manager said. Taekwang Industrial told law enforcement authorities that the letter damaged the reputation of the company and its directors and obstructed normal business operations. Truston has alleged that major decisions at Taekwang Industrial, including new mergers and acquisitions, were made without going through the board.
Truston issued a statement on the 14th responding to the complaint, saying "a hollowed-out board is documented in the records." The firm demanded that Taekwang Industrial disclose whether the complaint itself was approved by a board resolution and whether the independent directors agreed to filing a criminal complaint against a shareholder.
Taekwang Industrial recently filed a police complaint against three people, including Truston chief executives Hwang Sung-taek and Lee Sung-won, on charges of defamation and obstruction of business. The complaint stated that they damaged the reputation of the company and its directors and obstructed normal business operations through a shareholder letter containing false content. It specifically objected to the letter's description of the Taekwang Group management council as a "ghost-like body" that dictates group management. The shareholder letter alleged that major decisions at Taekwang Industrial had been made without board resolutions, following decisions by the Taekwang Group management council, a body of ambiguous standing.
Taekwang Industrial said the consultative body among affiliates was renamed the management support council in August last year. "The management support council is also merely a consultative body formed to enhance synergy among affiliates, not an organization that substitutes for decision-making on affiliate management," the company said. It added that Truston had pressured directors by raising the prospect of inspecting accounting books, filing a shareholder derivative suit, requesting an extraordinary shareholders meeting and filing an obstruction-of-business complaint. "This amounts to obstructing free and independent corporate activity and board work by force," the company said.
Truston countered that inspecting accounting books and similar steps are rights explicitly granted to shareholders under the Commercial Act. "If this constitutes force, then the entire set of minority shareholder rights provisions in the Commercial Act becomes an instrument of force," the firm said.
Truston has taken issue with Taekwang Industrial's announcement of its acquisition of Aekyung Industrial. According to Truston, Taekwang Group announced on July 1 last year a 1.5 trillion won ($1.1 billion) investment in new businesses along with a plan to acquire Aekyung Industrial. Taekwang Industrial, the actual acquiring entity, held an emergency board meeting on July 2. The Korea Exchange designated Taekwang Industrial as a company in breach of disclosure obligations on July 30.
Truston said its earlier shareholder letter remains in force and demanded a response from the Taekwang Industrial board and all of its directors by Oct. 3. The firm also said it would cooperate fully if an investigation begins, and that it hoped the process would reveal the members of the Taekwang Group management support council, its meeting records and the instructions it issued to affiliates. Truston views the management support council as an organization that has decided and coordinated the company's major issues without any basis in Taekwang Industrial's articles of incorporation.
"If the company answered a shareholder letter sent to the board with a criminal complaint, the essence of this case is who made that decision," Truston said. "The new fact revealed by the complaint is that the management council was the control tower."
