SK Corp faces Sovereign legal action

PUBLISHED : Monday, 08 November, 2004, 12:00am
UPDATED : Monday, 08 November, 2004, 12:00am


Monaco-based largest shareholder denies the move to oust the company's convicted chairman is a takeover attempt

The largest single shareholder in South Korea's SK Corp, Sovereign Asset Management, is poised to take legal steps in a bid to bar chairman and convicted criminal Chey Tae-won from the board.

The Monaco-based investor last month requested an extraordinary general meeting (EGM) at South Korea's largest oil refiner to pass resolutions barring anyone charged with, or convicted of, a criminal offence from acting as a director.

Chey was given a three-year jail term in March last year for leading a 1.5 trillion won ($10.3 billion) accounting fraud at affiliate SK Global. He is on bail pending an appeal of the sentence and walked into his old job at SK Corp.

On Friday, the board refused Sovereign's request for an EGM.

In a statement yesterday, the shareholder said that 'legal redress would be pursued through the Korean courts' but did not elaborate further on the actual steps to be taken.

Sovereign, which holds a 14.9 per cent stake in the company, said the request for an EGM was supported by more than 470 minority Korean shareholders.

It stated that it has never sought control of SK Corp, dubbing the request for an EGM as an issue of 'basic shareholders' rights and respect for the law'.

Steps to topple Chey from his boardroom position have been painted in the Korean press as a takeover attempt.

Sovereign said yesterday its action was triggered by the board's refusal to account for the company's recent failings. 'A list of nine specific concerns was detailed in a letter from Sovereign to the board of SK Corp on March 16,' it noted.

'No response to this letter has ever been received from the board and all efforts to raise these issues ... have been rebuffed.'

At a March annual general meeting, Sovereign failed to gain majority support from shareholders to elect new directors to the board and amend the articles of association which would bar a criminal from sitting on the board.

However, since then SK Corp holdings by foreign shareholders have increased to 61 per cent from 42.4 per cent.

Sovereign has stressed a sense of urgency in its attempt to oust the chairman. 'Without real corporate governance reform of the company, the company is destined to remain undervalued,' it said.

'SK Corp shareholders need protection against future misdeeds and with a board not prepared to look after their interests, they need a change to the articles [of association] to ensure protection as soon as possible.'

The investment company last year fought strongly against a rescue by SK Corp of affiliate SK Global, since renamed SK Networks.

Eventually, SK Corp did take part in the bailout, contributing 850 billion won to a restructuring late last year.