The Incheon District Court has rejected a petition filed by the Korea Development Bank (KDB) for an injunction against a shareholders' meeting of GM Korea Co. set for Oct. 19. Accordingly, the likelihood of the KDB and GM Korea having a legal battle over restructuring of the ailing company has increased.
GM Korea is convening the extraordinary general meeting of shareholders to endorse a controversial plan to set up a separate R&D company. The KDB, which is the second largest shareholder of GM Korea after GM of the United States, had sought a court injunction against the shareholders' meeting, arguing that the plan wasn’t agreed in advance with the KDB.
During a recent parliamentary audit, KDB Chairman Lee Dong-geol said, “We didn’t get prior notice of GM’s plan to spin off GM Korea’s R&D functions to establish a new company. When the shareholders’ meeting takes place, we will exercise the veto right.”
The problem is whether the separation of the R&D entity meets the requirements for the exercise of the veto right. According to the articles of association of GM Korea, a vote of 85 percent in favor is required when it comes to matters for a special resolution at shareholders’ meeting. If the separation of the entity comes under the category, the KDB, which owns a 17 percent stake in GM Korea, can exercise its veto right. However, there is no way for the KDB to prevent GM Korea from separating the entity when it is categorized as a general matter requiring an ordinary resolution.
GM Korea’s labor union is preparing to go on strike to protest the carmaker's plan to establish the R&D subsidiary.
The court said on the same day, “The split-off plan constitutes a reorganization scheme so it requires yes votes from 85 percent of the shareholders.” Therefore, there can be another battle at the shareholders’ meeting.
An official from the IB industry said, “The shareholders’ meeting will be held but a legal dispute is inevitable as there's a substantial difference of opinion between the KDB and GM Korea. There is concern that GM Korea can face a delay in normalization.”