A Seoul court has told the top management of Hyundai Elevator Co., including Hyundai Group chairwoman Hyun Jung-eun, to pay 170 billion won (US$141.67 million) to Hyundai Elevator for causing losses to it.
Previously, Schindler, a Switzerland-based elevator producer that owns the second largest stake in Hyundai Elevator, lodged a derivative suit against Hyun and Han Sang-ho, former CEO of Hyundai Elevator, for causing massive losses to the company. The Seoul High Court decided partially in favor of the plaintiff, reversing an earlier ruling by a lower court.
The lawsuit by Schindler, the world's largest elevator manufacturer, was triggered by nearly 700 billion won (US$583.33 million) worth of losses that Hyundai Elevator suffered by acquiring financial derivatives. The financial product was based on the share prices of Hyundai Merchant Marine. Under the deal, Hyundai Elevator earns a profit when the stock price of Hyundai Merchant Marine Co. increases and suffers a loss when the stock price falls.
Schindler sent an official document to the audit committee of Hyundai Elevator and asked the company to seek compensation for damages from the financial deal in early 2014, but the committee did not reply to the multinational elevator group. Accordingly, it filed a shareholder derivative suit for damages.
A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation when management causes a loss to the corporation by violating articles of association or neglecting its duty.
The court's latest ruling was a reversal from an earlier one. In the first trial, the court ruled against the plaintiff, saying that the group’s financial derivatives contract was a normal business decision. The verdict was partially overturned in the appellate trial.