Right for Management Intervention
The South Korean government now can exercise its voting rights in enterprises benefiting from its key industry stabilization fund. Although the government’s role was limited to acquisition of shares without voting rights at first, the limited exercise has been permitted through negotiations at the National Assembly.
On May 6, the Financial Services Commission announced the latest amendment to the enforcement ordinance of the Korea Development Bank Act after the National Assembly passed the amendment to the act for the purpose of key industry stabilization fund establishment on April 29. The latest amendment stipulates when the government can exercise the voting rights.
Specifically, Korea Development Bank in principle does not exercise the rights in relation to its shares with voting rights in such enterprises, and yet it can exercise the rights when investment recoupment is predicted to be difficult due to a significant violation of financing terms and the exercise is in compliance with a presidential decree.
More specifically, the exercise is possible when a resolution is made on an issue that can significantly affect the value of stocks, such as a decrease in capital and sub-par value stock issuance, and when the exercise is necessary for fund asset preservation with a beneficiary enterprise having filed for a restructuring procedure.
The fund is available for the seven industries of aviation, shipping, automobile, shipbuilding, electrical, telecommunications, and machinery and equipment manufacturing. When it comes to the other industries, addition by the Financial Services Commission is possible based on negotiations between the heads of the Ministry of Economy and Finance and another ministry. The related pre-announcement of legislation is until May 8, and then a cabinet meeting will be held for voting after the Ministry of Government Legislation deliberates on it.