Activist Flashlight loses landmark KT&G treasury share lawsuit in South Korea
Activist investor Flashlight Capital Partners has lost a closely watched legal challenge against former directors of South Korean tobacco giant KT&G, in a case that tested the extent of board accountability over treasury shares, according to a report by Bloomberg.
Flashlight Capital Partners, the activist investor, has lost a significant legal battle against former directors of South Korean tobacco company KT&G, according to Bloomberg. The ruling, delivered by the Daejeon District Court, found that the former directors acted lawfully in decisions regarding the transfer of treasury shares.
The activist firm had sought damages of KRW69.8m ($49,850) from 18 former KT&G directors, alleging negligence in approving the transactions and claiming that the transfers harmed shareholders. The dispute centered on KT&G's transfer of approximately KRW1tn ($706m) of treasury shares over 17 years following the company's privatization in 2002.
The lawsuit highlighted the contentious issue of treasury stock, which has gained prominence as South Korea strives to enhance shareholder rights and address the "Korea Discount" that has historically undermined the valuations of domestic companies compared to their international counterparts. The case was particularly noteworthy as it could potentially set a precedent for holding directors more accountable for corporate decisions involving treasury stock, especially as the country pushes for stricter corporate governance reforms.
Flashlight's founder, Sanghyun Lee, hailed the ruling as a pivotal moment for the country's governance overhaul, emphasizing the crucial role of boards in improving corporate accountability.
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