Hanjin KAL’s KRW 66.3 Billion Treasury Share Transfer Under Scrutiny Over Possible Control Defense

Investigators are scrutinizing a KRW 66.3 billion treasury share transfer from Hanjin Group's holding company, Hanjin KAL, to an employee welfare fund. The inquiry centers on whether the transaction was a legitimate welfare measure or an attempt to bolster Chairman Cho Won-tae's control over the company. The Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency recently conducted a search and seizure at Hanjin KAL, where they identified CEO Ryu Kyung-pyo as a suspect, potentially facing charges of breach of fiduciary duty under South Korea's Act on the Aggravated Punishment of Specific Economic Crimes.

The investigation is comparing this case to a 1999 Kia Group precedent, where executives transferred funds to an employee organization to secure management control. However, the Hanjin KAL case differs in that it involved the transfer of existing shares rather than cash. The company transferred 440,044 treasury shares worth approximately KRW 66.3 billion, representing around 0.66% of the company's total outstanding shares.

The size of the contribution has raised concerns, as Hanjin KAL had only 25 full-time employees. Investigators are examining the purpose of the transfer, its potential impact on the company, and whether senior executives understood the implications of transferring voting rights. The outcome of the investigation could set a precedent for how South Korean authorities assess the use of treasury shares and employee welfare funds in corporate control disputes.