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KT&G Board Decides Not to Sue Over FCP Litigation Request 2024.02.07
The KT&G Board of Directors announced on February 7th that it would not file a lawsuit in response to a letter from Agnes (FCP), a shareholder with Cayman Islands nationality, demanding compensation for damages from former and current directors who decided on the disposal of the company's shares to public interest corporations.

On January 19th, the KT&G Audit Committee held its first meeting to objectively and professionally assess the legal validity of this claim by engaging an external legal institution for review. Subsequent discussions and careful consideration of the external legal expert's review occurred during the second Audit Committee meeting on February 6th and the fifth Board of Directors meeting on February 7th.

The conclusion reached was that the disposal of its shares was in recognition of the corporate social responsibility to support mutual growth, including stabilizing living conditions and enhancing welfare for employees of partner companies. It was deemed that the scale and conditions of the contribution were not excessive in light of the financial status, all required legal procedures, including transparent disclosure of the disposal facts, were adhered to, and it was not considered a means to maintain management control.

Therefore, the KT&G Board of Directors and Audit Committee, considering the opinion of external legal experts that it is unlikely a breach of the director's duty of care would be recognized, resolved not to initiate litigation related to the disposal of its shares.

The KT&G Board addressed claims made by FCP in media interviews suggesting the company disposed of its shares to nonprofit organizations and associations without legitimate purposes, utilizing them to maintain control and management rights, which were purportedly challenging to discern from public disclosures. The Board clarified that these allegations were not true.

The Board affirmed that all disposals of the company's shares were conducted per relevant laws, procedures, and disclosures and that the stock-holding status of the company's public welfare foundation and related funds have been transparently disclosed to shareholders and stakeholders annually.

From 2002 to 2019, in response to 21 instances of treasury stock disposals raised by FCP, KT&G made a total of 66 individual disclosures, continually executing disclosures on factual statements in quarterly, semi-annual, and annual reports, as well as on the status of large corporate groups.

Additionally, half of the disposed treasury shares were contributed to employee stock ownership associations through paid contributions, with voting rights exercised by individual members according to relevant laws. The remaining shares were contributed for legitimate purposes, such as public and employee welfare, with voting rights independently exercised by each organization.

Lim Min-Gyu, Chairman of the KT&G Board of Directors, expressed deep concern, stating, "Unfounded claims and suspicions related to the disposal of treasury shares could tarnish the corporate image and ultimately harm the collective interests of the shareholders." He further stated, "The Board will continue to listen to the opinions of shareholders attentively and will dedicate itself to enhancing the corporate value of KT&G and maximizing the interests of all shareholders."

(Photo caption) KT&G logo image
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