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QUAD Investment Management is an independent, private, discretionary investment management firm. Since 2010, our firm has been investing in Korea equity market on behalf of institutions and individual investors and integrates Korea Stewardship Code (please see http://sc.cgs.or.kr/) in our investment process. We believe engagement is a dialogue amongst investors, the management and the Board pursuing long-term growth approach for companies and sustainable returns for clients.

[Press Release] QUAD Requests Open Clarifications from the Board of Directors

쿼드자산운용
6 Mar 2023

QUAD Investment Management Requests Clarifications from the Board of Directors of 
Hy-Lok Korea(Stock Code: KS 013030)


PRESS RELEASE PROVIDED BY

QUAD INVESTMENT MANAGEMENT

March 6, 2023


Questions Regarding the Legal Eligibility of the Auditor Candidate Recommended by the Board of Directors


SEOUL, SOUTH KOREA / -- QUAD Investment Management(“QUAD”) manages funds that holds an investment representing a 5.0% economic interest in Hy-Lok Korea(KS 013030)(the “Company” or “Hy-Lok Korea”).  Prior to the upcoming AGM on March 17, 2023, QUAD is requesting clarifications from the Board of Directors of Hy-Lok Korea. 


In our view, the two agendas proposed by the Board of Directors goes directly against the interest of all shareholders. That is, i) cutting the number of Directors and Auditors through Amendment of Articles of Incorporation and ii) recommending candidate with potential legal risks vis-à-vis applicable Korea laws have no claim of creating long-term values for the shareholders. The Board of Directors’ efforts strengthen the Controlling Family’s control is by no means protecting general shareholders’ interests.


Open Questions to the Board of Directors

  • According to disclosure on Public Announcement of Convocation of AGM, Lee, Joon Hong, the auditor candidate recommended by the Board of Directors, is ‘currently’ the representative tax accountant at Haein Tax & Accounting Services, a Busan, Korea based tax services firm with two employees in total including Lee, Joon Hong himself. Korea Certified Tax Accountant(CTA) Law clearly prohibits CTAs holding concurrent office in for-profit business and with that said, on behalf of the shareholders, we ask the Board to explain the legal eligibility of your candidate in this regard. 


Korea Certified Tax Accountant Law 

Article 16 (Ban of Holding Concurrent Office by Paid Public Official or Engaging in Profitable Business)

② A tax accountant shall not, unless otherwise permitted by the Minister of Finance and Economy, engage in any profit-making business, or become an employee of a profit-making entity, or become an executive officer, a director or employee of a juristic person established for profit.



  • Disclosure on Public Announcement of Convocation of AGM states that 'Lee Joon Hong's candidacy may be subject to revocation based on the result of the findings of Korea Public Service Ethics Committee'. In addition to your candidate’s uncertainty under Korea Certified Tax Accounting(CTA) Law, the public disclosure is yet another legal risk that the shareholders may have to tolerate. On behalf of the shareholders, we ask the Board to explain the legal stance of your candidate in this regard.


  • Due to your candidate’s legal uncertainties, what is the contingent plan of the Board of Directors if and when your candidate is not eligible to be legally recommended and/or nominated(i.e. do you plan to continue with Kang, Jin Gu, your outgoing auditor of the past 19 years?)?


  • What are the benefits of the Board of Directors proposed ‘Agenda 2. Amendment of Articles of Incorporation’? In specific, what are the general shareholders’ benefit by decreasing the number of Directors and Auditors?


Key Issues on ‘Agenda 2: Amendment of Articles of Incorporation’

Current

The Board Recommendation (Proposed)

Comments

Article 32(The Number of Directors)

The Company maintains the number of its Directors of minimum three to maximum seven and maintains at least a one fourth of outside Directors out of the total Directors.

Article 32(The Number of Directors)

The Company maintains the number of its Directors of minimum three to maximum six and maintains at least a one fourth of outside Directors out of the total Directors.

The Board is proposing the ‘cut’ from seven to six

Article 44(The Number of Auditors)

The Company may have up to three auditors. If more than one, at least one of them shall be full-time.

Article 44(The Number of Auditors)

The Company may have one full-time auditor.

 

The Board is proposing the ‘cut’ from three to one


On February 9, 2023, QUAD announced campaign on Hy-Lok Korea to protect and restore shareholders value as a result of suboptimal governance and mismanagement by the Company. As of December 31, 2022, Hy-Lok Korea ownership includes 34% of institutional investors and 18% of individual shareholders.


The Presentation can be downloaded at Paradigm Shift: New Era and New Hy-Lok Korea


About QUAD Investment Management

QUAD is a Seoul, South Korea based independent, discretionary investment firm founded in 2009.  QUAD adopted and integrates Korea Stewardship Code in its investment process.  More information about QUAD is available at: http://en.quadim.com/


This press release does not constitute a solicitation of a proxy within the meaning of applicable laws, and accordingly, Hy-Lok Korea shareholders are not being asked to give, withhold or revoke a proxy.