Korean Fund May Sue KT&G Directors, Alleging Losses Exceed 1 Trillion Won

South Korean activist fund Flashlight Capital Partners (FCP) has filed a lawsuit against KT&G directors, accusing them of negligence in overseeing the use of the company’s treasury shares, resulting in losses exceeding 1 trillion won. KT&G stated that the share contributions were made to fulfill social responsibility and employee welfare objectives and followed legal procedures.

According to South Korean media outlet Newssis, current and former directors of tobacco company KT&G have been sued by activist fund Flashlight Capital Partners (FCP). They are alleged to have caused losses to the company exceeding 1 trillion won (US$748 million).

KT&G’s position is that “the contribution of treasury shares was carried out through lawful procedures and was intended for the company’s social contribution activities and employee welfare.”
Previously, FCP sent a request to the chairman of KT&G’s audit committee demanding that a directors’ liability lawsuit be filed. The investigation targets 21 current and former internal and external directors, including current KT&G President Baek Bok-in.
If KT&G does not file a lawsuit to pursue directors’ liability within 30 days of receiving the request, FCP may bring a shareholder derivative suit.
FCP claims that since 2001, Baek Bok-in and other board members donated 10 million KT&G treasury shares to foundations and funds without compensation, rather than enhancing shareholder value through cancellation or sale, thereby causing damage to the company.
In response, KT&G said in a statement, “In order to fulfill the company’s corporate social responsibility, the company donated part of its treasury shares to improve the welfare of public-interest organizations and employees.”