[비즈한국] Hwacheon Daeyu Asset Management (Hwacheon Daeyu) has recently appointed a new outside director, drawing attention to the background of this decision. Hwacheon Daeyu has effectively suspended its business operations following the Daejang-dong development corruption scandal, with many company officials currently standing trial. It is in this climate that the company has chosen to appoint an outside director.
According to the corporate registry, Hwacheon Daeyu appointed an individual surnamed Cho as an outside director in June of this year. With this appointment, Hwacheon Daeyu's board of directors now consists of three people: CEO Lee Han-sung, internal director Kim Man-bae, and outside director Cho. Both CEO Lee and director Kim are currently on trial, making it difficult for them to engage in the management of Hwacheon Daeyu. However, since outside director Cho is also not an internal director, there are limitations to their involvement in management.
At present, participating in the management of Hwacheon Daeyu holds little significance, as company operations have effectively been halted since the Daejang-dong development scandal. Last year, revenue was zero. With expenses only consisting of salaries, taxes, and insurance premiums, the company recorded an operating loss of 1.146 billion KRW.
However, that does not mean Hwacheon Daeyu is without value. As of the end of last year, the company's total assets stood at 156 billion KRW. Of this, 59.2 billion KRW is in cash and cash equivalents, and 46.3 billion KRW is in short-term financial instruments. Investment assets also amount to 30.8 billion KRW. Even if Hwacheon Daeyu were to liquidate immediately, it would first need to dispose of these assets.
For this reason, analysts suggest that Hwacheon Daeyu’s appointment of an outside director may be with asset disposal in mind. The suggestion is that they have recruited an expert to assist with the asset liquidation process that must eventually take place. While there are limits to how much an outside director can intervene in company affairs, they are fully capable of providing relevant advice and consulting. However, this is merely speculation, and Hwacheon Daeyu has not released an official statement.
Previously, in December of last year, Hwacheon Daeyu dismissed Choi Woo-hyang, former vice president of Ssangbangwool, as an internal director. Former Vice President Choi drew attention when he appeared wearing a helmet to help Kim Man-bae leave the Seoul Detention Center after Kim’s arrest warrant was dismissed in October 2021. The fact that Hwacheon Daeyu continues to change its board of directors even after the controversy suggests that there is still some level of internal activity (Related article 'Helmet Man' former Ssangbangwool Vice President Choi Woo-hyang dismissed as internal director of Hwacheon Daeyu).
Meanwhile, Hwacheon Daeyu’s largest shareholder, director Kim Man-bae, was sentenced to eight years in prison by a first-instance court last October on charges including breach of trust under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. Director Kim subsequently appealed and was released in April of this year upon the expiration of his detention period during the appellate trial. Upon leaving the detention center, Director Kim said, "As I have repeatedly stated in court, I deny the charges," and added, "I will sincerely tell the truth based on facts in future trials."