Korea's top court lets shareholders solicit one-meeting proxies without a 5% stake filing

The minority shareholders' case, as reported by en.sedaily.com citing legal sources ^[14], needed every solicited proxy counted as part of one block. A breach of the large-holding rule restricts voting only on the shares above the 5% line ^[7]. Company A and shareholders B and C started below it ^[3], so their own stake could not be the breach. The proxies that Company A and B collected had to be added in ^[4][6], and on that reading, the more votes a campaign gathered, the more of its votes would have been restricted ^[7].

The court asked for more than voting side by side. Joint holding needs a meeting of minds to exercise the votes together, or the right to direct how they are cast ^[9]. "The mere fact that a shareholder has had a third party exercise voting rights on his or her behalf for a specific shareholders' meeting on a temporary and revocable basis, or has delegated the exercise of voting rights to a proxy solicitor under the Capital Markets Act, cannot be taken as an agreement to exercise voting rights jointly," the court said ^[10]. The appellate court had relied on the same two facts: the delegation covered one extraordinary meeting, and shareholders were free to revoke it ^[8].

The holding applies to whoever solicits. An activist or minority group with a small owned stake gains from it, and so does a group friendly to management, because the court's wording covers any delegation to a proxy solicitor ^[10]. In Melfas itself, the side that lost was the company's minority shareholders ^[2]. The holding also has an edge. Its language turns on proxies that are temporary and revocable ^[10], and a standing or irrevocable arrangement would be tested against the court's second route, a right to direct the votes ^[9].

I think the activist reading holds, within limits the case makes plain. Company A, B and C had agreed to vote together, and their combined stake was still the figure that had to stay under 5% ^[3][6]. A group that crosses 5% on shares it owns, or has agreed to vote jointly, still reports to the Financial Services Commission and the Korea Exchange ^[6]. This view would be wrong if a later court treats a proxy that gives the solicitor discretion over how to vote as a right to direct those votes ^[9].

Some of the delegators became plaintiffs. The proxy forms the investigation found altered belonged to shareholders who had delegated 3,239,602 shares to B's side and then joined the suit as co-litigants ^[11][12]. The report does not give Melfas's share count or the court's reasoning on the forgery point, so that block cannot be measured against the 5% line.