The management rights dispute surrounding touch screen semiconductor design (fabless) company Zinitix, listed on KOSDAQ, is intensifying between its largest shareholder and the current management.
According to the Financial Supervisory Service's electronic disclosure system on the 23rd, Halo Electronics International Corporation, Zinitix's largest shareholder, announced on the 20th that it had purchased approximately 700,000 shares on the market, raising its equity from 33.48% to 35.45%.
This is through its parent companies, Halo Microelectronics and Halo Electronics. According to a large shareholder report that Halo filed in January, David In-kyun Nam, a non-standing director who was previously in a special relationship, has been excluded from this classification. Director Nam is currently part of the management engaged in the management rights dispute with the largest shareholder.
The management side is also increasing its equity. CEO Kwon Seok-man secured 0.34% equity through a market purchase worth about 120 million won in May. Additionally, the management is pushing for a capital increase worth about 1 billion won (approximately 3.7% equity), completing the payment on the 20th. Halo applied for a suspension of the capital increase's effectiveness on the 13th, asserting that it was a means for the management to unlawfully expand their equity, but the Suwon District Court dismissed the request.
The reason both sides are competing for equity is because a vote is approaching. Halo plans to hold a temporary shareholders' meeting on July 9 to dismiss all sitting board members. Halo aims to appoint eight new directors to restructure the company. Halo is the international corporation of the semiconductor company Halo Microelectronics, listed on the Shanghai Stock Exchange.
However, separate from stock purchases, the shareholder register was closed as of May 29. This means that any shares purchased now will not have voting rights. Because of this, both sides are reportedly already working to gather votes from minority shareholders.
The four directors whom Halo requested to be dismissed were appointed in August of last year. This was shortly after Halo acquired 30.93% equity in Zinitix for about 21 billion won from Seoul Electronics & Telecom, among others. Notably, most of these individuals worked at Halo and were brought onto the board by Halo. Director Nam In-kyun served as the CEO of Halo, while Head of Operations Jang Ho-cheol was appointed Managing Director of the Korean branch. Kwon Seok-man, CEO of Zinitix, had also served as the head of Halo’s Korean branch.
The conflict between them surfaced when, at the March shareholders' meeting, the management passed a motion to partially amend the articles of association to weaken Halo's control. It eliminated the limit on the 'allocation of new shares to individuals other than shareholders,' which had been restricted to 30% of the total issued shares, and allowed issuing convertible bonds (CB) to specific individuals with board approval. It also removed the cap of 20 billion won on the issuance of CBs and warrants. This means that the board, which is controlled by the management, can issue new shares without restriction to forces other than the largest shareholder.
In response, Halo requested permission to convene a temporary shareholders' meeting to dismiss these directors in April. This situation has led to the largest shareholder filing a management rights dispute lawsuit.
Halo and the management are claiming that the other side is attempting to leak core technology. Halo stated that the management has continuously committed illegal acts, including violating non-competition obligations, leaking core technology and trade secrets, unauthorized concurrent positions without board approval, and misappropriating research equipment. Halo sent a notice demanding an official explanation regarding these allegations and urged them to present substantial solutions by the 27th.
On the other hand, the management stated, "Some of the newly proposed board members are Chinese nationals, making it difficult for them to perform the role of a full-time director in Korea," and noted, "We cannot rule out the possibility that this action may be an attempt to access Zinitix's semiconductor core technologies."