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| Hyundai Elevator's headquarters in Chungju, North Chungcheong Province / Courtesy of Hyundai Elevator |
Swiss company urges Korean firm's execs to pay additional $160 million
By Park Jae-hyuk
Hyundai Group Chairwoman Hyun Jeong-eun continues to face the risk of losing control over Hyundai Elevator, a key subsidiary, as her legal battle with Swiss elevator maker, Schindler, has not yet come to an end, according to sources familiar with this issue, Wednesday.
A court document obtained by The Korea Times showed that a lawsuit Schindler filed in 2020 against the chairwoman and the former directors of Hyundai Elevator is still ongoing, despite her recent payment, in response to a previous legal case, of over 200 billion won ($150 million) in compensation for causing damage to the Korean elevator maker.
Schindler has been rumored for some time to be seeking to gain management control of Hyundai Elevator, which is the only Korean elevator manufacturer and ranks at the top of the domestic market.
"Schindler has suffered difficulties in increasing its share in the Korean market, unlike ThyssenKrupp and Otis, both of which have successfully expanded their presences here," an industry official said.
As the second-largest shareholder of Hyundai Elevator with 15.5 percent stake, Schindler claims the defendants owe the Korean elevator firm an additional 214.8 billion won ($160 million). Hyun holds a 7.83 percent stake in Hyundai Elevator, but is considered to be the largest de facto shareholder, as she and her allies collectively own a combined 26.57 percent stake.
"In the previous lawsuit, the court acknowledged that the defendants had violated their duty of due diligence," one of the sources said on condition of anonymity. "If the chairwoman is defeated in the ongoing litigation, she could also be forced to pay a significant amount of interest in arrears."
In April, Hyun finished paying 170 billion won and interest in arrears to Hyundai Elevator, as the Supreme Court in March accepted Schindler's claim that she had caused damage to the Korean firm by signing derivative financial product contracts between 2006 and 2014. The deal was regarded as an attempt to maintain Hyun's control over Hyundai Merchant Marine (HMM), an affiliate of Hyundai Group, which is now under the supervision of creditors led by state-run Korea Development Bank.
Schindler filed the previous lawsuit in 2014, after hiring Kim & Chang, Korea's largest law firm which is also dealing with the ongoing litigation. The defendants hired Lee & Ko, Shin & Kim and KHL, which are also major law firms in Korea.
In the ongoing lawsuit, Schindler is asking the defendants to provide additional compensation for Hyundai Elevator, alleging that the Korean elevator firm had suffered financial damage from four decisions made by management.
The plaintiff claimed that the defendants had forced Hyundai Elevator to sign a risky stock swap deal with Daishin Securities in 2010 to gain voting rights at HMM. Schindler also questioned Hyundai Elevator's decision in 2012 to acquire cash-strapped LK Frontier, a real estate developer renamed Hyundai Learning & Training Center. These two claims were dismissed in the previous lawsuit on a technicality.
In addition, the Swiss company argued that the defendants had caused damage to Hyundai Elevator by giving Hyun the rights to buy convertible bonds issued in 2015 and 2016 at lower prices and by establishing Hyundai Movex in 2017 after splitting off Hyundai Elevator's logistics automation business.
When Hyun lost the previous legal battle in March, she handed over her Hyundai Movex stocks to Hyundai Elevator, without selling her share in the elevator firm. As a result, the chairwoman was able to maintain management control over Hyundai Elevator.
The Solidarity for Economic Reform, however, pointed out that compensation for damage from illegal acts should be made in money. The civic group asked Hyundai Elevator's board of directors to clarify whether the payment through the stock handover can bring more benefits to the company.
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