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Photo = Fair Trade Commission |
[Alpha Biz= Paul Lee] The Korea Fair Trade Commission (KFTC) has initiated an investigation into Chairman Choi Yun-beom of Korea Zinc, following allegations of defending his management rights through offshore circular shareholding.
According to a report from The Korea Economic Daily on Tuesday, the KFTC's Corporate Group Monitoring Department sent a notification to MBK Partners and Youngpoong, stating that the review procedure for the issue related to "Korea Zinc's illegal activities" has begun.
This comes about a month after MBK Partners and Youngpoong submitted a report to the KFTC at the end of January, accusing Chairman Choi of using overseas affiliates to circumvent domestic regulations on circular shareholding, and thereby illegitimately defending his control over the company.
The Choi family transferred 10.3% of Youngpoong's shares to their Australian subsidiary, Sun Metal Corporation (SMC), on the day before an extraordinary shareholders' meeting on the 23rd, where the Youngpoong-MBK alliance was expected to secure control over Korea Zinc. Although domestic fair trade laws prohibit creating new circular shareholding structures, the Choi family used offshore entities to create a circular shareholding chain: Korea Zinc → Sun Metal Holdings (SMH) → SMC → Youngpoong → Korea Zinc. As a result, the voting rights of Youngpoong-MBK in Korea Zinc were restricted.
The KFTC has decided to investigate whether Chairman Choi violated Articles 21 (prohibition of mutual cross-shareholding), 36 (prohibition of evading corporate group regulations), and the enforcement decree Article 42-4 (regulation on illegal practices related to mutual cross-shareholding) of the Fair Trade Act. Since this is the first case dealing with illegal practices regarding the prohibition of mutual cross-shareholding, the investigation’s outcome is expected to have significant repercussions across the business sector.
If the KFTC concludes that Chairman Choi violated the law, actions such as warnings, corrective measures, fines, or criminal charges could be imposed.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
