[At a Crossroads for Listed Companies] Selvas AI② Preferential Support to CEO's Private Company... No Disclosure

Selvas AI's Undisclosed 2 Billion KRW CB Investment in Selvas Tour
Employees Work at Selvas Tour but Salaries Paid by Selvas AI

Selvas AI, a KOSDAQ-listed company, has been found to have provided preferential support to a personal company owned by CEO Gwak Min-cheol. Furthermore, the company did not disclose this support in its business report, sparking controversy.

According to the Financial Supervisory Service's electronic disclosure on the 17th, Selvas AI CEO Gwak Min-cheol established 'Selvas Tour' on June 27 last year with a capital of 50 million KRW. The business purposes of Selvas Tour include general travel agency services, travel brokerage, and the sale of airline tickets and boarding passes. The CEO is Gwak Min-cheol. There is no equity relationship between Selvas AI and Selvas Tour.

Selvas AI invested 2 billion KRW in convertible bonds (CB) in this personal company of the CEO in October last year. The nominal interest rate of these CBs is 0%. In a situation where the average interest rate of 91-day commercial paper (CP) has recently exceeded 4% due to rising market interest rates, Selvas AI lent money interest-free to the startup Selvas Tour.

In response, the company explained that although the nominal interest rate is 0%, the maturity interest rate is 3%, so there is no problem. However, this rate is below the appropriate interest rate of 4.6% for related parties under inheritance and gift tax law. There are also criticisms that the interest rate applied is low considering that the startup Selvas Tour borrowed more than 40 times its capital.

Moreover, since the 2 billion KRW is a CB that can be converted into shares upon maturity, if Selvas AI converts it into shares before the maturity date in October 2026, Selvas Tour will effectively have used the money interest-free.

Regarding this, KB Securities, the underwriter of Selvas AI's paid-in capital increase, stated, "The payment of CB investment funds to Selvas Tour may be an issue of violating the Commercial Act. However, the Commercial Act allows certain exceptions, and Selvas AI considers this as 'necessary for achieving business purposes' and believes it executed the investment through proper procedures (board of directors)."

Furthermore, Selvas AI did not disclose the investment in Selvas Tour's CB under the 'related party transactions' section in its business report. In last year's business report, Selvas AI disclosed holding a bond of 33 million KRW against Selvas Tour but did not include the 2 billion KRW CB investment.

The accounting industry views related party transactions sensitively because there is a possibility that major shareholders or management could embezzle company profits. Financial authorities and the investment industry also emphasize the importance of related party transactions. Selvas AI failed to disclose such a significant factor that greatly influences investment decisions.

Not only financial support such as CBs but also Selvas AI employees have been confirmed to be working unpaid at Selvas Tour. Currently, the inside directors of Selvas Tour include Yoon Seung-hyun, Selvas AI's Sales General Director, and Jung Yeon-su, Selvas AI's Finance Team Manager. They appear to be performing duties for Selvas Tour while receiving salaries only from Selvas AI.

In response, a Selvas AI official said, "The failure to disclose the CB transaction with Selvas Tour was a mistake," and added, "It will be included from the first quarter report this year." The official also explained, "Regarding employee salaries, I understand that there is a contract to pay a certain portion as performance bonuses once Selvas Tour generates sales and achieves results."

Meanwhile, Selvas AI is currently conducting a paid-in capital increase by rights offering worth 78.8 billion KRW. Including the paid-in capital increase of its subsidiary Selvas Healthcare, it plans to raise about 100 billion KRW from shareholders.