Financial Supervisory Service Requests Investigation into Loan Companies with Capital of 5 Billion Won 'Falsely Paid-in'

Special Inspection Results of 9 Loan Companies with Frequent Transactions with Related Parties
FSS "Strict Measures Against Illegal Activities of Loan Companies"

The Financial Supervisory Service (FSS) has identified a loan company that falsely reported a capital payment of 5 billion KRW and referred the case for investigation. This loan company exploited the fact that limited liability companies, unlike joint-stock companies, are not required to submit a certificate of capital deposit when registering company establishment or capital changes, engaging in illegal and unfair business practices such as false capital payment registration.

On the 14th, the FSS conducted a special inspection in May targeting nine loan companies with frequent financial transactions involving the CEO, major shareholders, and related parties, and referred the limited liability company A for investigation on these charges. The FSS has requested judicial authorities to investigate B, the largest partner confirmed to have made false capital payments, and plans to take strict measures against loan company A, which falsely registered its capital, in accordance with relevant laws and procedures.

The FSS’s special inspection revealed that B, the largest partner and director of limited liability loan company A, made false capital payments during the company’s establishment and subsequent capital increase processes. According to commercial registration regulations, joint-stock companies must submit a certificate of capital deposit issued by a financial institution to the registry office when registering establishment or capital changes, but limited liability companies can substitute this with a capital contribution confirmation stamped with the company seal, which was exploited in this case.

B, the largest partner and director of loan company A, falsely registered capital payments first during the initial company establishment in January 2019 and two capital increases in May and September, then paid the capital (three times, totaling 2 billion KRW). Subsequently, in capital increases in June 2020 and June 2022, B only falsely registered the capital without paying 1 billion KRW and 2 billion KRW respectively.

Park Woon-gyu, head of the Public Life Infringement Response Division, explained, "It is judged that this was an attempt to evade legal regulations for sound operation of loan companies, such as the 500 million KRW self-capital requirement and total asset limits."

The FSS plans to strongly respond to illegal activities by loan companies uncovered through on-site inspections and other means, while also disseminating information about these illegal practices to the industry and providing education on preventing recurrence through workshops for loan companies.