NTS Launches Surprise Tax Audit on MBK Partners
Financial Authorities Express Concerns Over "Financial Capital's Control of Industrial Capital"
PEF Industry Closely Watches for Expanded Probe Into 'Five Enemies of New Financial-Industrial Separation'
The National Tax Service (NTS) has been confirmed to have launched a tax investigation into MBK Partners, prompting the private equity fund (PEF) industry to closely monitor the financial authorities' movements. Since the end of last year, concerns about a 'new financial-industrial separation' theory (worries about financial capital's control over industrial capital) have been circulating, and with the Homeplus incident emerging, voices expressing apprehension about a comprehensive investigation into the industry are rising.
Earlier, on the 11th, it was confirmed that the NTS Investigation Division 4 was deployed to MBK Partners, the largest private equity fund operator in Northeast Asia, and news also emerged that another private equity fund, A, is under investigation. Investigation Division 4 primarily probes complex cases involving offshore tax evasion, tax avoidance, and nominee transactions, in addition to general tax audits targeting large corporations and high-net-worth individuals.
In this regard, MBK stated, "This is a regular tax audit that comes five years after those in 2015 and 2020." It is known that MBK underwent objection procedures in 2020 and was ultimately subjected to a supplementary tax payment amounting to several billion won. A private equity fund A did not confirm whether it is under investigation by the NTS.
The private equity fund industry is also closely watching whether the Financial Supervisory Service (FSS) will take action following the NTS. A representative from a private equity fund operator said, "Coincidentally, the companies that were referred to as the 'five enemies of new financial-industrial separation' by financial authorities at the end of last year appear to be targets of the NTS investigation," adding, "There are concerns that the FSS investigation may expand this year."
In MBK's case, controversies have continued with allegations related to the 2023 Ostem Implant CB call option disguised gifting, the start of the Korea Zinc management rights dispute last year, and this year's Homeplus corporate rehabilitation proceedings. In the case of private equity fund A, it faced backlash from minority shareholders after buying and selling listed company stocks within less than a year, followed by a sharp drop in stock prices. Additionally, company B, linked to the Ostem Implant case, company C, accused of insider trading by fund executives using undisclosed information of the acquisition company, and company D, which made a separate contract with Bang Si-hyuk, chairman of HYBE, to return listing profits, have all been named as the 'five enemies of new financial-industrial separation.'
The private equity fund industry is closely watching whether the financial authorities, who have hinted at the possibility of a comprehensive investigation, will actually take action. At a meeting with 12 institutional specialized private equity funds including MBK Partners on December 12 last year, Ham Yong-il, Deputy Governor of the Financial Supervisory Service, mentioned, "There are concerns that PEFs, which aim for relatively short-term profit generation, may inadvertently damage the long-term growth engines of companies." On the 5th, the day after MBK filed for Homeplus corporate rehabilitation proceedings, Lee Bok-hyun, Governor of the FSS, stated, "There are various advantages and side effects related to financial capital's control over industrial capital, and we have commissioned a research institute to conduct a study," adding, "Once the results come out in the first half of the year, we will review them with the Financial Services Commission."
According to Article 249-21 of the Capital Markets Act, the Financial Services Commission can take various measures such as dissolution orders and business suspension against institutional exclusive private equity funds based on prohibitions on the use of undisclosed important information, unfair trading acts, and concerns about significantly undermining financial market stability.
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