Impact of Last Month's Tax Investigation
The financial authorities have decided to suspend the major shareholder eligibility review for the private equity firm KCGI, which is pursuing the acquisition of Hanyang Securities. This follows the National Tax Service's initiation of a tax investigation into KCGI.
On the 16th, the Financial Services Commission resolved at its regular meeting to halt the major shareholder eligibility review related to KCGI's acquisition of Hanyang Securities. This decision comes about three months after KCGI applied for approval of the major shareholder change to the financial authorities on January 22.
This is due to the Seoul Regional Tax Office Investigation Division 4, known as the "reaper of the business world," starting a special tax investigation into KCGI last month, examining allegations of tax evasion and personal misconduct by CEO Kang Sung-bu. The financial authorities' major shareholder eligibility review allows for suspension of the process if ongoing investigations or inspections by the prosecution, the Fair Trade Commission, the National Tax Service, or others are expected to affect the review. Typically, the major shareholder eligibility review is completed within 60 days from the application date, but this time the review was prolonged and overlapped with the National Tax Service investigation, leading to the suspension.
In this context, Lim Jae-taek, CEO of Hanyang Securities, chose to remain at Hanyang Securities and canceled his planned move to Daol Investment & Securities starting this month, amid growing concerns that KCGI's acquisition of Hanyang Securities had become uncertain due to the National Tax Service investigation.
However, the major shareholder eligibility review for KCGI has not been completely nullified. The Financial Services Commission may resume the review if necessary after examining the progress of lawsuits, investigations, and inspections that caused the suspension. The suspended review will be reassessed every six months to determine if conditions for resumption are met. KCGI stated, "Our status as the preferred bidder is recognized until the end of June, and our intention to acquire remains unchanged."
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