Excluding treasury stock from calculations of the shareholding ratio of controlling families could increase the number of companies subject to profit misappropriation regulations by 25. Fair Trade Commission Chairman Joo Byeong-ki stated that legal amendments are necessary to prevent regulatory evasion through treasury stock.
During a National Assembly audit of the Fair Trade Commission on October 12, Joo agreed with Democratic Party lawmaker Park Hong-bae's assertion that treasury stock should be excluded when determining the shareholding ratio for profit misappropriation regulations. Joo emphasized the need for legal changes to eliminate means of circumventing regulations.
The current Fair Trade Act designates companies where the controlling family holds more than 20% of shares, as well as subsidiaries where the company holds more than 50%, as targets for profit misappropriation regulations. This system aims to prevent undue benefits from flowing to controlling families through internal transactions within corporate groups.
The issue arises because treasury stock is included in the total number of issued shares when calculating the shareholding ratio. Although treasury stock has no voting rights, its inclusion in the denominator effectively lowers the controlling family's shareholding ratio.
According to data submitted to Park by the Fair Trade Commission, excluding treasury stock would increase the number of companies subject to profit misappropriation regulations from 1,047 to 1,072. Notable examples include LS and DB Insurance, where the controlling families' shareholding ratios are 19.6%. However, when treasury stock is excluded, LS's ratio rises to 22.4% and DB Insurance's to 21.1%.
If a company is included in the regulatory scope, its subsidiaries are also affected. Park noted that related affiliates such as LS Cable, LS Mtron, DB Life, and DB Capital could also fall under the regulatory framework.
Park stated, "The inclusion or exclusion of treasury stock can change the regulatory status of 25 companies," and pointed out that the current method of calculating shareholding ratios could create blind spots in profit misappropriation regulations.
In response, Joo acknowledged that treasury stock is indeed being misused as a means to evade profit misappropriation regulations. He noted that the abuse of treasury stock has been problematic and that while corporate law has been amended, the Fair Trade Act has not kept pace, expressing his willingness to cooperate on related legislation.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.