‘MB’s Closest Associate’ Cheon Sin-il, Chairman of Sejung, Takes Advantage of Stock Price Drop Due to COVID-19 for Gift Transfer

[Asia Economy Reporter Jang Hyowon] Cheon Shin-il, chairman of Sejung and known as a close aide of former President Lee Myung-bak, has gifted his shares to his children. It is interpreted that this was done recently to reduce gift tax due to the stock price drop caused by the novel coronavirus disease (COVID-19).

Cheon Sin-il, Chairman of Sejung

According to the Financial Supervisory Service's electronic disclosure on the 16th, Cheon Shin-il, chairman of Sejung, gifted 1,639,074 shares (9.05%) to his children. He transferred 580,826 shares (3.21%) to his eldest son, Cheon Sejeon, CEO of Sejung, and 1,058,248 shares (5.84%) to his second son, Cheon Hojun, vice president.

Accordingly, CEO Cheon's shareholding increased from 7.79% to 11.0%, making him the largest shareholder. Vice President Cheon's shareholding also expanded from 4.16% to 10.0%. Meanwhile, Chairman Cheon's stake decreased from 13.72% to 4.67%.

The reason Chairman Cheon decided to make the gift is attributed to the stock price decline. Recently, as the stock price dropped due to COVID-19, even gifting the same number of shares results in lower gift tax. The tax base for stock gifting is calculated based on the average stock price over four months, two months before and two months after the gift date.

From early this year until the 14th, Sejung's stock price fell by about 36.5%. Due to the impact of COVID-19, the stock price has been on a downward curve since February. On the 23rd of last month, it plunged to 1,050 won, the lowest price since its listing in June 2000.

Accordingly, Chairman Cheon is estimated to reduce gift tax by about 40%. The average stock price for two months before the gift date, which was the 14th, was 1,994 won. Assuming a similar trend for the following two months, the total value of the gifted shares is about 3.268 billion won.

Since he gifted stocks worth 1.1 billion won and 2.1 billion won to his two sons respectively, after deducting 50 million won and applying a 40% tax rate, the total gift tax is calculated to be about 1.2 billion won. For gifted assets between 1 billion and less than 3 billion won, a 40% tax rate applies, and for 3 billion won or more, a 50% tax rate applies.

If the share value were calculated based on the average stock price for two months from December 13 last year to February 13 this year, before the stock price drop (2,992 won), the value of the gifted shares would be 4.941 billion won. In this case, the tax rate would increase to 50%, and the total gift tax is estimated to be about 2.2 billion won. Due to the stock price decline, about 1 billion won in gift tax was saved.

Meanwhile, Cheon Shin-il, chairman of Sejung, was a classmate of former President Lee Myung-bak at Korea University (class of '61) and was called a key figure in the MB government, suspected of being a channel for Lee's slush funds. In 2011, he was sentenced to prison for bribery related to Daewoo Shipbuilding & Marine Engineering.

This content was produced with the assistance of AI translation services.