Holding Companies with Controlling Shareholders: Concentrated Family Shareholding and High Proportion of Internal Transactions Persist

Fair Trade Commission, 'Analysis Results of Holding Companies under the Fair Trade Act in 2020'

Shareholding Ratio of the Family of the Owner in Holding Companies with Owners at 49.5%... Internal Transaction Ratio at 15.3%
Proportion of Non-Dividend Income such as Brand Fees, Real Estate Rent, Consulting Fees at 51.9%
Fair Trade Commission: "Concerns over Unfair Internal Transactions within Holding Structures... Need to Expand Regulation Targets for Private Interest Appropriation"

[Sejong=Asia Economy Reporter Joo Sang-don] In the case of holding companies of general holding groups with owners, the shareholding ratio of the owner's family reached 50%, indicating it remains high. More than half of the income came from non-dividend income such as brand fees, real estate rent, and consulting fees, and the proportion of internal transactions was also higher compared to general groups.

On the 18th, the Fair Trade Commission disclosed the results of the "2020 Analysis of Holding Companies under the Fair Trade Act" containing these details.

According to this, as of the end of September this year, the number of holding companies was 167, down from 173 the previous year. This was due to a larger decrease in small and medium holding companies with total assets under 500 billion KRW (from 94 to 82) than the increase in holding companies belonging to publicly disclosed corporate groups (from 39 to 43).

The converted groups, referring to large corporate groups where the total assets of holding companies and their subsidiaries account for more than 50% of the total assets of all companies in the corporate group, numbered 24, an increase of one from 23 the previous year. This is because Samyang, newly included as a large corporate group this year, was classified as a converted group.

The average shareholding ratio of the owner and the owner's family (including the owner) in holding companies belonging to general holding converted groups (22 groups) was 26.3% and 49.5%, respectively, showing that the concentration of shareholding in the owner's family remains.

The internal transaction ratio of the converted groups averaged 15.25%, similar to 15.77% the previous year. However, it remained higher than the internal transaction ratio of general groups (10.48%).

The representative holding companies belonging to converted groups had a structure where they received more non-dividend income (51.9%) compared to dividend income (40.9% of sales). This is higher than other holding companies (38.4%). In particular, seven companies including Harim Holdings, CJ, Kolon, HDC, Korea Technology Group, Celltrion Holdings, and Booyoung had a non-dividend income ratio exceeding 70%.

Goo Seong-rim, head of the Holding Company Division at the Fair Trade Commission, said, "In large corporate groups that have converted to holding structures, there is an issue of expanding control centered on grandchild companies, and the possibility of unfair internal transactions exists not only within the holding structure but also between affiliates inside and outside the structure." He added, "It is necessary to improve governance by raising the mandatory shareholding ratio of subsidiaries and grandchild companies and to more thoroughly prevent unfair internal transactions by expanding the scope of regulation targets for private interest appropriation."

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