General Holding Companies' 'Cash and Cash Equivalents' Total 55 Trillion Won... Fair Trade Commission Expects Use for Venture Investment

Fair Trade Commission, Analysis Results of Holding Companies under the Fair Trade Act in 2021

[Sejong=Asia Economy Reporter Joo Sang-don] As of the end of last year, the cash and cash equivalents held within the system of general holding companies amounted to a total of 55.349 trillion KRW. The Korea Fair Trade Commission (KFTC) expects that, starting from the end of this year, general holding companies will be able to hold corporate venture capital (CVC), and that the retained funds of general holding companies will be utilized for venture investments through CVCs.

On the 10th, the KFTC analyzed and disclosed the status of holding companies as of the end of December 2020 based on the 2021 holding company business reports.

As of the end of last year, the number of holding companies was counted at 164, a decrease from the previous year. There were 154 general holding companies and 10 financial holding companies.

The number of large business groups, or conversion groups, where the total assets of the holding company and its affiliated subsidiaries, grandchild companies, and great-grandchild companies account for 50% or more of the total assets of all companies belonging to the corporate group, increased by 2 from 24 to 26 compared to the previous year. Bando Holdings and IS Holdings were included in the large business groups due to an increase in total assets.

The average total assets of all holding companies amounted to 2.1598 trillion KRW, an increase of 163.1 billion KRW compared to the previous year (1.9967 trillion KRW). The average debt ratio was 35.3% (general 35.6%, financial 30.1%), similar to last year's 33.9%. The legal standard is below 200%.

For the first time in this survey, the KFTC identified that the cash and cash equivalents within the system of general holding companies totaled 55.349 trillion KRW. Among all holding companies, excluding one March fiscal year-end company, the average cash and cash equivalents of 153 companies excluding financial holding companies (10 companies) was 395.3 billion KRW.

A KFTC official stated, "The cash and cash equivalents within the system of general holding companies are directly linked to investment capacity," and added, "It is expected that the retained funds of general holding companies will be utilized for venture investments through CVCs."

The number of affiliated companies was 2,020, similar to the previous year (2,022). The average number of subsidiaries, grandchild companies, and great-grandchild companies of holding companies were 5.5, 6.2, and 0.7 respectively. Compared to the previous year, subsidiaries increased by 0.1, grandchild companies by 0.3, and great-grandchild companies decreased by 0.1.

In the case of conversion group holding companies, the average number of subsidiaries decreased from 10.9 to 10.3, while the average number of grandchild companies increased (from 19.8 to 20.0). The KFTC understood that conversion groups have expanded their control by increasing grandchild companies rather than subsidiaries or great-grandchild companies.

Shin Yong-hee, head of the KFTC Holding Company Division, said, "The KFTC plans to maintain conditions that allow the choice of holding company structures to utilize the advantages of holding companies, while continuously monitoring and improving systems to prevent abuse for expanding the controlling family's power and private interests." He added, "After this announcement of holding company business report results, we will also disclose in-depth analysis results including ownership and investment structures, internal transaction status, and revenue structures of holding companies."

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