Fair Trade Commission, which claimed "No private gain by the controlling family," faces controversy over SPC indictment for internal transactions

Fair Trade Commission Claims 'Mildaewon' Shares Sold Below Value for Succession Purpose
SPC: "Value Assessed Through Proper Procedures by External Accounting Firm"

SPC headquarters building in Yangjae-dong, Seocho-gu, Seoul. Photo by SPC Group

[Asia Economy Reporter Moon Hyewon] As the prosecution investigating allegations of unfair support and breach of trust involving SPC Group's affiliates recently summoned members of the controlling family one by one for questioning, attention is focused on the details of the investigation.

According to industry sources on the 2nd, the prosecution is reportedly focusing more on the case where small shareholders of ‘Shani,’ one of SPC’s affiliates, filed a breach of trust complaint against the controlling family, rather than the issue related to the SAMLIP transit fee reported by the Fair Trade Commission (FTC).

In fact, the prosecution summoned Vice President Heo Hee-soo for questioning as a suspect on the 23rd of last month. The FTC did not file a complaint against Vice President Heo, but the small shareholders of Shani accused him of breach of trust.

The main reason the small shareholders filed a complaint against the controlling family is that Shani transferred shares of another SPC affiliate, ‘Milda One,’ which it held, to SPC Samlip at a low price, causing losses to Shani.

This issue was included in the case where the FTC imposed a fine on SPC in July 2020 for unfair support of affiliates. The FTC viewed this as part of SPC’s act of funneling profits to Samlip to increase the value of Samlip shares held by the second generation for the purpose of succession of management rights by the controlling family. According to the FTC, at that time, the controlling family made Shani transfer Milda One shares at 255 KRW per share, significantly lower than the normal price of 404 KRW per share, resulting in a profit of 2 billion KRW for Samlip.

However, there are many criticisms pointing out flaws in the FTC’s claims.

The normal price of 404 KRW claimed by the FTC is the valuation as of December 31, 2012, but the actual stock transfer took place on December 28, 2012, and the FTC is basing its argument on a valuation standard that did not exist at the time, which is considered an unreasonable judgment.

SPC argues that the value was calculated through proper procedures and standards by an external accounting firm at the time.

Also, the shareholder composition of Milda One mostly consisted of Paris Croissant, an unlisted company 100% owned by the controlling family (45.4%), Shani (21.7%), and individual shares of the controlling family (13.2%). Therefore, if Milda One transferred shares at a low price, it would mean that the controlling family caused losses to themselves, which contradicts the FTC’s claim that profits were given to the second generation for succession.

According to the FTC’s logic, the person who suffered losses would be punished, creating an unprecedented situation.

In the administrative lawsuit filed by SPC against the FTC, it is reported that the FTC has yet to provide a clear answer on how supporting Samlip would help the second generation’s succession, drawing attention to the outcome of the lawsuit.

An industry insider said, "Since the FTC’s logic that SPC supported the listed company Samlip at the expense of the controlling family’s losses is highly controversial, the prosecution is likely to have considerable legal deliberation."

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