K Cube Holdings "Not a Financial Company"... Denies Fair Trade Commission's Accusation of Violating Financial-Industrial Separation Rules

Kim Beom-su, Head of Kakao Future Initiative Center, appeared at the comprehensive audit of the Ministry of Science and ICT and related audit target organizations held at the National Assembly on the 24th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Kang Nahum] When the Korea Fair Trade Commission decided to refer K Cube Holdings, regarded as Kakao's de facto holding company, to the prosecution for violating the financial-industrial separation regulations, K Cube Holdings rebutted by stating that it is "not a company engaged in financial business" and hinted at legal action.

On the 15th, K Cube Holdings stated in a press release, "We acquired Kakao shares with our own funds and, like any ordinary company, we are merely consumers of financial products who operate and manage our held assets. Therefore, we are unrelated to the essential characteristics of financial companies that raise third-party capital to conduct business," clarifying their position.

Although K Cube Holdings is not a "company engaged in financial business," the Fair Trade Commission interpreted K Cube Holdings as a "financial company" and restricted its voting rights.

Earlier, the Fair Trade Commission decided to file a corporate complaint regarding violations of voting rights restrictions on shares of K Cube, Kakao, and Kakao Games. Under the current Fair Trade Act, financial and insurance companies within large business groups are restricted from holding shares and exercising voting rights in non-financial affiliates. Article 25 of the Fair Trade Act stipulates that "a company belonging to a business group subject to mutual investment restrictions that engages in financial or insurance business shall not exercise voting rights on shares of domestic affiliates it has acquired or owns." The Fair Trade Commission judged that K Cube Holdings violated this provision.

Regarding the addition of "other financial investment business" to its articles of incorporation in July 2020, K Cube Holdings explained, "In cases like K Cube Holdings, a non-financial company whose dividend income from shares constitutes most of its revenue, it was difficult to find an appropriate classification under the Korean Standard Industrial Classification," adding, "The business objectives in the articles of incorporation can be arbitrarily stated and may include future desired industries." They further noted, "There is no review procedure by related authorities, so merely stating a business purpose in the articles of incorporation does not change the substance of the business."

In response to the Fair Trade Commission's criticism that K Cube Holdings exercised voting rights on all agenda items (48 items) across four general meetings of shareholders of Kakao and Kakao Games during 2020-2021, K Cube Holdings emphasized, "Of the 48 board agenda items, 47 would have passed regardless of K Cube Holdings' exercise of voting rights," and "The remaining one was a procedural matter to shorten the board meeting convening period, which did not cause any harm to shareholders nor restrict the authority of outside directors."

K Cube Holdings stressed, "The voting rights restriction regulation for financial companies under the Fair Trade Act is a financial-industrial separation regulation introduced 35 years ago in 1987 to curb large business groups from expanding control by utilizing others' capital, and it is still in effect. K Cube Holdings is a case that does not substantially fall under the purpose of this regulation."

They added, "The Fair Trade Commission has previously decided on warning measures rather than prosecution in about ten similar cases, including clear financial business companies," and "We believe more cautious legal application is necessary for K Cube Holdings, which cannot be regarded as a financial business company."

K Cube Holdings plans to proceed with necessary legal and institutional responses, such as administrative litigation and injunction applications, after receiving the official decision document from the Fair Trade Commission and conducting internal review.

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