Buyeong Forced to Revive Its Failing 'Son's Company'... Fair Trade Commission's Corrective Order
On the 10th, the Fair Trade Commission to Sanction Unfair Support Practices by Subsidiaries of the Corporate Group Booyoung
Booyoung Group affiliate former Daehwa Construction received a corrective order from the Fair Trade Commission (FTC) for purchasing shares of the former Booyoung Entertainment, which was in a state of capital erosion, at an inflated price to provide support. Booyoung Entertainment was a company where Lee Seong-han, the third son of Booyoung Group Chairman Lee Jung-geun and a film director, served as CEO. Daehwa Construction was a company where Lee Jung-geun’s spouse, Na Gil-soon, was the largest shareholder. They supported the ‘son’ company, which was at risk of being liquidated, through abnormal means to keep it afloat.
On the 10th, the Fair Trade Commission decided to impose a corrective order, including a future prohibition order, and a provisional fine of 360 million KRW on former Daehwa Construction, a Booyoung Group affiliate, for participating under favorable conditions in the paid-in capital increase conducted by former Booyoung Entertainment in 2012, thereby supporting Booyoung Entertainment. The FTC explained that the corrective order was issued to prevent repeated unfair support practices such as participating in paid-in capital increases for insolvent affiliates.
Former Booyoung Entertainment was a film production company where Lee Seong-han, the third son of Booyoung Group’s owner Lee Jung-geun, served as CEO and sole shareholder. After being incorporated into the Booyoung Group affiliates in 2009, the company borrowed 4.5 billion KRW from Donggwang Housing, another affiliate, but was unable to repay due to film box office failures, resulting in a capital erosion state with a stock valuation of zero per share.
However, former Daehwa Construction, a construction affiliate of the former Booyoung Group where Lee Jung-geun’s spouse Na Gil-soon was the largest shareholder, supported the company by participating in Booyoung Entertainment’s paid-in capital increase, issuing new shares at 50,000 KRW per share totaling 4.5 billion KRW. This paid-in capital increase allowed former Booyoung Entertainment to escape the risk of being pushed out of the film production market. Daehwa Construction absorbed and merged Booyoung Entertainment, enabling the business to continue.
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The FTC stated, “Using artificial and unfair methods, the insolvent affiliate was able to continue existing in the film production market regardless of its competitive ability,” and added, “We will continue to monitor acts that distort sound trade order and strictly deal with violations of the law.”
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