The Korea Fair Trade Commission (KFTC) has initiated an investigation concerning Choi Yoon-beom, the chairman of Korea Aion, over allegations of unlawful circumvention of voting rights through overseas circular investments. These allegations were brought forth by MBK Partners and Youngpoong, who reported to the KFTC last month, claiming they had evidence of management rights being defensively shielded by creating circular investment loops.
On March 11, 2025, the KFTC communicated to both MBK and Youngpoong about the commencement of review procedures connected to Korea Aion’s potential evasion of the law. The investigation is and will be focused on whether Choi, through the establishment of overseas subsidiaries, has contravened specific regulations forbidding circular investments within the domestic market.
The chain of investment highlighted by MBK and Youngpoong suggests the following: Korea Aion invested capital directly in its subsidiary, Sign Metal Holdings (SMH), which then vested its resources in the Australian subsidiary, Sign Metal Corporation (SMC). Notably, SMC is reported to have acquired 10.3% of Youngpoong’s shares. This structure enables circular investments among Korea Aion, Youngpoong, and SMC, effectively limiting the exercise of voting rights by Youngpoong and MBK.
Current regulations under the Fair Trade Act explicitly prohibit new circular investments between domestic affiliates, yet no definitive legal frameworks exist governing overseas investment structures. Hence, this KFTC investigation could set notable precedents concerning the legality of cross-shareholding practices utilizing international entities.
On March 7, 2025, during the proceedings of the Seoul Central District Court, Judge Kim Sang-hwan partially granted Youngpoong’s application for provisional disposition, which sought to annul the effect of resolutions from the extraordinary shareholders’ meeting held earlier. The ruling concluded it was unlawful to limit Youngpoong’s voting rights via this investment structure. Consequently, the court also temporarily suspended the appointments of directors by Choi’s side, affirming the argument made by Youngpoong.
Highlighting the essence of governance disputes, Choi’s team has filed objections to this court ruling. They contest the decision on the legal grounds surrounding the suspension of directors’ duties and the restructuring of voting rights limits at the shareholders’ meeting, illustrating the complex web of corporate governance and the strategies employed by those involved.
Both MBK and Youngpoong have depicted public sentiment around the leadership as unfavorable lately, banking on recent controversies surrounding environmental pollution at the Seokpo Smelter and episodes involving Homeplus to tilt opinion against Choi’s leadership during this tumultuous time. Industry analysts suggest as the situation progresses, if Youngpoong and MBK navigate through multiple shareholders' meetings, they may manage to effectively seize control over the Korea Aion board.
Within this corporate struggle, the Fair Trade Commission has outlined its investigation grounds. It has signified to probe various articles within the Fair Trade Act, particularly targeting Articles 21 and 36, which deal with the prohibition of cross-shareholding and evading group regulation respectively. Should evidence emerge to substantiate violations, the KFTC could impose corrective measures, financial penalties, or even move to file criminal charges.
This case marks the first legal inquiry assessing circular investments executed through offshore entities and the potential legislative updates needed to regulate such practices comprehensively. The corporate ramifications are not just sectoral; they hold significance for how other businesses might structure their investments abroad moving forward.
Choi’s side is reportedly set to convene another board meeting on March 13, 2025, aimed at finalizing schedules for upcoming regular shareholders’ meetings, likely deciding its fates through votes heavily influenced by stock shares amid this struggle for managerial authority. The anticipated shareholder battle now looms as those closely watching expect it to result determinatively, shedding light on regulatory failures and paving out necessary adjustments by the KFTC to handle corporate governance adequately.
Industry experts have suggested the KFTC’s approach could lead to discernible changes across corporate practices as wider scrutiny on international whereabouts and associated investment strategies potentially opens the floor for broader discussions. A representative from the KFTC stated, "Given we’ve formally registered this matter, we will thoroughly verify the facts throughout this process and observe the methods of compliance and regulatory adherence." This atmosphere of expectation brings about queries, amplifying the focus on managerial ethics and corporate responsibility moving forth.