The financial authorities, which were reviewing the suitability of Korea Corporate Governance Improvement (KCGI) as a major shareholder of Hanyang Securities, decided to ultimately suspend the examination process. This decision was made because of the high possibility of sanctions as KCGI is undergoing a special tax audit by the National Tax Service.
The Financial Services Commission (FSC) held a regular meeting on 16th at 2 p.m. and voted to suspend the suitability examination for KCGI as a major shareholder of Hanyang Securities. A senior official at the FSC noted, "Since it is a special tax audit rather than a general tax audit, we judged that there is a high possibility of sanctions and decided to suspend the examination." KCGI applied for approval of the change of major shareholders to the financial authorities on Jan. 22.
According to current regulations, when lawsuits, investigations, or inspections by the FSC, Fair Trade Commission, National Tax Service, Financial Supervisory Service, or the prosecution are underway, the financial authorities determine whether to suspend examinations based on criteria such as seriousness, clarity, urgency, and recoverability. The FSC viewed the special tax audit that KCGI is undergoing as potentially having a significant impact on the suitability examination for major shareholders.
The Seoul Regional Tax Service's Investigation Division 4 has been conducting a special tax audit on KCGI since the 11th of last month. Known as the 'corporate grim reaper,' Investigation Division 4 is the unit that detects and investigates suspicions of tax evasion or illicit fund creation. Although the National Tax Service has not disclosed the allegations, there are reports in the industry that the National Tax Service is also looking into KCGI's tax evasion allegations and the personal allegations against KCGI representative Kang Seong-bu.
The suspension of the suitability examination for major shareholders does not mean a complete nullification of the examination. The FSC will assess the fulfillment of conditions for resuming the examination every six months. If, at that time, no sanctions are imposed by the National Tax Service or if a non-indictment is issued, the examination may resume. A senior official at the FSC said, "We will keep an eye on the progress and results of the tax audit."