"Loophole Investments During Grace Period"... Fair Trade Commission Sanctions Sial Holdings for Violating Holding Company Act

Additional Acquisition of Non-Affiliate Shares During Grace Period
Purchased Other Non-Affiliates Even After Meeting the '15% Rule'

Sial Holdings has been sanctioned for exploiting the grace period granted during its transition to a regular holding company, by further acquiring shares in non-affiliates and repeatedly circumventing regulatory boundaries.

On July 29, the Fair Trade Commission announced that it had decided to impose corrective orders (including a future prohibition order) and a total fine of 79 million won on Sial Holdings for violating the restrictions on holding company operations.

According to the current Fair Trade Act (Article 18, Paragraph 2, Subparagraph 3), a holding company is prohibited from owning more than 5% of shares in non-affiliates to prevent excessive expansion of control and to ensure focus on managing subsidiaries. However, an exception is granted if the total value of non-affiliate shares is less than 15% of the total value of subsidiary shares, in order to guarantee investment autonomy for companies.

As of its transformation into a regular holding company on November 10, 2023, Sial Holdings held more than 5% ownership in 14 non-affiliates, including Cobalt, and the proportion of non-affiliate shares (30.46%) exceeded the 15% threshold. As a result, the Fair Trade Commission granted a two-year grace period, during which Sial Holdings was required to resolve this violation.

However, instead of correcting the violation, Sial Holdings pursued a 'reckless management' strategy by acquiring additional non-affiliate shares during the grace period. Immediately after the transition—in December 2023—it newly acquired a 14.29% stake in Cripictures, a non-affiliate. In August 2024, it further increased its holding in Cobalt, another non-affiliate, from 9.51% to 15.16%.

Subsequently, in September 2024, Sial Holdings disposed of all shares in 10 non-affiliates, including Cripictures, which brought its non-affiliate shareholding ratio down to 5.16%, thereby temporarily resolving the violation. However, just two months later, in November 2024, the company again purchased shares in a different non-affiliate, causing its non-affiliate shareholding ratio to surge to 17.75%, and once again breaching the law. This state of violation persisted until January 2025, when the market value of the holdings fell and the ratio dropped to 14.8%.

Taking into account the duration and significance of the violations, the Fair Trade Commission calculated fines of 26 million won related to Cripictures and 53 million won related to Cobalt, totaling 79 million won. The commission stated, "We took into consideration the fact that Sial Holdings repeatedly violated the law during the grace period following the transition to a holding company, as well as the fact that the period of violation was not short," adding, "We will continue to strictly monitor and impose strong sanctions against actions that undermine the purpose of the holding company system, which is to form a simple and transparent ownership and control structure."

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