Holding companies Growing motivation for holding company conversion 1. End of circular shareholdings Overweight (Maintain) For Korean conglomerates, circular shareholdings are no longer a feasible option for Industry Report maintaining and expanding control over their vast business empires. Under the revision to the Monopoly Regulation and Fair Trade Act (MRFTA), large corporate groups are November 26, 2015 banned from forming new circular shareholdings or strengthening existing one s. Companies are allowed to keep previously established circul ar shareholdings, but are Daewoo Securities CCCo.,Co., Ltd. encouraged to gradually and voluntarily untie their existing shareholdings (which are required to be publicly disclosed). However, we believe there is a possibility tha t existing [Holding Companies/IT Services] circular shareholdings could also be directly regulated, potentially becoming subject to Dae-ro Jeong mandatory removal within a certain period. +822-768-4160
[email protected] Ultimately, the unwinding of circular shareholdings should serve as a major catalyst to convert to a holding comp any. Some of the biggest Korean conglomerates, such as Yoon-seok Seo Samsung, Hyundai Motor Group (HMG), and Lotte, have recently been making great +822-768-4127 efforts to unwind their existing circular shareholdings. By doing so, they may be able to
[email protected] avoid potential policy risks whi le also making the transition to a holding company structure easier. In our view, adopting a holding company structure is the best or second-best option for conglomerates looking to tighten their managerial control and ensure ownership succession. 2. Opportune time for holding company conversion The government is introducing various policies to facilitate holding company conversion.