South Korean Watchdog Refers K Cube Holdings To Prosecution

The antitrust regulator decided to refer K Cube Holdings, a company wholly owned by Kakao founder Kim Beom-su, to the prosecution over allegations of illegally executing its voting rights to Kakao companies, violating the Fair Trade Act.

Founded in 2017, K Cube Holdings is considered a de facto holding company of Kakao.

It owns 10.51 percent of Kakao as the second-largest shareholder following Kim — who has a 13.27 percent ownership — and also holds 0.91 percent of Kosdaq-listed Kakao Games.

The Fair Trade Commission (KFTC) on Thursday said that K Cube Holdings violated the Fair Trade Act by executing its voting rights as a stockholder of Kakao and Kakao Games despite being subject to limitations on mutual investments.

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According to the Fair Trade Act, a financial or insurance company belonging to an enterprise group subject to mutual investment regulations cannot practice its voting rights on its affiliated companies, due to the principle of so-called “separation of industrial and financial capital.”

The regulation was designed to prevent corporate owners from using money made by financial or insurance businesses to strengthen their control over non-financial affiliates or for the purpose of management succession.