Gov’t to slash holding co’s required stake in 3rd-tier subsidiary from 100% to 20%

Gov’t to slash holding co’s required stake in 3rd-tier subsidiary from 100% to 20%

Shin Hyun-gyu, Kim Yoo-tae

2014.02.13 17:54:14

The South Korean government decided to implement a measure to induce conglomerates to invest their internal reserves to stimulate the creative economy and venture business industry. 
At present, if a holding company wants to acquire and turn a venture firm or small and mid-sized business (SMB) into a great grandson subsidiary via its sub-subsidiary, its sub-subsidiary is required to own 100 percent of the great grandson subsidiary. But the government plans to scale back the mandatory ownership quota to 20 percent for acquiring listed companies. 
The relevant governmental agencies discussed such ‘merger and acquisition (M&A) stimulus measure’ at a vice ministerial-level meeting at the government complex in Gwanghwamun, said the Ministry of Strategy and Finance, Ministry of Science, ICT and Future Planning, Ministry of Trade, Industry and Energy and others Thursday. “The three-year economic innovation plan, which carries ‘creative economy’ as one of major themes, will incorporate M&A stimulus plan to accomplish the theme,” a government official said. 
The government intends to cut a holding company’s compulsory 100 percent stake quota in non-listed great grandson subsidiary from 100 percent to 40 percent, and that of listed great grandson subsidiary to 20 percent. This would channel conglomerates’ funds into a larger number of small and mid-sized venture firms. Under the current law, a holding company’s sub-subsidiary, which has 10 billion won ($9.3 million) cash, can only buy two venture companies worth five billion won each. But with this deregulation, such sub-subsidiary will be able to invest two billion won of its holding company’s fund, or 40 percent stake, in each of five non-listed venture firms worth five billion won in total. This means all the five venture firms will be able to receive funds.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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