The Financial Supervisory Service (FSS) is planning to look into every company that is suspected of being involved in M&A deals without the funds to finance them. This type of M&As is carried out based on acquisition financing with a target company’s stocks and management rights held as security. With regard to it, the need to protect investors has been continuously pointed out as the practice can lead to corporate fund appropriation and fraudulent accounting after acquisition.
To that end, the FSS is going to monitor certain companies suspected of having carried out such deals by using listed companies’ public disclosures. The investigation targets include those that conducted external financing based on the largest shareholders’ shareholding notifications, those conducted large-scale financing after largest shareholder change by means of CB, BW and paid-in capital increase, and those where large-scale liquidation occurred via a security right holder or the like.
When it comes to non-listed stocks, the FSS is going to check the acquisition prices, accounting appropriateness, etc. As far as lending and prepayment are concerned, it is going to examine the reasons, relationships with companies, accounting appropriateness, and so on. The FSS is going to take measures such as audit review when financial statements yield accounting fraud allegations.