South Korea’s Fair Trade Commission (FTC) has concluded an on-site inspection at the headquarters of 영풍 (Young Poong) in Seoul’s Gangnam district as part of an ongoing investigation into allegations of illegal circular shareholding involving the company and its affiliate, 고려아연 (Korea Zinc). The inspection, completed in December 2025, marks a significant step in the regulator’s review of whether 영풍 improperly used its 100% owned subsidiary, 와이피씨 (YPC), to transfer shares of 고려아연, potentially forming a new circular ownership structure prohibited under Article 22 of the Monopoly Regulation and Fair Trade Act.
The investigation stems from a complaint filed in October 2025, which alleges that 영풍 established YPC in March 2025 and subsequently transferred 5,262,450 shares of 고려아연—representing a 25.42% stake—to the new subsidiary through a contribution in kind. According to the complaint, this transaction created a circular shareholding chain: 영풍 → YPC → 고려아연 → SMH (a foreign subsidiary of 고려아연) → 영풍. The FTC is examining whether this arrangement constitutes an illegal “new circular shareholding” under Korean competition law, which prohibits such structures when they are formed to unfairly expand control or impede legitimate management rights.
Additional scrutiny has focused on 영풍’s acquisition of 10 extra shares of 고려아연 on March 12, 2025, shortly after establishing YPC, which investigators have noted as a potentially relevant detail in assessing the timing and intent behind the share transfers. The FTC confirmed it began formal proceedings following the complaint and has been reviewing documentation and conducting interviews as part of its standard investigative process.
Industry analysts and market observers have expressed concern over the potential implications of the case, particularly given the prominence of both 영풍 and 고려아연 in South Korea’s non-ferrous metals sector. A finding of violation could result in corrective orders, including the requirement to dismantle the alleged shareholding structure, alongside possible administrative sanctions. The FTC has not yet announced a timeline for its final determination, but officials have indicated that the review is progressing with attention to the legal standards established in prior circular shareholding cases.
Understanding Circular Shareholding and Korean Antitrust Law
Circular shareholding, or 순환출자, occurs when a group of companies owns shares in each other in a way that creates a closed loop of control, such as Company A owning shares in Company B, which owns shares in Company C, which in turn owns shares in Company A. Under Article 22 of the Monopoly Regulation and Fair Trade Act, the formation of new circular shareholding structures is generally prohibited if This proves deemed to facilitate unfair business practices, such as entrenching management control without sufficient shareholder oversight or enabling coordinated behavior that undermines market competition.
The law permits existing circular structures that were established before certain regulatory thresholds or that meet specific exemption criteria, but any new formation after the law’s enactment requires regulatory scrutiny. Authorities assess whether such arrangements serve a legitimate business purpose or are primarily designed to consolidate control in ways that may disadvantage minority shareholders or distort market dynamics. In the case of 영풍 and 고려아연, the FTC is evaluating whether the apply of an intermediary subsidiary (YPC) to facilitate the transfer of shares was intended to circumvent these prohibitions.
Legal experts note that proving intent and structural impact is central to such cases. The FTC must demonstrate not only the existence of the shareholding loop but also that it was formed after the relevant legal restrictions took effect and that it risks enabling anti-competitive coordination or unfair dominance. The burden of proof lies with the regulator, and companies involved typically have the opportunity to present defenses regarding business rationale and compliance efforts.
Corporate Responses and Market Impact
As of the FTC’s December 2025 on-site inspection, neither 영풍 nor 고려아연 has publicly admitted to any wrongdoing related to the allegations. Both companies have maintained that their corporate actions comply with applicable laws and regulations. In previous statements, 영풍 has described the establishment of YPC as part of a broader organizational restructuring aimed at improving operational efficiency, while 고려아연 has emphasized its commitment to transparent governance and regulatory cooperation.
The investigation has drawn attention from institutional investors and corporate governance advocates, who warn that unresolved concerns over shareholder control mechanisms could affect investor confidence and valuation metrics for the involved firms. Market analysts have noted that while the FTC’s process remains ongoing, any eventual finding of violation could prompt shareholder actions or require structural changes that may influence strategic planning across the sector.
South Korea’s stock exchange regulations require listed companies to disclose material information that could affect investment decisions, and both 영풍 and 고려아연 are obligated to keep shareholders informed of significant developments in regulatory proceedings. To date, no formal sanctions or corrective measures have been imposed, and the companies continue to operate under normal market conditions while the FTC’s review is underway.
Next Steps in the Regulatory Process
The FTC has not announced a specific date for the conclusion of its investigation or the issuance of a formal decision. However, based on standard procedural timelines for similar cases, the agency typically completes its review within several months of concluding on-site inspections, followed by a period for deliberation and potential administrative hearings if contested. Interested parties, including the companies involved and any third-party complainants, will have opportunities to respond to preliminary findings before any final determination is made.
Stakeholders seeking updates are advised to monitor the FTC’s official website and press releases, where notices of hearings, preliminary reports, and final decisions are typically published. Filings made by 영풍 and 고려아연 with the Financial Supervisory Service and the Korea Exchange may contain relevant disclosures as the process evolves.
This case underscores the ongoing focus of Korean regulators on preventing the use of complex corporate structures to circumvent fair competition principles. As the investigation progresses, it will serve as a test of how rigorously Article 22 is applied in instances involving intermediary subsidiaries and cross-held equity among major industrial groups.
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