Police raid Korean Air holding company Hanjin KAL over alleged capital-markets law violations

South Korean police have raided Hanjin KAL, the holding company of the group that owns Korean Air, over alleged violations of the Capital Markets Act and other offenses.

The Seoul Metropolitan Police Agency’s financial crimes investigation unit said on Sept. 7 that it had recently searched Hanjin KAL and related locations. The investigation follows a complaint filed last May by the civic group Committee for People’s Livelihood Measures.

The group accused Hanjin Group Chairman Cho Won-tae and Hanjin KAL Chief Executive Ryu Kyung-pyo of contributing 440,044 treasury shares to an in-house employee welfare fund to protect management control.

The case emerged as Hanjin KAL faced the possibility of a management-control dispute with Hoban Group, its second-largest shareholder. Hoban raised its stake from 17.44% to 18.46% last year. Hanjin KAL then disposed of 0.66% of its treasury shares by contributing them to the welfare fund.

Unlike treasury shares, which do not carry voting rights, shares contributed to an employee welfare fund do carry voting rights. That difference led to the interpretation that Hanjin KAL had taken the step to defend management control against Hoban’s increased stake. The police raid forms part of the investigation into whether the move violated capital-markets law.