Chung Yoo-seok, the third-generation owner and CEO of Ilyang Pharmaceutical, is set to become the company's largest shareholder through a stake transfer. Analysts say former chairman Chung Do-eon decided on the transfer after trading was suspended and the share price plunged last year amid allegations of accounting fraud.
According to industry sources Monday, Chung will receive 1.7 million shares of Ilyang Pharmaceutical from his father, former chairman Chung Do-eon. The former chairman's stake will fall to 12.64% from 21.34%, while Chung's stake will rise to 12.84% from 4.14%.
Some interpret the transfer to Chung as having taken place after the share price decline to reduce the gift tax burden. Ilyang Pharmaceutical closed at 7,870 won on the 30th of last month, down 47.85% over the past year. Based on that share price, the transfer of 1.7 million shares amounts to 13.4 billion won. Applying the top rate of 50% to this figure, the gift tax is estimated at approximately 6.7 billion won.
Ilyang Pharmaceutical's weak share price stemmed from allegations of accounting fraud that surfaced last year. Financial authorities determined last year that the company had overstated its net profit and equity capital over an extended period by including a Chinese joint venture in its consolidated accounts. Charges of accounting violations triggered a listing eligibility review, and trading was suspended from September last year to March this year.
