The Supreme Court of South Korea upheld earlier rulings to suspend the Financial Services Commission’s restrictions on Samsung BioLogics, citing fear of irreparable damage to the company.
Samsung BioLogics shares on Wednesday jumped just shy of 4 percent to 339,000 won ($285).
The Supreme Court’s decision is in line with the earlier ruling from the High Court, which had declared at end-May, “If, according to the suggested restriction, an FSC-appointed auditor replaces top financial officer of Samsung BioLogics, the company will be branded as a firm that has committed accounting fraud even before a ruling is made on the case. This will significantly impair BioLogics’ corporate image and credibility.”
“This may cause Samsung BioLogics’ core partners and investors to halt or withdraw business, creating an incorrigible management crisis which damage will be too great to be compensated or recovered.”
The SFC had made two separate suggestions for restrictions against BioLogics.
The first suggested restrictions, dated July 12, 2018, said that, “Samsung BioLogics violated accounting standards by intentionally omitting information regarding its joint venture agreement with Biogen in its public disclosure.”
It requested BioLogics to dismiss executives in charge, designate external auditors for three years and called for prosecutorial involvement.
The SFC’s second suggested restrictions, dated Nov. 14, 2018, says “BioLogics intentionally violated accounting rules by changing the accounting treatment of its stake in Samsung Bioepis from book value to fair market value in 2015.”
It called for dismissal of BioLogics’ chief executive, a fine of 8 billion won and referral of the case to the prosecutors. BioLogics’ auditor Samjong KPMG was to be imposed a fine of 170 million won and banned from auditing the company for the next five years, while Deloitte Anjin was to be barred from auditing BioLogics for the next three years.
On Sept. 6, the Supreme Court finalized its decision to suspend FSC’s ruling on the second restriction, and on Friday it ruled on a suspension of the first restriction.
The prosecution meanwhile plans to indict BioLogics within the year.
If the company is found guilty through the prosecutorial investigation, the FSC ruling will once again take effect, however, if the company wins the suit, the suspended restrictions will dissipate.
By Lim Jeong-yeo (firstname.lastname@example.org