[비즈한국] Recently, 'internal transactions' at HYBE352820 have come under scrutiny. This is because in the third quarter of this year, the subsidiary HYBE IM received 4 billion won from ADOR. ADOR collaborated with Krafton259960, the operator of the game Battlegrounds, using NewJeans IP, but the licensing revenue was taken by HYBE IM, a game software company. Since ADOR's IP was utilized, allegations have been raised that the internal transaction details are opaque, especially given that ADOR paid costs to HYBE IM. Furthermore, questions have been raised regarding the producing services provided to subsidiaries by HYBE chairman Bang Si-hyuk. While Chairman Bang provides producing services to HYBE labels, such details cannot be found in disclosure documents.
Is Chairman Bang Si-hyuk’s Producing Not Subject to Disclosure?
HYBE is a company subject to regulations on the appropriation of private interests. These regulations apply to companies where the head’s family holds a stake of 20% or more, and companies in which such entities hold more than a 50% stake. According to the 2024 status of share ownership for corporate groups subject to disclosure, announced by the Fair Trade Commission in August, HYBE had the highest proportion of companies subject to private interest appropriation regulations at 93.3%.
HYBE maintains a structure rarely seen among domestic entertainment companies. It has HYBE as a parent company with management, game development, and platform companies as subsidiaries. While common in large conglomerates, this 'multi-label' structure is unusual in entertainment. Although the stated goal is to guarantee autonomy between labels, in terms of equity, it is a one-man system led by Chairman Bang Si-hyuk. Chairman Bang is the largest shareholder holding 31.6% of HYBE shares and serves as the chairman of the board. All of HYBE's major labels are subsidiaries of HYBE.
Chairman Bang Si-hyuk is also a famous producer. Before becoming the head of HYBE, he made a name for himself as the producer who created BTS. In entertainment, producing ability is directly linked to an idol's success—and thus, revenue. Chairman Bang also takes on producing roles for artists under HYBE labels. He has produced LE SSERAFIM under Source Music, ILLIT under BELIFT LAB, &TEAM under HYBE LABELS JAPAN, and KATSEYE under HYBE AMERICA. Notably, Chairman Bang served as the 'executive producer' for LE SSERAFIM and ILLIT.
It is not that Chairman Bang Si-hyuk is employed as a producer by HYBE or its subsidiaries. It is a form where he remains HYBE chairman while providing producing services to certain labels. The strange part is that no record of Chairman Bang's producing services can be found in HYBE’s disclosure materials. While the fact that Chairman Bang produces has been publicized through press releases distributed by HYBE, it is entirely absent from disclosure documents such as financial statements and business reports.
In principle, transactions between Chairman Bang Si-hyuk and HYBE labels fall under 'related-party transactions.' The Korea Accounting Institute's corporate accounting standards define related-party transactions as 'the transfer of resources, services, or obligations between related parties, regardless of whether a price is charged.' It further states, 'In the case of related-party transactions, the nature of the related-party relationship, as well as information about transactions and outstanding balances necessary to understand the potential impact of the relationship on financial statements, must be disclosed in the footnotes.'
HYBE explains that it does not enter into individual service contracts every time Chairman Bang Si-hyuk provides producing services to a label. They state that the services are provided when a label requests them from Chairman Bang. A HYBE official stated, "Because Chairman Bang receives royalties proportional to his participation share when he produces, it is not considered a related-party transaction. Therefore, it is not subject to disclosure."
In short, the explanation is that although Chairman Bang provides producing services to the labels, he does not receive a separate fee for them. However, a transaction does not need to involve a fee to be classified as a related-party transaction.
Financial Supervisory Service: "Currently Reviewing Complaints Related to HYBE"
Noh Jong-eon, an attorney at Law Firm Junsang, explained, "It is a situation that doesn't usually happen in corporations. For example, it's like the chairman of Samsung Electronics005930 going to a Samsung subsidiary's factory to perform design work. Receiving the producing services of an influential producer like Bang Si-hyuk—an intangible asset—for free could be seen as a transaction under conditions significantly more favorable than normal terms, which leaves room for it to be a subject of disclosure. Usually, disclosure regulations related to related parties are meant to prevent the parent company or chairman from receiving undue profit, but this can be seen as the opposite."
Regarding this, an official from the Financial Supervisory Service stated, "Related-party transactions are matters that must be disclosed. However, whether Chairman Bang Si-hyuk's provision of producing services needs to be disclosed can be determined during an accounting audit by considering whether it constitutes a related-party transaction and its impact on investors' decisions. We are currently looking into several complaints related to HYBE. We are not yet at the stage of initiating an accounting audit."