Samsung SDI Co., a battery making unit of South Korea’s largest conglomerate Samsung Group, will have to dispose 4.04 million shares in its affiliate Samsung C&T Corp. by August following stricter interpretation of the country’s antitrust regulations.

The order came from the Fair Trade Commission on Monday in compliance with a stricter regulatory guideline for conglomerates to prevent new cross-affiliate shareholding through reorganization.

Samsung SDI will have to sell 4,042,758 shares in Samsung C&T worth 541.7 billion won ($503.8 million) under Friday’s closing price by August 26 at the latest as it must not hold any shares in the sister company including those achieved through the merger of Samsung C&T and Cheil Industries in 2015.

Shares of Samsung C&T on Monday closed 1.87 percent down at 131,500 won, while shares of Samsung SDI ended 2.75 percent down at 177,000 won from the previous session.

Cross-shareholding management structure allows affiliated companies of big business groups to hold shares in each other based on a circular structure, allowing the group owner to have control over entire affiliates with little stake.

Upon merger of Samsung C&T and Cheil Industries in 2015, the FTC interpreted that the reorganization would “strengthen” its cross-shareholding structure. The new guideline is based on the interpretation that the merger “created” new stakeholding in Samsung C&T, giving the top conglomerate six months of grace period for Samsung SDI to dispose the shares.

If Samsung SDI does not dispose its shares in its sister firm Samsung C&T by August 26, it would be imposed with a corrective order, fines, and even criminal punishment.

An unnamed FTC official, meanwhile, advised that conglomerates with merger plans involving affiliates should review the latest established rule to prevent regulatory violation.

By Lee Jae-cheol and Lee Eun-joo

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