SPC Group Chairman Hur Young-in leaves the Seoul Central District Court on Friday, after being acquitted of charges related to evading gift taxes through undervalued share transactions. (Yonhap)

The Seoul Central District Court on Friday acquitted Hur Young-in, chairman of South Korea's largest bakery chain, SPC Group, of charges related to gift tax evasion through undervalued share transactions.

Hur was accused of selling shares of Mildawon, the family-owned grain company, at below-market rates in December 2012 to avoid gift taxes. The shares sold for 255 won each, markedly lower than their 2011 appraised value of 1,180 won and their 2008 purchase price of 3,038 won.

Prosecutors claimed this resulted in financial damages to SPC affiliates Shany and Paris Croissant totaling over 18 billion won ($15.93 million), while benefiting another affiliate, Samlip, nearly 18 billion won.

The court, however, found the evidence insufficient to prove that the share pricing constituted a breach of duty or embezzlement. It highlighted the difficulty in projecting future growth in the grain processing sector, adding that the valuation method used by SPC Group -- based on the previous three years' net profits and losses -- was a standard approach for unlisted stocks and did not indicate improper intervention.

The court also expressed skepticism regarding the prosecution's claim that Chairman Hur's low-priced share transfers were aimed at evading the "nepotism gift tax." This specific tax targets indirect profits accrued by individuals, their children or relatives through directing business to a company where they hold shares.

However, the court found this interpretation unconvincing, emphasizing the lack of clear evidence linking the share valuation to a deliberate attempt at tax evasion through nepotistic channels.

The court added that Hur's family owned nearly all the shares of Paris Croissant and Shany at the time of the transaction, implying they ultimately were at the brunt of any losses.

SPC Group expressed gratitude for the court's decision, affirming its commitment to ethical management in both Korea and its global operations. The prosecution said it plans to appeal.