The charges against Chung Mong-koo, the chairman of Hyundai, come a month after he was arrested as a suspect in the raising of $138 million in slush funds since 2001 and causing damage estimated at more than $410 million to the group through misconduct.

The charges were announced on Tuesday by a spokesman for the supreme prosecutors office.

Hyundai, along with its Kia affiliate, is the world's seventh largest car manufacturer and has a 70% share of the South Korean market.

Prosecutors also plan to charge Chung's son Chung Eui-sun, the president of Kia, along with other Hyundai group executives after further investigation.

Chung Eui-sun was previously questioned over the case, although he was not detained.

Embezzlement and misappropriation of corporate funds, involving amounts more than $5.3 million, can each carry life jail terms in South Korea.

Family culture

The company is suspected of using a substantial portion of the slush fund to bribe government and financial officials in return for business favours.

The investigation has given an insight into how the South Korea's sprawling family-run conglomerates, or chaebol, shift money within group companies, using complex share ownership networks to control their business.

A Hyundai spokesman declined to comment.

Corporate experts say the inquiry will not deal a serious blow to Hyundai's push for expansion, especially in the US, China, India and Europe.

As part of that expansion, the company said it would proceed with the signing of a contract on Thursday to finalise a $1.26 billion deal to build a major auto plant at Nosovice in the northeast of the Czech Republic.

The plant is planned to turn out about 300,000 vehicles a year from 2008.