South Korea has said it will revoke the licence of the company that owns the ferry that sank with the loss of around 300 lives last month, as prosecutors prepare manslaughter charges against its chief executive.
Kim Han-Sik, head of Chonghaejin Marine Co, was picked up at his home south of Seoul and taken into custody in the south-western port city of Mokpo.
"Kim faces various charges including manslaughter and violating maritime law," senior prosecutor Yang Jong-Jin told AFP.
The charges stem from allegations that Mr Kim was involved in, or turned a blind eye to, the overloading of the Sewol's cargo consignment, which seen as a major contributing factor to its capsize on 16 April.
Meanwhile, the Ministry of Oceans and Fisheries said it planned to close down Chonghaejin's ferry operations entirely.
In a statement, the ministry said it would begin by revoking the company's licence to operate the route taken by the Sewol from the western port of Incheon to the southern island of Jeju.
At the same time it would pressure the owners to give up the licences to its two other routes between the mainland and outlying islands.
"The name of Chonghaejin Marine Co. will never be allowed to darken the ferry industry again," a ministry spokesman said.
Handcuffed and wearing a cap and surgical mask that hid his face, company head Kim Han-Sik was paraded before television cameras after he was detained.
"I apologise to the victims and the families," he said.
He then refused to answer further questions from reporters, staying silent with his head bowed.
The captain of the Sewol ferry has already been arrested along with 14 crew members and four lower-ranking Chonghaejin Marine officials.
The ferry had 476 people on board when it sank after listing sharply to one side and then rolling over.
Initial investigations suggest it was carrying up to three times its safe cargo capacity.
The confirmed death toll stood at 269 on Thursday, with 35 people still unaccounted for.
Ko Myung-Sok, spokesman for the federal disaster force, said operations to recover the remaining bodies had been repeatedly suspended because of conditions at sea, with powerful currents a constant danger for the dive teams.
"So far, 24 divers have been treated for injuries and decompression sickness," Mr Ko said.
The death of a diver on Tuesday has fuelled debate as to how long the recovery operation should continue.
The deciding factor so far has been the sensitivities of the relatives of those still unaccounted for.
The coastguard has promised that the giant floating cranes to be used in the salvage operation will only be brought in once all the bodies trapped in the submerged ship have been retrieved.
But with some bodies being recovered several kilometres away from the disaster site over the past week, it is unclear just how many remain trapped.