Will the Ruling Party Accelerate or Decelerate the Corporate Bill?

13 Days Until the Opening of the 21st National Assembly... Ruling Party's Dominance, Tension as Checks and Balances Disappear

[Asia Economy Reporter Kiho Sung] With the opening of the 21st National Assembly just 13 days away, tension is rising in the business community. The 'supermajority ruling party,' having secured 177 seats enabling unilateral passage of bills, is raising concerns that it may aggressively push forward 'regulatory bills' as part of its campaign promises. Amid an unprecedented economic crisis triggered by the COVID-19 pandemic, the business sector points out that 'anti-business legislation' will inevitably become an additional burden on the economy. Even within the ruling party, voices are emerging that call for a slowdown in line with the New Deal policy adopted by the Blue House as a strategy to overcome COVID-19.

According to the 'Regulatory Reform Portal' of the Presidential Committee on Regulatory Reform on the 18th, since the start of the 20th National Assembly's term on May 30, 2016, a total of 3,923 regulatory bills have been proposed by lawmakers up to this date. These bills contain 7,277 regulatory provisions.

The problem lies with the 21st National Assembly, where the ruling party can pass bills unilaterally. The Democratic Party of Korea secured 177 seats, while the opposition parties' seats have decreased accordingly. The checks and balances to prevent the ruling party's dominance have disappeared. Furthermore, the Democratic Party has included many regulatory bills that were abolished in the 20th National Assembly as campaign promises for the 21st general election.

Among these, the business community is most concerned about the amendment to the Commercial Act. Through the 21st general election manifesto, the ruling party has stated its intention to reintroduce seven regulatory bills that were pursued in the 20th National Assembly, including ▲the multiple derivative lawsuit system ▲mandatory electronic signature voting and cumulative voting system ▲introduction of separate election of audit committee members ▲prevention of major shareholder family control strengthening through treasury stocks.

The amendment to the Commercial Act is expected to be led by Representative Yongjin Park. He plans to continue pushing the Commercial Act amendment he pursued in the 20th National Assembly into the 21st National Assembly. The current Commercial Act allows companies to use treasury stocks when conducting spin-offs or split mergers. Treasury stocks are allocated new shares from the spin-off and exchanged for the controlling shareholder's shares in the spin-off company. However, the key point of the amendment Park plans to pursue in the 21st National Assembly is to prohibit the allocation of new shares from spin-offs to treasury stocks. If this amendment passes as is, SK Group, which has recently increased its treasury stocks, will have to reconsider its corporate governance restructuring direction.

There is also an expectation that the Fair Trade Commission's exclusive right to prosecute will be abolished and that the Fair Trade Act amendment to strengthen regulations on large and medium-sized enterprises' internal transactions will be reintroduced. If the exclusive right to prosecute of the Fair Trade Commission is abolished, anyone will be able to report unfair corporate practices to the prosecution. The business community fears indiscriminate accusations resulting from this. The regulation on internal transactions currently applies to affiliates owned 30% or more by the controlling family and 20% for unlisted affiliates; the amendment expands this to affiliates owning 20% of shares. If passed, major companies such as Hyundai Glovis and GS Construction will be included in the regulatory scope.

In the labor sector, comprehensive amendments to laws such as the Labor Standards Act and the Trade Union Act are anticipated. These include ▲guaranteeing activities of non-regular worker union representatives ▲allowing dismissed workers to join unions ▲guaranteeing severance pay for workers with less than one year of service ▲strengthening conditions for layoffs, all of which restrict labor flexibility.

Additionally, ▲the amendment to the Distribution Industry Development Act ▲regulations on large franchise store openings ▲consumer class action lawsuits are expected to become hot-button 'anti-business bills.'

The business community is calling for a slowdown in the push for regulatory bills amid the already heightened management uncertainties caused by the COVID-19 crisis. An executive from one of the top four conglomerates said, "Contrary to the government's intention to revive the economy through the New Deal policy, it is not right to harm the economy with regulatory bills that hinder corporate activities. We hope that discussions on regulatory bills by the political circles, which are said to be aimed at saving small business owners and self-employed people, proceed more rationally and logically."

This content was produced with the assistance of AI translation services.