"Corporate Clampdown" Fair Trade Act Amendment... Many Awaiting Approval

112 Unresolved Bills in the 20th National Assembly... 36 Cases Likely to Be Reintroduced

[Asia Economy Reporter Moon Chaeseok] As the Fair Trade Commission has reintroduced the amendment to the Monopoly Regulation and Fair Trade Act (Fair Trade Act) focusing on the abolition of exclusive prosecution rights, concerns are growing that other corporate tightening laws that were not processed in the 20th National Assembly may be pushed again in the 21st National Assembly.

According to the National Assembly Bill Information System on the 12th, out of 121 bills related to the 'Monopoly Regulation and Fair Trade Act' proposed during the 20th National Assembly session, 112 bills, accounting for 92.6%, were not passed (excluding alternative reflected dismissals and only applying expiration of term dismissals). Even excluding overlapping content and the full revision bill announced by the Fair Trade Commission on the 10th, there are 36 bills remaining. In the first six months after the opening of the 20th National Assembly, 33 bills, which is 27% of the 121 proposed bills, were introduced. Considering President Moon Jae-in's 'Equal Economy Theory' and Kim Tae-nyeon, the floor leader of the Democratic Party of Korea's message of 'Realizing Economic Justice,' the 'early firepower' could be repeated in the 21st National Assembly. Already, three bills have been proposed over six days from the 5th to the 11th.

A bill likely to be pushed again is the voting rights restriction law for mutual investment restriction business groups (with total assets of 10 trillion won or more), proposed by Democratic Party lawmaker Park Yong-jin in January 2017. Known as the 'Second Samsung C&T Merger Prohibition Law,' it prohibits companies belonging to mutual investment restriction business groups that operate financial or insurance businesses from exercising voting rights on domestic affiliate stocks they acquire or own.

The Fair Trade Commission also announced plans to revise the law with similar content but allows exceptions such as ▲when acquiring or owning stocks to engage in financial or insurance business ▲when acquiring or owning stocks with approval under the Insurance Business Act for efficient management of insurance assets ▲and when resolving one of the following at the shareholders' meeting of the relevant domestic affiliate (limited to listed companies): appointment or dismissal of executives, amendment of articles of incorporation, or merger with another affiliate. This is looser than the 'Park Yong-jin Law.'

The government also agrees with the law's intent to check major shareholders. Both the Fair Trade Commission and the Ministry of Justice have lowered the resolution conditions for shareholders' meetings from 'majority of voting rights of attending shareholders plus at least one-quarter of total issued shares' to 'majority of voting rights of attending shareholders' to curb major shareholders. The Financial Services Commission allows major shareholders to exercise only 3% of voting rights in auditor appointments.

Additionally, bills have been proposed to ▲strengthen administrative sanctions by the Fair Trade Commission and ▲strengthen corporate governance disclosure obligations. A notable example is the bill proposed by Democratic Party lawmaker Song Gap-seok on October 5, 2018, which raises penalties for unfair support acts and preferential treatment of family businesses from 'up to 3 years imprisonment or a fine of up to 200 million won' to 'up to 5 years imprisonment or a fine of up to 500 million won.'

Regulations requiring transparent management disclosure regardless of legal violations also stand out. Related bills include ▲disclosure of internal governance norms of large conglomerates (former lawmaker Lee Eon-ju, September 22, 2016) ▲regular surveys on internal transactions of business groups (former lawmaker Park Seon-sook, June 22, 2017) ▲disclosure of illegal acts by executives of business groups (former lawmaker Chae I-bae, September 12, 2018) ▲imposition of board resolution and disclosure obligations on internal transactions above a certain scale for disclosure-target business groups (with total assets of 5 trillion won or more) (Democratic Party lawmaker Lee Hak-young, October 24, 2018) ▲disclosure of land asset information held by disclosure-target business groups according to the Real Estate Price Disclosure Act (former lawmaker Lee Chun-seok, May 1, 2019), among others.

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