'Fair Economy 3 Laws' Passed by State Council... Business Community Reacts "Management Contraction" (Comprehensive)

"Business Community Opinions Not Reflected... Continued Discussions in the National Assembly"

[Asia Economy Reporter Kim Ji-hee] Following the passage of the 'Fair Economy 3 Acts'?including the amendments to the Commercial Act and the Fair Trade Act, as well as the enactment of the Financial Group Supervision Act?at the Cabinet meeting on the 25th, voices of concern from the business community about increased management burdens have erupted. In particular, there are criticisms that these measures could further stifle corporate activities amid rising anxieties over domestic and international economic crises caused by the novel coronavirus disease (COVID-19) pandemic.

First, regarding the amendments to the Commercial Act and the Fair Trade Act, the business community evaluates that the bills are filled with problematic provisions. In the case of the Commercial Act amendment, the introduction of the separate election system for audit committee members is said to have made it difficult to defend against speculative forces. Under the current Commercial Act, audit committee members are elected from among the directors after their appointment, but the amendment requires that at least one audit committee member be elected separately from the directors. It also includes a provision limiting the voting rights of the largest shareholder to 3% when combined with those of related parties.

Jung Young-seok, head of the Corporate Policy Team at the Korea Chamber of Commerce and Industry, explained, "Companies are expressing concerns about the separate election of audit committee members following the passage of the Fair Economy 3 Acts at the Cabinet meeting, especially regarding this issue. This is because limiting the voting rights of major shareholders could impose a significant burden on defense if speculative forces are elected as audit committee members."

Regarding the amendments to the Fair Trade Act, complaints about increased regulations are pouring in. The criteria for regulating internal transactions (self-dealing) have been strengthened from the current threshold of 30% ownership for listed companies and 20% for unlisted companies within the controlling family to a uniform 20% for both. This expands the number of companies subject to regulation. To avoid regulation, controlling shareholders must sell existing shares, and holding companies must acquire more shares of subsidiaries, thereby increasing corporate burdens.

There are also concerns that the abolition of exclusive prosecution rights will lead to a surge in accusations and investigations. In cases of serious collusion such as price-fixing or bid-rigging, any competitor can report large corporations to the prosecution, which can then proceed with investigations based on its own judgment.

Above all, the business community fears that these bills could hamper corporate activities already struggling due to COVID-19. Yoo Jung-joo, head of the Corporate System Team at the Federation of Korean Industries, said, "It is regrettable that the government is pushing forward with bills that impose significant management burdens on companies at a time when they are facing severe difficulties due to COVID-19." He urged, "Please prioritize the proposal and passage of bills aimed at overcoming the crisis and revitalizing the economy."

The Korea Employers Federation also expressed concerns in a comment on the same day, stating, "The amendments include many provisions that are excessive compared to global standards, such as the separate election of audit committee members under the Commercial Act and the regulation of self-dealing under the Fair Trade Act." They added, "These will significantly increase management burdens through excessive regulations on governance such as director appointments, excessive accusations related to collusion, and contraction of transactions between companies, which will negatively affect the global competitiveness of our companies."

They further noted, "In this difficult situation where the unprecedented infectious disease crisis and economic downturn may continue indefinitely, such regulatory tightening will further dampen corporate investment sentiment," adding, "Ultimately, this will also have a negative impact on economic recovery."

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