Concerns Over 'Economic 3 Laws' Even Within the Ruling Party... 3% Rule and Exclusive Prosecution System Abolition Harm SMEs

Deputy Minister of Justice Lee Yong-gu and Deputy Chief of the Court Administration Office Kim In-gyeom are attending the 'Agenda Coordination Committee on the Partial Amendment to the Act on the Establishment and Operation of the High-ranking Officials' Crime Investigation Agency' held at the National Assembly's Legislation and Judiciary Committee on the 8th. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Wondara] Concerns remain within the ruling party over the forced passage of the Democratic Party's 'Fair Economy 3 Laws.' Initially, there were worries that the '3% rule' and the abolition of the exclusive prosecution system could negatively impact small and medium-sized enterprises (SMEs), but these issues were all excluded during the legislative process this time.

According to the National Assembly's Political Affairs Committee on the 8th, the Listed Companies Act proposed by Democratic Party lawmaker Kim Byung-wook is expected not to be brought to the plenary session on the 9th as it remains under committee review. A representative from Kim's office said, "The Listed Companies Act is currently pending in the Political Affairs Committee," adding, "It is unrealistic to expect it to be passed in this plenary session."

The Listed Companies Act, proposed by Kim in September, primarily exempts listed companies with less than 100 billion won in market capitalization from the obligation to appoint outside directors. If this bill passes, it would relax the so-called '3% rule,' which limits controlling shareholders to exercising voting rights on a maximum of 3% of shares when appointing auditors. This was noted as a measure to address concerns that the existing Fair Economy 3 Laws might threaten the management rights of small-scale companies.

At a forum on the Listed Companies Act held in July, Kim stated, "The significance of the Listed Companies Act lies in consolidating the special provisions for listed companies scattered across the Commercial Act and the Capital Markets Act," and added, "Through this process, we expect to see effects such as shareholder-centered general meetings and the establishment of rational corporate governance."

Concerns raised within the ruling party about the abolition of the exclusive prosecution system were also not discussed during the processing of the Fair Economy 3 Laws. Initially, there were worries within the ruling party that abolishing the exclusive prosecution system could harm SMEs and venture companies, which generally have less legal team capacity compared to large corporations. A Democratic Party Political Affairs Committee official expressed, "If the exclusive prosecution system is abolished, companies could be summoned by prosecutors frequently," adding, "While large corporations with strong legal teams may not be significantly affected, SMEs and venture companies could face situations where owners are summoned by prosecutors daily, effectively paralyzing company operations even if only one prosecution case is filed."

Meanwhile, there is also a possibility that the regulatory level of the Fair Economy 3 Laws could be further strengthened at the agenda adjustment committee. Bae Jin-kyo, a Justice Party lawmaker appointed as an agenda adjustment committee member for the Political Affairs Committee, stated in a press release that "Although the Fair Trade Act appears to be the maximum reform for conglomerates, in reality, it has already been diluted by reflecting industry opinions, with the exclusive prosecution right only partially abolished, significantly weakening its reformative nature," and added, "I will strive to supplement the shortcomings of the government's proposed amendments to the Fair Trade Act to alleviate the economic monopoly of conglomerates and large corporations and to reform governance."

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