From Next Year, Large Corporations Must Disclose Internal Transactions with Logistics, SI, and Public Interest Corporations

Fair Trade Commission, Administrative Notice of Amendment to 'Regulations on Disclosure of Important Matters and Large-scale Internal Transactions'

[Sejong=Asia Economy Reporter Ju Sang-don] Starting next year, companies belonging to publicly disclosed business groups will be required to disclose internal transactions related to logistics and system integration (SI), as well as internal transactions with public interest corporations, once a year.

On the 31st, the Fair Trade Commission announced that it has prepared amendments to the 'Regulations on Disclosure of Important Matters by Companies Belonging to Publicly Disclosed Business Groups' and the 'Regulations on Board Resolution and Disclosure of Large-scale Internal Transactions' and will hold an administrative notice period until the 21st of next month.

Currently, internal transactions of goods and services by companies belonging to large business groups are disclosed only once a year as a total amount regardless of industry classification, and the status of internal transactions by industry is not disclosed. The Fair Trade Commission views this as limiting the ability to grasp and monitor specific industry conditions. Both logistics and SI industries have long seen the representative companies of business groups achieve significantly high sales through affiliates, increasing the need for monitoring. However, with the current disclosure items alone, it is impossible to confirm the sales status of companies engaged in logistics and SI through internal transactions or the purchase status of affiliated companies.

Accordingly, the Fair Trade Commission has newly established an obligation for companies belonging to publicly disclosed business groups to disclose the status of logistics and SI internal transactions once a year. Consequently, companies engaged in logistics and SI within these groups must disclose their sales status to affiliates, while companies not engaged in logistics and SI must disclose their purchase status of logistics and SI from affiliates.

However, the specific scope of the SI industry and the transaction scale subject to disclosure have not yet been determined. A Fair Trade Commission official explained, "Through discussions with the industry, we plan to specify the disclosure threshold for logistics and the scope of the SI industry by the first half of this year. However, daily-use transactions such as courier services and quick services used by employees are not considered subject to logistics transaction disclosure."

An obligation will also be newly established for companies belonging to publicly disclosed business groups to disclose internal transactions with public interest corporations once a year. Accordingly, when internal transactions involving funds, securities, assets, goods, and services occur with public interest corporations, the transaction details for each individual public interest corporation must be disclosed.

This follows the amendment of the Monopoly Regulation and Fair Trade Act last year, which imposed board resolution and disclosure obligations on large-scale internal transactions with public interest corporations. As a follow-up measure, the need to require companies belonging to publicly disclosed business groups to disclose the overall transaction status with public interest corporations has increased.

The newly established disclosure obligations for internal transactions with logistics, SI, and public interest corporations through this amendment will be implemented starting May next year, considering the preparation time needed by the relevant business groups.

Additionally, to reduce the disclosure burden on companies, if a transaction is canceled by one party’s board resolution, the counterparty can disclose the cancellation within seven days from the cancellation date without a board resolution. Furthermore, the scope of 'routine transaction areas' exempt from board resolution obligations for financial and insurance companies has been clearly limited to 'transaction areas within industries related to finance and insurance.'

The Fair Trade Commission plans to finalize and implement the amendment after collecting opinions from stakeholders during the administrative notice period and passing a resolution at the plenary meeting.

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