Large corporations with canceled transactions will be exempt from board resolution requirements going forward

Fair Trade Commission Revises 'Regulations on Board Resolutions and Disclosures for Large-scale Internal Transactions'

[Sejong=Asia Economy Reporter Joo Sang-don] Large corporations unilaterally canceled from transactions by the counterparty will no longer need to go through board resolution procedures.

The Fair Trade Commission announced on the 18th that it has revised the 'Regulations on Board Resolutions and Disclosures for Large-scale Internal Transactions' accordingly.

The board resolution and disclosure system for large-scale internal transactions is a system that requires companies belonging to publicly disclosed business groups to obtain prior board approval and disclose when conducting internal transactions amounting to 5 billion KRW or more, or 5% or more of the larger amount between capital stock or total capital.

Until now, if the main details of a transaction changed, board resolution and disclosure were required. Even the counterparty whose transaction was unilaterally canceled had to formally go through board resolution. Accordingly, when one party to a transaction cancels the transaction by board resolution, the counterparty can now conduct only a post-disclosure within 7 days from the cancellation date without board resolution. This has been improved.

The Fair Trade Commission also clarified the scope of exemption from board resolution for financial transactions conducted by companies engaged in finance and insurance businesses. Although board resolution is exempted when financial and insurance companies conduct financial transactions under standard contracts in 'routine transaction areas,' the interpretation was unclear, causing confusion such as omission of board resolutions. Through this revision, by limiting it to routine transaction areas related to the financial or insurance business conducted by the company, the scope of application of the special regulation has been clarified.

Additionally, under current regulations, non-financial and non-insurance companies can conduct quarterly batch board resolutions for financial transactions under standard contracts with affiliated financial companies. However, financial and insurance companies were excluded from this special regulation, raising fairness issues. Therefore, the scope of application has been expanded to all companies subject to internal transaction disclosure, allowing financial and insurance companies to conduct quarterly batch board resolutions when conducting financial transactions under standard contracts with affiliated financial or insurance companies in non-routine transaction areas.

A Fair Trade Commission official stated, "The revised standards will be implemented immediately," and added, "By revising the disclosure regulations, it is expected that the board resolution and disclosure system for large-scale internal transactions will be operated more rationally, thereby reducing the disclosure workload burden on companies belonging to publicly disclosed business groups."

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