Major Conglomerate Heads Must Disclose Overseas Affiliate Status Starting Next Year

Fair Trade Commission Issues Administrative Notice on Amendments to Four Notices Including Detailed Disclosure Procedures

[Sejong=Asia Economy Reporter Joo Sang-don] Starting next year, the head of a large corporation (same person) must disclose general information such as the representative and business details of overseas affiliates in which the head’s family holds 20% or more of the shares, as well as shareholder status. Until now, only overseas affiliates where domestic affiliates were the largest shareholders were disclosed, and this disclosure obligation was imposed on the corporate group. Going forward, the head must disclose overseas affiliates where the head’s family holds 20% or more of the shares.

On the 3rd, the Fair Trade Commission announced that it will revise the “Regulations on Disclosure of Important Matters of Companies Belonging to Disclosure Target Corporate Groups” accordingly and will give administrative notice until the 23rd.

Previously, the fully revised Monopoly Regulation and Fair Trade Act (effective December 30, 2021), enacted on December 29 last year, requires the same person to disclose ▲ shareholder status of overseas affiliates in which the head’s family holds 20% or more shares ▲ stock ownership status of overseas affiliates directly or indirectly invested in domestic affiliates.

This revision of the notice specifies the general status, stock ownership status (shareholders and investment status), and circular shareholding status that the same person must disclose. Accordingly, the same person must disclose the general information and shareholder status of overseas affiliates where the head’s family owns 20% or more of the total issued shares, including company name, representative, country of location, establishment date, and business details, classified by the same person and relatives, non-profit corporations, affiliates, treasury stocks, etc. In addition, the general information and stock ownership status of overseas affiliates that directly or indirectly own shares of domestic affiliated companies must also be disclosed. The purpose is to encourage voluntary improvement of ownership, governance structure, and management practices by strengthening the responsibility and transparency of transactions by the disclosure target corporate groups themselves.

Once this revision is finalized, the same person must disclose the status of overseas affiliates by May 31, based on the designation date of the disclosure target corporate group (usually May 1 each year). However, the Fair Trade Commission plans to specify exemption reasons for overseas affiliate disclosure through amendments to the Enforcement Decree of the Fair Trade Act. A Fair Trade Commission official said, “There was an opinion from corporate groups that it is unreasonable to hold the same person responsible if the relatives do not cooperate and the same person cannot fulfill the disclosure obligation for overseas affiliates,” adding, “Therefore, if relatives refuse to provide information and there is no investment or transaction relationship between the relative’s company and domestic affiliates, it is practically impossible for the same person to disclose, so the disclosure obligation will be exempted in such cases.”

Along with this, the Fair Trade Commission will also revise the notice related to board resolutions and disclosure systems of public interest corporations. The fully revised Fair Trade Act requires public interest corporations to obtain prior board approval and disclose when acquiring or disposing of shares of domestic affiliates or conducting internal transactions above a certain scale.

Accordingly, public interest corporations must disclose acquisitions and disposals of domestic affiliate shares, funds, securities, assets amounting to 5% or more of the larger of total net assets or basic net assets, or 5 billion KRW or more, and transactions of goods and services with affiliates invested by the same person and relatives. Board resolutions must follow the procedures and methods under the Act on the Establishment and Operation of Public Interest Corporations and be disclosed within 7 days after the resolution.

This revision also includes provisions to exempt small unlisted companies with total assets under 10 billion KRW from the obligation to disclose important matters, thereby reducing corporate burdens.

The Fair Trade Commission plans to finalize the revision after fully collecting opinions from stakeholders and related ministries during the administrative notice period, through plenary meeting resolutions, and implement it in line with the enforcement date of the fully revised Fair Trade Act.

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