Reduction of Scope for Independent Executive Officers...Only Family Members Related to the Owner Among Executive Relatives Are Subject to Investment Restrictions

Administrative Notice on the Amendment of the 'Independent Management Recognition System Operation Guidelines'

[Asia Economy Reporter Joo Sang-don] Going forward, the relatives of executives who are not related to the same person (head) of a business group will be allowed to hold shares in companies belonging to the business group.

The Fair Trade Commission announced on the 12th that it has prepared a revision of the "Independent Management Recognition System Operation Guidelines" containing this content and will conduct an administrative notice for 20 days until November 1.

The Independent Management Recognition System is a system that excludes a company from the group and excludes the relevant relatives or executives (independent managers) of the same person of the business group from the same person-related parties when it is recognized that they independently manage the company.

The current guidelines stipulate that the scope of persons related to independent managers, who must meet the independent management recognition requirements such as investment restriction requirements based on the independent management confirmation letter, should be determined. In the case of executive independent management, when preparing the independent management confirmation letter, the spouse of the executive, relatives within the sixth degree of kinship, and all relatives within the fourth degree of affinity must be listed as persons related to the independent manager.

Therefore, for executive independent management, even if there is no relation to the same person of the business group, relatives within the sixth degree of kinship of the executive were restricted from holding shares in companies belonging to the business group, and executives who wanted to conduct independent management had to identify all relatives and manage their investments.

Accordingly, the revision requires that when filling out the independent management confirmation letter, only those who are relatives of the executive and also related to the same person of the business group be listed. This reduces the scope of relatives of executives subject to investment restriction requirements as persons related to independent managers.

However, to prevent evasion of regulations through loopholes, if an executive holds shares through nominees such as relatives, the executive independent management may not be recognized or may be canceled.

Additionally, the revision allows the Fair Trade Commission to request corrections or, ex officio, request submission of documents if the application documents are incomplete at the time of applying for independent management.

Post-management of relative independent management will be strengthened. Currently, to monitor unfair support between companies belonging to the business group and companies under relative independent management, companies that applied for relative independent management are required to submit transaction details with the business group for three years after independent management. However, companies newly acquiring control by independent management relatives after independent management are not obligated to submit transaction details, limiting the monitoring of unfair support. Therefore, the obligation to submit transaction details has been expanded to include companies newly acquiring control by independent management relatives for three years after independent management.

A Fair Trade Commission official said, "This revision actively reflects difficulties raised during the operation of the system so far, enhancing the rationality of the executive independent management system, which will make it easier for companies to recruit competitive talent." He added, "During the administrative notice period, we will fully collect opinions from stakeholders and finalize and implement the revision within this year after procedures such as committee resolution."

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