'Core Technology' Companies Face Tougher Overseas Sales... Government Approval Required Even for Selling 30% Stake

Government Announces 'Our Technology Protection Strategy Amid Global Tech Hegemony Competition'
Establishing Core Talent DB for Direct Government Management... Strengthening Punishment Standards for Technology Leakage Also Planned

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government is set to strengthen the approval criteria for mergers and acquisitions (M&A) when companies holding national core technologies sell their shares overseas. To prevent the overseas outflow of key personnel, the government will directly establish and manage a database (DB) of core personnel, expand the designation of national core technologies, and also push to strengthen penalties for technology leakage. Amid the intensifying global technological hegemony competition such as the US-China tech rivalry and increasing attempts by foreign capital to acquire Korean companies like MagnaChip, the government aims to enhance technological security and national competitiveness by protecting our core technologies and personnel.

On the morning of the 23rd, the government announced the "Our Technology Protection Strategy under Global Technological Hegemony Competition" at the Government Complex Seoul, chaired by Prime Minister Kim Boo-kyum during the National Policy Issue Inspection and Coordination Meeting.

First, companies holding national core technologies must obtain government approval when selling shares to foreigners, and the current standard of selling '50% or more' of shares will be tightened to '30% or more.' If a foreigner acquires 30% or more of the company's shares and becomes the largest shareholder, the government can directly decide whether to approve the M&A, thereby expanding the scope of overseas M&A review.

Previously, even if a foreigner acquired less than 50% of shares, the government would review the M&A if the acquirer became the largest shareholder and exercised dominant influence over executive appointments and management. However, going forward, even if the acquired shares are less and the acquirer does not become the largest shareholder, if the acquirer exercises dominant influence over business execution such as executive appointments, organizational changes, or new business investments, the government will also be able to decide on M&A approval, including such cases in the regulatory scope.

The scope of foreigners subject to government M&A regulations will also be expanded. Dual nationals, foreign private equity funds (PEFs), and domestic corporations controlled by foreigners will be regarded as foreigners to prevent regulatory gaps caused by indirect foreign investments. Currently, only companies holding national core technologies that sell shares overseas are required to report M&A to the government, but going forward, foreign acquirers will also be required to apply for government approval, imposing a reporting obligation.

An official from the Ministry of Trade, Industry and Energy said, "There is a risk of regulatory blind spots, such as when a foreigner does not acquire shares of a company holding national core technologies but acquires shares of the parent company that effectively controls the company," adding, "We will strengthen the effectiveness of the overseas M&A review system by including a wider variety of M&As in the regulatory scope."

To prevent the overseas outflow of personnel holding national core technologies, the government will directly operate a core personnel management pool. To this end, the government plans to build a personnel database (DB) system by 2023 and directly monitor the entry and exit information and job changes of the relevant personnel. The government will initially implement this for personnel requiring job change restrictions who have consented to the provision of personal information, and plans to gradually expand the management personnel through future legislation.

To encourage long-term retention of core personnel, a fund will be established with a 70:30 ratio between large corporations and the government to provide incentives.

Additionally, the designation of national core technologies will be significantly expanded from the current 12 fields and 73 designations. Key technologies such as semiconductors, displays, batteries, and materials, parts, and equipment (SoBuJang) that have secured global competitiveness will be newly designated as national core technologies to restrict overseas leakage. A "technology sunset system" will be introduced to revoke the designation of technologies whose protection value has declined, creating an environment where technology exports can be revitalized and reinvestment in advanced technologies can form a virtuous cycle.

The government will also push to establish sentencing guidelines for industrial technology leakage in courts. According to the current Supreme Court Sentencing Guidelines Committee, overseas leakage of national core technologies is punishable by imprisonment of three years or more and a fine of up to 1.5 billion KRW. The government plans to propose the establishment of a new category for industrial technology leakage infringement and strengthening of sentencing guidelines to the Sentencing Commission in the second half of 2023.

An official from the Ministry of Trade, Industry and Energy stated, "Recently, latecomer countries in technology have been attempting to steal technology through various methods such as overseas M&A, personnel poaching, and cyber hacking," adding, "We will respond with all government ministries to prevent the overseas outflow of core technologies and personnel in response to changes in the global technology protection environment."

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