General Holding Company CVC Must Submit Annual Investment and Contribution Details with Supporting Documents

Fair Trade Commission Revises and Implements Reporting Guidelines for Holding Companies

[Sejong=Asia Economy Reporter Joo Sang-don] Corporate Venture Capital (CVC) of general holding companies must report investment details, investor details by investment association, and sales details of stocks and bonds of CVC-invested companies within 4 months from the end of each fiscal year.

The Fair Trade Commission announced on the 27th that it has revised and will implement from the 30th the "Guidelines on Reporting the Establishment/Conversion of Holding Companies and Business Details of Holding Companies, etc." containing these provisions.

This revision aims to stipulate related reporting procedures and forms to implement the allowance of general holding companies to hold CVCs and the deregulation of the establishment and operation of venture holding companies following the full revision of the Fair Trade Act.

The fully revised Fair Trade Act permits general holding companies to establish and hold CVCs to revitalize venture investment, while imposing certain behavioral restrictions such as limiting external funding to less than 40% in CVC financing and investment to prevent side effects from the relaxation of the separation of financial and industrial capital. Additionally, to monitor whether businesses comply with these regulations, general holding companies are required to report the acquisition and ownership of CVC stocks, CVC investment status, and investor details according to the standards set and announced by the Fair Trade Commission.

Based on the delegation of legal provisions, the revised notice establishes procedures and submission documents for general holding companies to report the acquisition and ownership of CVC stocks and CVC’s investment status and investor details.

Holding companies are required to submit a stock ownership report form and specify the types of attached documents when a general holding company acquires and owns CVC stocks.

CVCs, subsidiaries of general holding companies, must submit investment details, investor details by investment association, sales details of stocks and bonds of CVC-invested companies, and supporting documents related to investment and contributions within 4 months from the acquisition date of CVC stocks and the end of each fiscal year.

The fully revised Fair Trade Act has significantly eased the establishment requirements and operational regulations of venture holding companies to improve their utility. The total asset requirement for establishing a venture holding company has been lowered from 500 billion KRW to 30 billion KRW, and mandatory shareholding ratios in subsidiaries have been relaxed to enable freer venture investment. However, to monitor and prevent side effects such as private benefit appropriation arising from deregulation, venture holding companies and their affiliated companies must submit internal transaction status reports annually. Accordingly, venture holding companies and their subsidiaries, grandchild companies, and great-grandchild companies must prepare and submit transaction details with affiliated companies within the corporate group, categorized into four transaction types: fund transactions, securities transactions, asset transactions, and goods/services transactions.

A Fair Trade Commission official stated, "This revision is expected to contribute to achieving the primary goal of revitalizing venture investment by allowing general holding companies to hold CVCs and easing regulations on venture holding companies, while establishing a foundation to efficiently monitor side effects such as private benefit appropriation by controlling shareholders. Additionally, rationalizing reporting regulations related to holding company business reports is expected to resolve difficulties faced by businesses during system operation and reduce unnecessary corporate burdens."

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