From now on, acquisitions of companies with transaction amounts of 600 billion KRW or more and high growth potential must be reported to the Fair Trade Commission

Revision and Implementation of 'Corporate Merger Notification Guidelines'

Introduction of Transaction Amount Reporting System through Fully Revised Fair Trade Act

Even if the company size is less than 30 billion KRW, reporting is required when acquiring companies with high 'potential growth'
Criteria for growth assessment: 'Selling to more than 1 million people monthly in the domestic market or annual expenditure of 30 billion KRW or more on domestic research personnel, etc.'

[Sejong=Asia Economy Reporter Joo Sang-don] In the future, even if the total assets of the acquisition target company are less than 30 billion KRW, if the transaction amount is 600 billion KRW or more and the company has significant activities in the domestic market with high potential growth, the merger must be reported to the Fair Trade Commission.

The Fair Trade Commission announced on the 29th that it will revise and implement the "Guidelines for Reporting Corporate Mergers (Notice)" on the 30th, reflecting this content.

This revision aims to specify the method of calculating transaction amounts and the criteria for assessing the significance of domestic activities to implement the transaction amount-based reporting system introduced by last year's full revision of the Fair Trade Act.

The fully revised Fair Trade Act introduced a transaction amount-based reporting system in addition to the previous company size (total assets or sales) reporting criteria. Accordingly, if one party in a corporate merger has total assets or sales of 300 billion KRW or more and the other party has 30 billion KRW or more, or in the case of foreign companies, if domestic sales are 30 billion KRW or more, a reporting obligation arises.

At this time, even if the acquisition target company's size is currently less than 30 billion KRW, if the company has high potential growth that may affect market competition, subordinate regulations (notices) are being revised accordingly.

Transaction amounts are calculated based on type-specific criteria. First, the transaction amount for stock acquisition and ownership is defined as the sum of the value of the acquired or owned stocks and the assumed liabilities. For example, if Company A, which owns 5% of Company B's stock (book value 4.5 billion KRW), acquires 50% of the shares for 590 billion KRW, the transaction amount is the sum of the newly acquired amount of 590 billion KRW and the existing stock book value of 4.5 billion KRW, totaling 594.5 billion KRW. Company B's debt (10 billion KRW) is also reflected proportionally to the shareholding (55%), amounting to 5.5 billion KRW. Therefore, the total transaction amount becomes 600 billion KRW.

In the case of mergers, the transaction amount is the sum of the value of shares issued as merger consideration and the assumed liabilities; in business transfers, it is the sum of the transfer price and assumed liabilities; and in company establishment participation, it is the capital contribution of the largest investor under the joint venture agreement.

For example, if Company G and Company H enter into a contract to establish a company with capital contributions of 600 billion KRW and 20 billion KRW respectively, the transaction amount is the capital contribution of the largest investor, 600 billion KRW.

The 'significance of domestic activities' to be considered along with the transaction amount is recognized if 'in the past three years, the company has sold or provided goods or services to more than 1 million people monthly in the domestic market' or 'in the past three years, the company has leased domestic R&D facilities or utilized research personnel with an annual related budget of 30 billion KRW or more.'

Additionally, the revision stipulates that simplified reporting cases, which do not require extensive documentation during corporate merger reviews, should primarily be reported online through the Fair Trade Commission's website.

A Fair Trade Commission official said, "With this revision, it will help assess whether corporate mergers involving startups or companies with small size but high growth potential and transaction amounts exceeding a certain scale (600 billion KRW) restrict competition." He added, "The Fair Trade Commission plans to actively explain the revised contents through education for businesses so that the transaction amount-based reporting system and the online simplified reporting system can be quickly established in the market."

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