Small Business Closure Non-Reporting Penalty Reduced from 3 Years to 1 Year Imprisonment

Second Improvement Task for Economic Penal Provisions

Regulations closely related to the livelihoods of low-income groups and self-employed individuals will be significantly improved. When small business owners close their businesses or make minor changes, they will no longer face reduced penalties for failing to report business succession within one month, aiming to mitigate side effects such as stigmatization and the proliferation of criminal records.

On the 2nd, the Ministry of Economy and Finance and related ministries announced at the 3rd Regulatory Innovation Strategy Meeting chaired by Prime Minister Han Duck-soo that they have prepared the second set of improvement tasks for economic penal provisions. Improvement plans for 108 regulations that constrain corporate activities will be prepared and collectively submitted to the National Assembly in May. This follows the first set of improvements announced last August, which selected 32 penal provisions across 17 laws, marking the disclosure of additional regulations for amendment about six months later.

They focused on improving regulations that suppress corporate freedom and creativity, those that impose penalties even for minor compliance failures, and those with excessive penalties or sentencing. Under Article 124, Paragraph 1, Subparagraph 1 of the Fair Trade Act, a market-dominant business operator who unfairly obstructs another business operator’s participation in activities is subject to imprisonment of up to three years or a fine of up to 200 million won immediately; however, going forward, corrective measures will be taken first before deciding on penalties. Under Article 276, Paragraph 4, Subparagraph 4 of the Customs Act, those who violate the measures of the Commissioner of Customs or the head of customs, or refuse, obstruct, or evade inspections, will see penalties changed from fines up to 10 million won to administrative fines up to 10 million won. Under Article 83, Paragraph 1, Subparagraph 6 of the Tourism Promotion Act, damaging or removing certification documents such as official standards, previously punishable by imprisonment of up to two years or fines up to 20 million won, will now be subject to administrative fines up to 1 million won. Those who fail to obtain approval for low-emission vehicle supply plans will have their penalties adjusted from fines up to 5 million won to administrative fines up to 5 million won.

Twenty-three regulations closely related to daily life will also be improved. Among laws with over 1,000 cases filed in the past five years, those significantly affecting low-income groups and self-employed individuals with low crime severity were selected. Under Article 92, Subparagraph 1 of the Food Sanitation Act, failure to report closures or other matters within one month was punishable by imprisonment of up to three years or fines up to 30 million won, but this will be relaxed to imprisonment of up to one year or fines up to 10 million won. Under the Certified Public Accountant Act, failure to prepare work-related ledgers was punishable by fines up to 3 million won, but this will be adjusted to administrative fines up to 3 million won.

Obsolete regulations with no cases filed in the past five years, such as certain provisions of the Electronic Promissory Note Act, will also be improved. Under Article 22, Paragraph 3 of the Electronic Promissory Note Act, those who evade or obstruct inspections by the Minister of Justice on electronic promissory note management institutions could face imprisonment of up to one year, but will now be subject to administrative fines up to 10 million won. Under the Software Promotion Act, those who display certification marks or similar marks without certification will see penalties improved from fines up to 5 million won to administrative fines up to 10 million won.

The government plans to proceed with the legislative process for the second set of economic penal provisions in May and the third set in July. Additionally, it aims to complete the internal legislative procedures for submission during the regular National Assembly session in September.

[Image source=Yonhap News]

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