"Cancellation if Independent Management Recognized Based on False Data" Fair Trade Commission Guidelines Implemented

Fair Trade Commission Revises and Implements Guidelines for Independent Management Recognition System

The Fair Trade Commission (FTC) will implement guidelines from today that specify that companies recognized for independent management based on false information may have such recognition revoked.

On the 25th, the FTC announced the enforcement of the revised "Independent Management Recognition System Operation Guidelines" containing these provisions. This revision reflects amendments to the Enforcement Decree of the Fair Trade Act and aims to clarify frequently asked questions arising during the system's operation.

Independent management is a system where if a company is recognized as being independently managed by relatives or executives of the same controlling shareholder (the head) of a corporate group, that company is excluded from the corporate group's affiliates, and the relevant relatives are excluded from the controlling shareholder's related parties. Relatives of the controlling shareholder include spouses, blood relatives within the fourth degree, relatives within the third degree by marriage, biological fathers or mothers of children born out of wedlock acknowledged by the controlling shareholder under civil law, and blood relatives within the fifth or sixth degree or relatives within the fourth degree by marriage who own 1% or more of the shares of a domestic company controlled by the controlling shareholder.

The guidelines specify that one reason for revoking recognition of independent management is "cases where independent management was recognized based on submission of false information." If a corporate group submits false information, the FTC may retroactively cancel the recognition as an illegal or unjust administrative disposition under the Administrative Procedures Act. The FTC explained that by clearly defining the grounds for revocation, it aims to ensure the authenticity of application documents.

Additionally, reflecting the amendment to the Enforcement Decree of the Fair Trade Act that adjusts the scope of relatives of the controlling shareholder, the guidelines define the scope of relatives as "spouses, blood relatives within the fourth degree, relatives within the third degree by marriage, blood relatives within the fifth or sixth degree or relatives within the fourth degree by marriage who own 1% or more of the total issued shares of a domestic company controlled by the controlling shareholder, and biological fathers or mothers of children born out of wedlock acknowledged by the controlling shareholder under civil law."

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