In June 2016, the Korean Fair Trade Commission ("KFTC") announced its proposed amendment to the Enforcement Decree of the Monopoly Regulation and Fair Trade Act ("MRFTA," and such proposed amendment, the "Proposal"). The Vice Minister and the State Council have reviewed the Proposal.
Mainly, the Proposal seeks to narrow the scope of an "Enterprise Group subject to Limitations on Mutual Investment."
During September 2016, the KFTC is seeking comments from the public, interested stakeholders, and other relevant government authorities. In October 2016, the KFTC will submit the Proposal as an agenda item for the National Assembly.
Key Highlights of the Proposal:
Scope of "Enterprise Group subject to imitations on Mutual Investment" Narrowed
Under the current regime, an enterprise group with consolidated assets of KRW 5 trillion or more is regarded as being subject to the Limitations on Mutual Investment.
In an effort to reflect the relevant economic circumstances (changes), including the growth in the Gross National Product ("GNP"), the Proposal seeks to adopt an adjustment (increase) to the asset size threshold to KRW 10 trillion.
Likewise, under the existing exemption, an enterprise group with consolidated assets not exceeding KRW 7 trillion will be excluded from the scope (as compared to those with less than KRW 3.5 trillion).
In addition, the Proposal would exclude a public enterprise group.
Such an enterprise group has been under regulation in terms of capital contribution requirements, disclosure requirements, as well as mid-and long-term financial management requirements (e.g., via the Act on the Management of Public Institutions, and the Local Public Enterprises Act).
Deadlines Adjusted / Extended
The current regime requires the KFTC to complete its designation of enterprises subject to Limitations on Mutual Investment by April 1 of each year (or April 15, if necessary).
In Korea, as most enterprises hold a general meeting of shareholders in late March, the Proposal seeks to take into account practical difficulties in preparing relevant materials for KFTC submissions.
Accordingly, the designation deadline is to be adjusted to May 1 of each year (or May 15, if necessary).
Also, the Proposal extends the deadline to file details of equity ownership and debt guarantee status for a company newly designated as an enterprise subject to Limitations on Mutual Investment from the end of April to the end of May.
Asset Requirement for a Holding Company Adjusted
The Proposal would increase from the current KRW 100 billion holding company asset requirement to KRW 500 billion to bring it in line with the above threshold adjustments.
Regular Threshold Review (New Requirement)
In order to timely incorporate changing dynamics in the business environment, the Proposal seeks to adopt a provision requiring a review of the above thresholds every three years, including the holding company asset requirement.
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