Differentiation of Regulations
The government is mulling over applying different levels of regulations against cross-shareholding by major business groups. This is because the top 10, top 30, and top 50 groups differ greatly in size, and thus equity has to be ensured. Still, nothing has been fixed as to when and how to implement the different types of regulations.
“We have classified major business groups with a total equity of at least five trillion won [US$4.89 billion] into the group of cross-shareholding prohibition targets, but this is likely to be modified in view of fairness,” said a high-ranking official at the Fair Trade Commission, adding, “The amount of five trillion won does not reflect today’s business environments, and we are pondering upon various ways to proceed.”
It is said that the Fair Trade Commission is planning to ease the regulations in the lower-ranking group while tightening those in the higher-ranking group.
According to the agency, a total of 1,684 subsidiaries of 63 groups are subject to the prohibition on cross investment, according to the Monopoly Regulation and Fair Trade Act as of May 1 this year.
The groups cannot make inter-subsidiary mutual investment and cannot provide debt guarantees for the subsidiaries. The voting rights of the affiliated banking and insurance companies are limited, and any large-scale internal transaction must be preceded by a decision by the board of directors and followed by a public announcement. Important matters of non-listed firms, the current status of business groups, corporate combination, and share ownership have to be reported as well. New mutual investment will be prohibited from July 25 this year, too.