Severe Penalty
If big corporations violate prohibitive regulations on new circular shareholding, a maximum of 10 percent of the relevant stock buying price will be imposed as fines.
The Fair Trade Commission (FTC) announced that amendments to the Monopoly Regulation and Fair Trade Act prohibiting new circular shareholding between affiliated companies were passed in a cabinet meeting on July 15.
The amendments specified the criteria for fines for violation of new circular shareholding prohibition, and added types of law evasion activities.
Fines to be applied are calculated by multiplying imposition standard date (maximum 10 percent, depending on the seriousness) to stock buying price. Utilizing a money trust or acquiring shares under different names are also considered as breaching prohibitive regulations on circular shareholding. Besides, the circular shareholding status shall be included in corporate disclosure on family businesses.
In case of medium and small-sized companies, considering their financial burden, fines can be paid in up to six installments within two years. Previously these could be paid up to three times within a year.
The rate of additional payments on a refund has been downscaled to 2.9 percent per annum from 4.2 percent.
An FTC official said, “Effective enforcement of laws is expected in order to block the harm of circular shareholding such as supporting insolvent subsidiary companies, insolvency of entire group and excessive control over subsidiaries.” Amendments will be effective from July 25, after being proclaimed within this weak upon the approval of President.