The Fair Trade Commission (FTC) is intensifying its scrutiny of investment maneuvers by large corporations. The agency aims to prevent circumvention of investment bans through venture capital (CVC) and to block guarantees using special purpose companies (SPC).
On July 23, the FTC announced that it will prepare a revision of the 'Enforcement Decree of the Monopoly Regulation and Fair Trade Act,' which will be open for public comment until September 1. This revision is designed to strengthen regulations against illegal activities related to holding companies and improve the system of independent management for family members.
The FTC has introduced new categories of illegal activities related to CVCs under general holding companies. Current law allows CVC ownership as an exception to the principle of separation of banking and commerce. However, to prevent adverse effects, direct investments in designated prohibited investment targets, such as affiliates or family-owned companies, are restricted.
Previously, CVCs had been able to evade regulations by participating as limited partners (LP) in external investment partnerships and investing in prohibited targets. The revision will classify investments made by CVCs in funds primarily aimed at investing in prohibited companies, either directly or through the management of investment partnerships, as 'illegal activities.'
Additionally, the regulations prohibiting debt guarantees for companies within mutual investment-restricted conglomerates will be reinforced. Following the ban on debt guarantees related to loans from financial institutions, some companies used SPCs to secure loans, leading to irregularities where other affiliates entered into acquisition agreements. The FTC plans to define these similar debt guarantee activities conducted through SPCs as illegal as well.
The FTC will also amend regulations that have allowed family-owned companies to slip through the cracks of profit-seeking regulations. Under the current system, if a family member of the same individual is recognized as independently managed and separated from the corporate group, that family member is not considered a related party even if they later serve as an executive in an affiliate of the same individual.
The revision will establish a legal basis to revoke the exclusion of family members from being considered related parties if they serve as executives in companies affiliated with the same individual. This will apply to reappointments and extensions of terms, thereby closing potential loopholes for regulatory evasion due to the prohibition of retroactive application.
An FTC official stated, "We plan to finalize and implement the revision after gathering opinions from stakeholders and relevant ministries during the public comment period, followed by a review by the Legislation and Judiciary Committee."
On July 23, the FTC announced that it will prepare a revision of the 'Enforcement Decree of the Monopoly Regulation and Fair Trade Act,' which will be open for public comment until September 1. This revision is designed to strengthen regulations against illegal activities related to holding companies and improve the system of independent management for family members.
The FTC has introduced new categories of illegal activities related to CVCs under general holding companies. Current law allows CVC ownership as an exception to the principle of separation of banking and commerce. However, to prevent adverse effects, direct investments in designated prohibited investment targets, such as affiliates or family-owned companies, are restricted.
Previously, CVCs had been able to evade regulations by participating as limited partners (LP) in external investment partnerships and investing in prohibited targets. The revision will classify investments made by CVCs in funds primarily aimed at investing in prohibited companies, either directly or through the management of investment partnerships, as 'illegal activities.'
Additionally, the regulations prohibiting debt guarantees for companies within mutual investment-restricted conglomerates will be reinforced. Following the ban on debt guarantees related to loans from financial institutions, some companies used SPCs to secure loans, leading to irregularities where other affiliates entered into acquisition agreements. The FTC plans to define these similar debt guarantee activities conducted through SPCs as illegal as well.
The FTC will also amend regulations that have allowed family-owned companies to slip through the cracks of profit-seeking regulations. Under the current system, if a family member of the same individual is recognized as independently managed and separated from the corporate group, that family member is not considered a related party even if they later serve as an executive in an affiliate of the same individual.
The revision will establish a legal basis to revoke the exclusion of family members from being considered related parties if they serve as executives in companies affiliated with the same individual. This will apply to reappointments and extensions of terms, thereby closing potential loopholes for regulatory evasion due to the prohibition of retroactive application.
An FTC official stated, "We plan to finalize and implement the revision after gathering opinions from stakeholders and relevant ministries during the public comment period, followed by a review by the Legislation and Judiciary Committee."
* This article has been translated by AI.
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