Companies belonging to business groups that repeatedly violate disclosure obligations will face fines increased by up to 50%. The Fair Trade Commission (FTC) announced on September 7 that it will abolish the regulations that previously allowed for reduced fines for delayed disclosures or first-time violations.
The FTC will announce the revised standards for imposing fines related to violations of disclosure obligations for companies in business groups and for large internal transactions from September 8 to 28.
This revision aims to strengthen penalties for repeated violations of disclosure obligations and to eliminate unnecessary reduction criteria to enhance the effectiveness of sanctions.
Specifically, the level of fines for repeated violations will be increased. Under the current standards, if a company violates disclosure obligations between four and six times in the last five years, it faces a 10% increase in fines; if it violates seven or more times, the increase is 20%. The revised proposal sets the increases at 10% for one violation, 30% for two violations, and 50% for three or more violations. More than 50 companies have repeated violations of disclosure obligations at least twice in the last five years.
The criteria for counting repeated violations will also be improved. Currently, violations detected in the inspection year are included in the count, but under the new rules, violations in the inspection year will be excluded from the count.
The regulations that reduce fines based on the number of days of delay in disclosure will also be removed. Currently, fines can be reduced by 20% for delays of up to 30 days and by 75% for delays of three days or less.
The FTC explained that since the basic fine amount already accounts for the number of days of delay, further reductions would effectively negate the impact of the delay.
For violations of disclosure obligations regarding the status of business groups, fines will be increased by 50,000 won per day from the day after the disclosure deadline until the day the correction is completed. For violations of large internal transaction disclosure obligations, the increase will be 100,000 won per day.
The 20% reduction for first-time violations or for companies with no violations in the last five years will also be eliminated. This reduction currently applies to violations of disclosure obligations regarding the status of business groups.
Under the current standards, a 50% reduction for violations immediately after being designated as a new business group can lead to a maximum reduction of 70% in fines.
The regulation limiting the basic fine amount for small companies to 1% of the larger of their capital or total assets will also be removed. Companies with capital or total assets of 1 billion won or less will be subject to violations of disclosure obligations regarding the status of business groups, while those with 5 billion won or less will be subject to violations of large internal transaction disclosure obligations.
The FTC stated that since the financial status of violating companies is already considered when determining the final fine, reflecting financial status at the basic fine calculation stage would constitute double reduction.
The FTC plans to finalize and implement the revised proposal after reviewing opinions submitted by stakeholders during the administrative notice period and going through related procedures, including deliberation and resolution at a plenary meeting.
An FTC official stated, "Through this revision, we aim to encourage compliance with disclosure obligations by companies and enhance the transparency of ownership structures in business groups, thereby strengthening market oversight."
* This article has been translated by AI.
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