This content is from: Local Insights

Monopolies

The amended enforcement decree of the Monopoly Regulation and Fair Trade Act relaxes the rule limiting the total amount of shareholdings and introduces changes regarding the holding company system. The Act was passed during the parliamentary plenary session held on April 2 2007 and came into force accordingly.

Under the amendment, the maximum extent of capital contribution that can be made by chaebols in other domestic companies, including their affiliates, (the restriction on capital contribution) has been relaxed from the previous 25% of net assets to 40% of net assets. The restriction, which was previously imposed on chaebols with total assets of W6 trillion ($6.4 billion) or more, has also been relaxed so that it now only applies to chaebols with total assets of at least W10 trillion. Individual companies were previously subject to the same restriction if they were part of a chaebol group that was bound by the restriction on capital contribution, regardless of the size of their total assets, but this rule has now been relaxed to cover only those companies with total assets of at least W2 trillion.

The amendment also reduces the extent of shareholding that a holding company is required to have in respect to its subsidiaries and grand-subsidiaries from the previous 30% to 20% for listed companies, and from 50% to 40% for non-listed companies. Another change brought by the amendment increases the ceiling on the holding company's debt-to-equity ratio from the previous 100% of its total assets to 200% of it total assets. Also, the shareholding requirements that apply to an offshore listed company have been streamlined to bring them in line with those that apply to a domestic listed company.

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