August 26, 1999 
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| August 26, 1999 | atimes.com | |
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| The Koreas Govt lays down the law to chaebol SEOUL - South Korea will restrict equity holdings by the country's top 30 conglomerates, or chaebol, from 2001 and require major groups to secure board approval and notify minority shareholders and creditors of any large intra-group trading. The government introduced a new set of chaebol reforms Wednesday after a meeting with the heads of the top five chaebol, major banks and political leaders at the presidential office. The Fair Trade Law will be revised this year and the limit on chaebol units' equity investment in other companies, scrapped in 1997 amid economic difficulties, will be reintroduced in April 2001. Details of the limit will be decided after further consultations among related government offices. Formerly, a company affiliated to a parent group ranked among the top 30 could not own equity stakes in another firm worth more than 40 percent of its net assets. It was fined for every excess 10 percent. Chaebol will face heavy fines if illegal assistance to weak units is found. Other mechanisms to prevent unfair inside trading include a requirement for the top 10 groups to secure board approval for a certain size of inside trading. Corporate notification requirements will also be enforced to toughen supervision by creditors and miniority shareholders. Large listed companies will eventually have to fill half of their board with outside directors and an outside director will lead a committee authorized to recommend board members. Taxes on marginal profits on stock transfers will be imposed on shareholders with a stake of over 3 percent, or over stock market value of 10 billion won ($8.3 million), compared with the current ceiling of 5 percent. Anyone caught dodging inheritance tax will face audits. If the largest shareholder wants to hand over equity stock and management control, he or she must pay 20-30 percent extra inheritance tax. In order to revamp the chaebol dominance in the secondary financial market, the government will require all financial institutions to reserve half of their board seats with outside directors. They must appoint a commissioner to ensure that financial institutions abide by the regulations and to report regularly to the supervisory authorities. The Financial Supervisory Service will operate a separate monitoring force to supervise funds operated by chaebol-affiliated investment trust companies. Life insurers will have to keep separate books on dividend-rendering and dividend-free products. (Asia Pulse/Yonhap) | |||||||||
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