Fair Trade Commission: "Including 'Common-Law Spouses' in Chaebol Relatives... Scope of Relatives Reduced"

[Asia Economy Sejong=Reporter Dongwoo Lee] The "de facto spouse" of a conglomerate group head (same person) with biological children will be recognized as a relative under the Fair Trade Act. The scope of the head's blood relatives is reduced from the 6th degree to the 4th degree, and the range of in-laws is reduced from the 4th degree to the 3rd degree. Accordingly, the number of relatives in the conglomerate group will be reduced by nearly half.

The Fair Trade Commission announced on the 10th that it will give prior notice of the "Amendment to the Enforcement Decree of the Fair Trade Act" with these contents from the 11th until the 20th of next month.

The amendment reduced the scope of relatives of the same person who are special related parties from within the 6th degree of blood relatives and 4th degree of in-laws to within the 4th degree of blood relatives and 3rd degree of in-laws. If there are children legally recognized as biological children between the same person and the de facto spouse, the de facto spouse is included as a relative.

However, an exception is stipulated to include blood relatives of the 5th to 6th degree and in-laws of the 4th degree as relatives only when they assist the head's control power.

The Fair Trade Commission expects that the utilization of the grace system for incorporating small and venture companies into conglomerate groups will increase, thereby revitalizing the venture ecosystem.

Also, considering the differences between outside directors and general executives, companies controlled by outside directors are basically excluded from the scope of affiliated companies. Only when a company controlled by an outside director fails to meet the executive independent management requirements is it exceptionally incorporated as an affiliated company.

The conditions for small businesses' grace period for incorporation into conglomerate groups were also relaxed from 5% to 3% of R&D ratio relative to sales. In addition, it was clearly stipulated that subsidiaries of the relevant small and venture companies can also be granted a grace period for incorporation, and that applications for grace can be made within one year after meeting the conglomerate group incorporation requirements.

The Fair Trade Commission said, "If this amendment to the enforcement decree passes, the scope of special related parties such as relatives and affiliated companies will be rationally reorganized, improving excessive corporate burdens while enhancing the effectiveness of the system."