Abolition of Facility Maintenance Business Next Year... Ministry of Land, Infrastructure and Transport "Apply for Business Conversion by Year-End"

The Ministry of Land, Infrastructure and Transport announced on the 13th that since the facility maintenance business will be abolished starting January 1 next year, facility maintenance companies wishing to continue construction work must apply for a business type conversion to the registration authority by the end of this year.

Ministry of Land, Infrastructure and Transport / Photo by Hyunmin Kim kimhyun81@

The abolition of the facility maintenance business was promoted as part of the 2018 Construction Industry Innovation Plan (jointly by related ministries) and follows the amended Enforcement Decree of the Framework Act on the Construction Industry in 2020.

This was due to controversy over the "all-purpose license," which allowed entry into the market by meeting only low registration standards and performing maintenance work for all types of construction. In reality, specialized construction businesses require 68 technical personnel to perform all 28 types of construction work, whereas facility maintenance businesses could perform maintenance work for all types with only 4 technical personnel.

Some facility maintenance companies opposed the abolition and filed a constitutional complaint in 2021, but with a ruling of constitutionality in July, the business type conversion is proceeding smoothly. Currently, out of a total of 7,022 companies, 6,211 (about 88%) have completed the business type conversion. Companies that do not apply for conversion by the end of the year will be automatically deregistered.

The target for business type conversion includes businesses registered as facility maintenance by September 15, 2020, or those who met the registration criteria for facility maintenance by the same date and applied for registration. The application method is to submit to the Construction Association when converting to general construction business, or to the relevant city, county, or district office when converting to specialized construction business.

At this time, the obligation to meet the registration standards for the converted business type (for example, 6 technical personnel and capital of 500 million KRW for corporations or 1 billion KRW for individuals in civil engineering construction) is deferred until December 31, 2026. However, the previous registration standards for facility maintenance business (4 technical personnel and 200 million KRW capital) must be maintained. Furthermore, companies that meet certain registration standards in the third quarter of 2026 will have this obligation further deferred for 3 years until December 31, 2029. The additional deferral applies to former facility maintenance businesses whose 2025 construction capacity evaluation amount is below the average for their held business type and whose average performance from 2023 to 2025 is less than 300 million KRW.

Accordingly, from next year, ordering parties cannot require facility maintenance business as a qualification for bidding in announcements for newly ordered construction projects. Projects previously ordered under the facility maintenance business type will be ordered as either general or specialized construction depending on the nature of each project.

Kim Sang-moon, Director of the Construction Policy Bureau at the Ministry of Land, Infrastructure and Transport, said, "We will actively inform companies to ensure that business type conversion applications are made within the deadline," and added, "We will do our best to ensure that companies cooperating with government policies for construction industry innovation can carry out their business without inconvenience."