Democratic Party Proposes Private Equity Fund Regulations: Strengthened Borrowing Rules and Employee Notification Required for Acquisitions

Aimed at Preventing a Second Homeplus Incident
Capital Markets Act Amendments Proposed by Han Jeongae and Yoo Dongsoo

To prevent a recurrence of the Homeplus incident, the Democratic Party of Korea is moving to strengthen regulations on private equity funds. The proposed measures include tightening registration requirements, such as adding eligibility criteria for major investors, and strengthening disclosure obligations.

The Policy Committee of the Democratic Party announced in a press release on January 5 that Han Jeongae, Chair of the Policy Committee, and Yoo Dongsoo, Senior Vice Chair for Economic Affairs, have each sponsored amendments to the Capital Markets Act focused on strengthening oversight of private equity fund management. Both bills were submitted to the National Assembly on December 31 of last year.

The amendment sponsored by Chair Han includes provisions to "strengthen prudential supervision of private equity fund management." Specifically, it calls for: ▲ strengthening borrowing regulations for proper leverage management (requiring reporting to the Financial Services Commission if borrowings exceed twice the capital); ▲ expanding the reporting obligations of general partners (GPs) to financial authorities; ▲ expanding information disclosure to limited partners (LPs); and ▲ imposing an obligation to notify employees when acquiring a company.

Han Jeong-ae, Chair of the Policy Committee of the Democratic Party of Korea, is speaking at the National Assembly's National Audit Countermeasures Meeting held on the 23rd. 2025.10.23 Photo by Kim Hyunmin

The amendment sponsored by Vice Chair Yoo includes measures to "ensure accountability of general partners (GPs)." It stipulates: ▲ the introduction of eligibility requirements for major investors (sufficient investment capacity, sound financial status, and social credit requirements), thereby strengthening GP registration requirements; ▲ establishing grounds for the cancellation of unlawful GP registrations; and ▲ mandating the strengthening of internal controls and the appointment of compliance officers.

Regarding these amendments, the Policy Committee stated, "These measures were prepared following a party-government consultation between the Democratic Party and the Financial Services Commission on December 1 of last year," adding, "At that time, the party and government agreed on the urgent need to establish oversight mechanisms to prevent cases in which large private equity funds, after mergers and acquisitions, focus solely on short-term profits at the expense of the long-term value of companies."

Chair Han emphasized, "It has been 20 years since private equity funds were introduced, and their influence on the capital market and companies has grown, so commensurate responsibility and control mechanisms are needed." She added, "We hope that this amendment will restore trust in the capital market and serve as a turning point for private equity funds to focus on their original role of fostering a healthy ecosystem of risk and patient capital."