 On February 4, 2016, the “Special Act on Revitalising Companies” (the Act) was passed by the National Assembly of Korea as temporary legislation, scheduled to take effect on August 13, 2016 and remain operative for three years. Designed to revitalise industries which have been suffering from oversupply and to facilitate and initiate voluntary corporate restructuring, the Act provides for special new or amended provisions under the Korea Commercial Code (the KCC), the Financial Investment Services and Capital Markets Act (the FISCMA), the Monopoly Regulation and Fair Trade Act (the MRFTA), the Special Tax Treatment Control Law (the STTCL) and the Local Special Tax Treatment Control Law (the LSTTCL).The Act will apply to and provide certain benefits (see below) to companies whose corporate restructuring plans are approved by a government evaluation committee. The Act explicitly provides that if the corporate restructuring is found to have been done to facilitate ownership succession, to strengthen specially related parties’ control of a corporation or to provide unfair profits to affiliates, rather than for the purpose of enhancing company productivity, then the evaluation committee is obliged to reject the proposed corporate restructuring plans or cancel the plans. If they had previously been erroneously approved. If the approved corporate restructuring plans are cancelled for the foregoing reasons, the Act requires the relevant companies to refund any monetary benefits they received under the Act, plus treble damages (i.e. triple the amount of the benefits they had received pursuant to the enforcement decree). 1. Special provisions under the KCC and FISCMA: 2. Special provisions under the MRFTA: 3. Tax and financial support: the Act, through the STTCL (Articles 126-26 through 126-31) and LSTTCL (Article 57-2), provides special tax benefits, including tax deferral on gains, etc., and financial and R&D support to approved companies. 4. Support for removal of regulatory obstacles: the Act allows certain companies to request official interpretations and opinions on the applicability of laws and regulations to the relevant corporate restructuring activities and regulatory improvements. Because further details, including the definition of the term ‘oversupply’ and requirements of corporate structuring, are still to be determined by the enforcement decree, it will be necessary to monitor the progress of the enforcement decree’s adoption. Also, given the treble damages provision of the Act, companies planning to carry out corporate restructuring to obtain benefits under the Act should thoroughly review the applicable laws and regulations before formulating their restructuring plans. –––––––––––– |
Special act on revitalising companies to take effect in August 2016
