SEOUL: South Korea’s parliament has passed a bill aimed mainly at limiting the powers of owner families of big business conglomerates – known as chaebol – over affiliates.
The revised fair trade law, passed late on Thursday, is designed to reduce sharply the voting rights in affiliates by financial and insurance companies within the same business group, according to a statement from the Fair Trade Commission.
Samsung, the parent of Asia’s most valuable company, Samsung Electronics, and LG are two of the big family-run business conglomerates behind South Korea’s rise to become the world’s 11th largest economy from the rubble of war five decades ago.
But the huge debts and complicated ownership structures of the chaebol have also been blamed for playing a critical role in putting South Korea on the verge of sovereign insolvency during the 1997–98 Asian financial crisis.
Under the toughened law, financial firms belonging to a business group will be denied voting rights in an affiliate if the group’s non-financial companies already hold a combined 15% stake or more in the company.
When the combined stake of non-financial affiliates stands at 10%, however, financial firms belonging to the same group will be able to wield voting rights of up to 5%, regardless of their actual shareholdings.
The voting limit for the financial companies is due to be lowered to 25% on April 1 next year from 30% and by a further five percentage points in each of the next two years, officials at the anti-trust agency have said.
Fifty-one groups – each with combined assets of two trillion won (US$1.89bil) or more – are subject to the limit, according to the FSC statement. – Reuters
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