Cross-investment ban could cease

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Cross-investment ban could cease

Korea’s corporate watchdog chief said yesterday that the government may consider abolishing the regulation that bars conglomerate subsidiaries from cross-investment if corporate governance improves.
Under the country’s fair trade law, subsidiaries of business groups with assets of 2 trillion won ($2.14 billion) or more are banned from making equity investments in one another, a rule aimed at preventing reckless business expansion and improving cobweb-like governance structures.
“[We’re] considering not applying the equity investment ceiling scheme when mutual investment in jaebeol vanishes, and when more businesses transform themselves into holding companies,” Fair Trade Commission Chairman Kwon Oh-seung said at a seminar held in Seoul.
Korea’s family-controlled conglomerates, or jaebeol, have been under pressure to improve transparency in governance and management as the nation plans to adopt global accounting standards by 2011.
In an effort to encourage companies to introduce holding company structures, the antitrust regulator is mulling over offering incentives to companies that actively seek the system, the chairman said.
The commission is also considering raising the asset requirement ceiling of a holding company to better reflect the current size of the Korean economy, Kwon said. Holding companies are currently required to own a minimum of 100 billion won in total assets.
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