Holding companies held back

Home > Opinion > Editorials

print dictionary print

Holding companies held back

The revised bill dealing with the Monopoly Regulation and Fair Trade Act that lifts restrictions on holding companies has been pending at the National Assembly for 10 months. The bill still hasn’t even passed the assembly’s standing committee.

It would be somewhat understandable if the delays were due to differences in opinion after long hours of heated discussion. But discussions apparently have been held only twice. This ranks as a dereliction of duty by the National Assembly. Due to the delay, businesses that have already transformed into holding companies and those who have plans to do so are bearing huge burdens. From a company’s point of view, the worst part of the current situation is the uncertainty. If definitive decisions aren’t made, companies aren’t able to set out strategic plans for their businesses.

The government has three aims in revising the Monopoly Regulation and Fair Trade Act in regard to holding companies: It wants to ease regulations on debt ratios, the ability to own nonbanking financial institutions such as securities and insurance firms, and investing in non-subsidiaries. For holding companies, each and every point is an important issue. For example, if a firm that transformed itself into a holding company owns a finance affiliate, it must sell the firm under the current law. But if the bill gets revised, there is no need to take that step. So holding companies are stuck in limbo right now, as they’re unable to make any strategic plans. Financial firms also get involved in mergers and acquisitions every year, so executives and employees face instability.

The revision of the bill should be passed swiftly. Under the current law, there is no reason for firms to change into holding companies, as the only real benefit is that it postpones the transfer of income tax.

In fact, there are currently more drawbacks to doing this, as the companies are not able to own a financial subsidiary and face limitations on debt ratios.

If the government didn’t pressure firms to transform into holding companies, this wouldn’t be an issue. But the government is in fact nudging groups to take these steps.

That being the case, the law should be revised to lessen the restrictions. Pressuring companies under the current system brings about only negative results for these firms.

There is also the controversial issue surrounding the fairness of the Financial Holding Companies Act, passed last year, which allows financial holding companies to own general businesses, like manufacturing firms. Holding companies, it can easily be argued, should therefore now be allowed to own financial firms.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)