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Newsletter | May 2014, Issue 2
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CORPORATE |
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Preliminary Announcement on Special Act to Promote Growth and Strengthen Competitiveness of Medium-Size Enterprises |
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On February 28, 2014, the Small and Medium Business Administration (“SMBA”) made a preliminary announcement of the draft on the Enforcement Decree on the Special Act to Promote Growth and Strengthen Competitiveness of Medium-Size Enterprises (“Special Act”), which is scheduled to be implemented as of July 22, 2014. |
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In order to strengthen the competitiveness of medium-size enterprises (“MSEs”) via financial assistance and special tax reductions, the Special Act prescribes that the scope of MSEs eligible for such assistance should be stipulated in the Enforcement Decree. Accordingly, the determination of the scope of MSEs has been subject to much controversy. |
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The Enforcement Decree draft will exclude the following from the scope of MSEs: corporations belonging to an enterprise group subject to limitations on mutual investment (including foreign corporations under the same limitation) pursuant to the Monopoly Regulation and Fair Trade Act, companies engaged in the financial and insurance/superannuation business and non-profit corporations. Based on the Enforcement Decree draft, companies that are not classified as MSEs will not be able to enjoy the benefits provided by the central and local government such as support for technology innovation, human resources, globalization and management innovation. |
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Furthermore, the Enforcement Decree draft has defined “MSE nominees” as small and medium-size enterprises with (i) a turnover ranging from KRW 30 billion to 100 billion in the previous business year that has (ii) an annual average growth rate in turnover of 15% or more in the last three years or ratio of R&D investment to sales of 2% or more in the last three years. MSE nominees will be eligible to receive various types of support as set forth under the Special Act. |
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