INSIGHTS
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Newsletters VIEW MORENewslettersCabinet Passes Amendment to Enforcement Decree of Insurance Business Act The cabinet passed an amendment to the Enforcement Decree of the Insurance Business Act (“IBA”) during its meeting on June 18, 2019. The main focus of the amendment is to promote InsureTech developments. The key changes are as follows: First, the amendment will allow insurers to own FinTech companies as their subsidiaries, subject to the approval of the Financial Services Commission. Once the amendment becomes effective, insurers will be able to own companies that are primarily engaged in the types of businesses that are necessary for insurers’ efficient work performance and linked to the insurance business. Further, the amendment will allow entities applying for an insurance business license to outsource data processing by using cloud services, whereas prior to the amendment, it was unclear as to whether cloud services could be used. In addition to the foregoing, the following changes have also been adopted and will become effective from July 1, 2019: A limit will be introduced on the issuance of hybrid securities. The maximum total units of bonds and hybrid securities that can be issued will be limited to 100% of the equity as of the end of the preceding quarter. If a special purpose company (“SPC”) intends to become a major shareholder of an insurance company, shareholders who contributed 30% or more of the SPC’s capital or who serve as the SPC’s de facto controlling shareholders will have to satisfy the qualifications to be the major shareholders of an insurance company. Tenants of commercial properties will be allowed to enter into an insurance contract to protect their goodwill in the lease without obtaining the landlord’s consent. Administrative fines of up to KRW 100 million will be imposed on any insurance agency which breached its duty to disclose material business information, including the mis-selling ratio.2019.06.21
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Newsletters VIEW MORENewslettersKorean and Chinese Competition Authorities Enter into a Cooperation MOU The State Administration for Market Regulation of the People’s Republic of China ("SAMR") and the Korea Fair Trade Commission ("KFTC") announced on May 23, 2019 that they have finally entered into a long-anticipated memorandum of understanding ("MOU") to increase cooperation and communication on competition law enforcement in Korea and China. Main topics covered by this MOU include: Commitment to cooperation and coordination. The SAMR and the KFTC "intend, as appropriate, to share information that promotes healthy competition in the global market." The MOU also "promotes closer and better understanding between competition authorities through coordination." The SAMR and the KFTC intend to hold annual cooperation meetings, as well as share each other's competition law enforcement policies and activities. Framework for communication. The SAMR and the KFTC will host annual events, such as meetings, workshops, and cooperation in review/research in areas of common concern, and also expand information sharing and coordination. The SAMR and the KFTC will also establish stronger communication channels, such as "keep[ing] each other informed of significant competition policy and enforcement developments in their respective jurisdictions". The MOU also provides for sharing opinions on changes to each other's antitrust laws and policies, as well as coordination in cases where both competition authorities are stakeholders. Expanded cooperation in the future. The SAMR and the KFTC commit to further cooperation in the future through working-level coordination in order to effectively respond to international cartel cases and violation of globally accepted competition rules and laws by multinational companies. As a result of this MOU, an even closer working relationship between the Chinese and Korean competition authorities is anticipated, especially with respect to international cartel and abuse of market dominance investigations involving the Korean and Chinese markets.2019.05.29
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Newsletters VIEW MORENewslettersObligation to Appoint Domestic Agent under the Network Act Now in Effect On September 18, 2018, Article 32-5 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. (the “Network Act”) was enacted to require certain overseas Internet service providers to appoint respective domestic agents responsible for personal information protection. Following this introduction, the Enforcement Decree to the Network Act (the “Enforcement Decree”) was enacted on March 19, 2019, setting the standards used to determine and identify which service providers are subject to the domestic agent requirement under the Network Act. Details: Overseas Value-Added Service Providers: Under the Enforcement Decree, telecommunications service providers and similar service providers, who do not have a domestic address or a place of business in Korea and satisfy one of the following standards listed below, are required to designate a domestic agent in writing. Accordingly, many overseas value-added service providers (such as one of the following) are likely subject to the aforementioned obligation. Persons/entities whose total revenue for the previous year was KRW 1 trillion or more; Persons/entities whose revenue for the previous year from the information and communications service sector was KRW 10 billion or more; Persons/entities who had one million or more average daily users whose personal information was under the custody/management of the persons/entities for the most recent three-month period, as of the end of the previous year; and Persons/entities who: (i) have committed, or have the risk of committing, personal information intrusion; and (ii) were requested by the Korea Communications Commission (“KCC”) to submit information pursuant to Article 64, Paragraph (1) of the Network Act. Domestic Agents: They will be responsible for duties provided under the Network Act including, but not limited to: (i) duties of a person responsible for management of personal information; (ii) duty to inform, notify and explain to users of any loss, theft, leakage, forgery, or alteration of personal information; and (iii) duty to submit relevant items or documents pursuant to request from the Minister of the Ministry of Science and ICT (“MSIT”) or the KCC, on behalf of the entity it represents. In case a domestic agent fails to perform the above-mentioned obligations, the telecommunication service provider that has designated such an agent will be deemed to have violated the relevant regulations. Meanwhile, in designating a domestic agent, an entity must include the name, address, phone number, and e-mail address of such an agent into its privacy policy. In designating a corporation as a domestic agent, the corporation’s name and its representative’s name must be included, and the location must be the address of the corporation’s business office. A service provider that fails to designate a domestic agent, despite being obligated to do so, will be subject to an administrative fine of an amount not exceeding KRW 20 million. Significance: The operation and regulation of the domestic agent designation policy should be closely monitored, because while the KCC will initially provide a certain grace period to encourage business entities’ voluntary participation, it may later strictly enforce violations for not abiding by the new regulation.2019.05.15
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Newsletters VIEW MORENewslettersMOEL Announces Amendment to the Labor Standards Act Regarding Workplace Harassment An amendment to the Labor Standards Act (“LSA”) defining and prohibiting “Workplace Harassment” (the “LSA Amendment”) was promulgated on January 15, 2019 and will go into effect on July 16, 2019. On February 21, 2019, the Ministry of Employment and Labor (“MOEL”) released the Manual on How to Determine, Prevent and Respond to Workplace Harassment (the “Manual”). Details: Under the LSA Amendment, Workplace Harassment is defined as an “act by an employer or worker, which causes physical or mental suffering, or worsens the working conditions/environment of another worker, by taking advantage of his/her position or relationship within the workplace beyond the appropriate scope of work.” The obligations of an employer regarding Workplace Harassment are provided as follows (Articles 76-2 and 76-3 of the LSA Amendment): Prohibit Workplace Harassment (both employer and worker); Conduct fact finding and investigation without delay if an employer is notified or is made aware of Workplace Harassment; Take appropriate measures to protect the victim, such as changing the workplace or placing the victim on paid leave; Obtain the victim’s opinion regarding the measures to be taken against the harasser, and take necessary action, such as disciplinary action or changing the workplace of the harasser; Do not take any disadvantageous measures, such as dismissal, against the victim or the worker who reports the occurrence of Workplace Harassment (an employer is subject to a criminal fine of up to KRW 30 million or imprisonment of up to three years for violation of this obligation); and Provide measures on how to prevent and respond to Workplace Harassment in the Rules of Employment (“ROE”). MOEL’s Guidelines: In the Manual, which was released before the LSA Amendment goes into effect, the MOEL attempted to explain the requirements which must be met for an incident to constitute Workplace Harassment prohibited under the LSA, and specific measures on how to prevent and respond to Workplace Harassment. The Manual includes, among others: (i) an explanation on Workplace Harassment-related laws and regulations, criteria for how to determine Workplace Harassment, and detailed examples; (ii) measures on how to prevent and respond to Workplace Harassment; and (iii) examples of relevant ROE provisions and sample awareness survey questions that can be used in workplaces. The examples of Workplace Harassment provided in the Manual include: Physically assaulting or threatening a worker; Repeatedly and continuously using profane or abusive language; Defamatory acts such as humiliating a worker in front of other workers or on the internet or spreading rumors regarding a worker’s personal affairs; Repeatedly ordering a worker to perform personal chores unrelated to the worker’s task without reasonable grounds, such as ordering a worker to run personal errands; Not recognizing the work performance or achievements of a worker without reasonable grounds or ridiculing or mocking the worker; Engaging in a collective action of bullying, or excluding the worker from receiving important work-related information or from the decision-making process related to work without any justifiable grounds; Assigning work that is not relevant to the work specified in the worker’s employment agreement or only assigning menial tasks that are not relevant to the work specified in the worker’s employment agreement for a considerable period of time; Assigning almost no work to a worker for a considerable period of time without justifiable reasons; and Any other act that causes physical/mental suffering, or worsens a worker’s working environment beyond the appropriate work scope. In addition to recommending that provisions regarding measures on preventing and responding to Workplace Harassment be added to the ROE, the Manual recommends workplaces to create internal regulations regarding types of prohibited acts, preventive training, measures to protect victims, and measures against harassers. The Manual also introduces other measures, such as CEO policy statement, inspection of risk factors, workplace harassment & bullying prevention training, operating/designating a responsible team to handle (oversee) related matters, and internal awareness campaigns and promotion regarding the internal policies & procedures (i.e., internal system) in place. Further, the Manual also emphasizes the importance of maintaining confidentiality regarding the victim and the relevant persons while promptly handling a reported incident. Significance: After the LSA Amendment takes effect in July, it is expected that there will be many reports and disputes regarding Workplace Harassment. In addition, an amendment to the Industrial Accident Compensation Insurance Act is also expected to go into effect on July 16, 2019. This law newly includes “illness resulting from work-related mental stress caused by Workplace Harassment or verbal abuse of a customer, etc.” in the standards for recognizing occupational accidents. Thus, if Workplace Harassment occurs, the possibility of a victim’s illness resulting from work-related mental stress being recognized as an occupational accident will likely increase. Therefore, companies should be familiar with the LSA Amendment and the Manual, add provisions relating to Workplace Harassment in the ROE, and also thoroughly prepare prevention and handling measures, such as conducting prevention training, identifying the status of Workplace Harassment, and establishing disciplinary process and improvement plans accordingly to prevent and respond to Workplace Harassment.2019.05.15
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Newsletters VIEW MORENewslettersUpcoming KCC Amendment Bills and Implications In March 2018, the Ministry of Justice (“MOJ”) submitted to the Legislation and Judiciary Committee of the National Assembly its opinion on the 13 proposed amendments to the Korean Commercial Code (“KCC”) on corporate governance, as well as on the proposal by the MOJ special committee for the KCC amendment. This January, the MOJ expressed its strong desire to pass the pending amendments within the year. Key Changes Being Proposed under the Amendments: 1. Mandatory electronic voting system Electronic voting system allows shareholders to exercise their voting rights electronically without having to attend the general meeting of the shareholders in person. While the KCC allows companies to adopt this system by board resolution, as of 2018, only about 60% of the listed companies have adopted it. The amendment bills contemplate making it mandatory for listed companies that meet certain size requirement and/or other conditions to adopt the electronic voting system or written absentee voting system to increase minority shareholders’ participation in shareholders' meetings. The MOJ endorses a bill adopting a mandatory electronic voting system only, given the onerous procedure of written absentee voting. Mandatory electronic voting system is expected to enable minority shareholders to actively exercise their voting rights and to allow meeting quorum to be met with greater ease. On the other hand, shareholders’ opinion may not be properly represented as in live discussions, and on-the-spot amendments to the agenda during shareholders’ meetings would be challenging. The system could also bring shareholders’ resolution under challenge where a failure or an error in the electronic system is suspected. 2. Multi-tiered shareholder derivative action Several pending bills contemplate introducing a multi-tiered shareholder derivative action system under which the shareholders of a parent entity may file derivative action against a director, auditor or executive officer of a subsidiary in cases of such person’s breach of fiduciary duties. The standing requirements for filing a multi-tier derivative action (e.g., parent entity’s capital contribution ratio in the subsidiary) vary among the proposed bills. The MOJ appears to advocate the proposal by its special committee, which would require for standing: (i) the parent company to have contributed more than 50% of the capital of the subsidiary; and (ii) shareholders of the parent company to hold at least 1% (for listed parent companies, 0.01%) of the total issued and outstanding shares of the parent company. Introducing the multi-tiered shareholder derivative action system is expected to bolster minority shareholders’ supervisory power over the company’s subsidiaries and incentivize greater responsibility on the part of corporate directors, auditors and executive officers. On the other hand, there are concerns that such multi-tiered shareholder derivative actions may constrain business activities of the subsidiary entities in general, and allow speculative funds with shares in the parent entities to meddle with the businesses of their subsidiaries. 3. Separate election of directors for audit committee members Under the KCC, a listed company required to establish an audit committee (total assets of KRW 2 trillion or more) must appoint members of the audit committee at the general meeting of shareholders. Procedurally, this is done in two steps: (i) directors, whether they are to be audit committee member or not, are elected at the general meeting of shareholders; and (ii) among the elected directors, those proposed to be on the audit committee are put to vote (Articles 542-11 and 542-12 of the KCC). As a purported safeguard to ensure independence of the audit committee, the KCC currently restricts the voting rights of the following shareholders in the second step of the election of audit committee members: If the candidate for the audit committee is an outside director, any shareholder holding more than 3% of the issued and outstanding voting shares of the company; and If the candidate for the audit committee is not an outside director, the largest shareholder, if its combined shareholding (with related parties either in number of shares and voting units) exceeds 3% of the issued and outstanding voting shares of the company. However, the above safeguard has been criticized for being ineffective, because the voting restriction is not applied in the first step of the election, that is, when audit committee member candidates are initially elected as directors. To address this issue, a number of bills propose segregating the electing of directors who will serve as audit committee members at the initial election of directors, and applying the above voting restriction. The MOJ endorses a bill which requires sizable listed companies (with total assets of KRW 2 trillion or more) to hold such segregated election for at least one member of the audit committee. 4. Mandatory cumulative voting system “Cumulative voting,” which grants shareholders multiple votes per share in a multi candidate election and allows concentrating votes on a single candidate, may be adopted for certain qualifying shareholders upon request (i.e., shareholders with 3% of the issued and outstanding voting shares (1% for listed companies with total assets of KRW 2 trillion or more)). However, as the KCC allows such qualifying companies to opt out from the cumulative voting system by so indicting in the articles of incorporation, few companies have incorporated it. The proposed bills contemplate making cumulative voting system “mandatory” in certain cases. The MOJ endorsed suggestion by its special committee, which: (i) requires companies with certain asset size (to be specified by enforcement decree) to mandatorily adopt cumulative voting system; and (ii) lowers the current shareholding ratio threshold required to be entitled to request for cumulative voting. While such change would further empower minority shareholders and enhance corporate transparency, some raise concern that the proposed rule, together with segregated election of audit committee members, will make management control of corporate entities too vulnerable to outside challenge. Implications: The Minister of Justice had indicated in March of this year that the MOJ will prioritize incorporation of mandatory electronic voting system and the multi-tiered derivative action system over the other items, seeking passage of the amendments within the first half of the year. While on-going controversy on the amendment proposals and opposition by the business sector will likely delay the plan, the MOJ continues to express strong will to pass the legislation. As such, corporate entities should closely monitor the legislative developments and discourse, and prepare action plans in light of the anticipated changes that may arise from the amendments.2019.05.15
김·장 홍보
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