South Korea’s anti-trust watchdog will toughen up on oversight and regulation on cross-affiliate business deals at the country’s powerful family-owned business empires by lowering the threshold for equity ownership subject to the restriction to 20 percent from the current 30 percent.

Currently, listed companies where the owner family members own up to 30 percent and unlisted companies with 20 percent ownership fall under regulation on appropriation of work. Under the new revision, both listed and unlisted members 20 percent owned by owner family would come under the oversight.

The regulation to prevent chaebol family members from profiting by placing business orders in the companies they own regardless of their competence has taken in force from February 2015. If illicitness is confirmed in questionable business deals among affiliates of large conglomerates, companies or owners and other individuals related face prosecution probe and fines.

Under the guidelines, any individual deals between an affiliate where an owner family member owns a large stake and another exceeding the value of 20 billion won ($18 million) a year, or rewarding of an order 7 percent higher than the market value places the company under scrutiny by authorities.

Hyundai Glovis and Innocean Worldwide Inc., two affiliates of Hyundai Motor Group, partially owned by its founder’s heirs, would fall under new terms. The Chung family own nearly 29.9 percent of Hyundai Glovis and Innocean.

Among Samsung Group companies, Samsung Life Insurance, in which 20.82 percent is owned by the Lee family, would have to watch its step.

Cho Won-tae, eldest son of Hanjin Group Chairman Cho Yang-ho and CEO of Korean Air, has been reported to the prosecution for placing orders under an IT unit where he is the major shareholder. Hyundai Group and CJ Group also were levied with hefty fines for violating the rule.

By Na Hyun-joon

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]