South Korean conglomerates or large business groups with assets exceeding 5 trillion won ($4.26 billion) will have to disclose details on any internal transactions with their overseas affiliates and submit a full report on the ownership structure of their overseas entities, according to the country’s antitrust agency on Monday.

In a press briefing, Shin Young-sun, secretary general at the Fair Trade Commission, said the competition watchdog is pushing ahead with new rules requiring the country’s large business groups with 5 trillion won or more assets to report details on internal transactions with their overseas affiliates and shareholder ownership at the foreign entities to the country’s regulatory filing in a bid to ensure transparency in governance of the large conglomerates’ foreign businesses.

FTC’s latest move comes after the sibling feud at Lotte Group last year unexpectedly revealed that the group’s Japanese affiliates have control over local affiliates. The new rules are expected to take effect May next year.

Upon enforcement of the new rules, each large conglomerate will be required to unveil details on individual internal transactions that are made between their local units and offshore affiliates in trading products and services, including amount and period. For example, Samsung Electronics Co. has so far reported a combined volume of transactions that have been made between the local head office and various overseas affiliates, but it will have to separately report its internal transaction volume with its U.S., Chinese or Vietnamese entity.

An unnamed FTC official said that the amendment is expected to allow the government to be more aware of how much money has flown out to or in from which country whereas so far there has been a lack of monitoring on such information. The new rules, in particular, come at a time when internal transaction between domestic and overseas units at large business groups accounted for 23 percent of total transactions as of last year after steadily increasing over the last few years.

The antitrust watchdog is also expected to revise the country’s fair trade rule to require business groups to disclose information on shareholders and investment status at their overseas entities in which specially related persons or a business group has 30 percent or more ownership in. The FTC aims to figure out the actual owners of business groups’ overseas entities to look further into the ownership control structure of their domestic affiliates.

By Na Hyun-joon

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