[Bills in Focus] Corporate crises, special business zones and tax exemptions

Proposed Bill: Partial Amendment to the Corporate Restructuring Promotion Act

Proposed by Rep. Kim Jong-min (Democratic Party of Korea)

● The Corporate Restructuring Promotion Act was initially enacted in 2001 to enable autonomous restructuring between financial creditors and companies. Due to its effectiveness in normalizing the operations of financially troubled companies and reducing damage to vulnerable groups such as subcontractors and general commercial investors, this act was extended five times and is set to expire in October 2023.

However, this act is as relevant as ever with demands for corporate restructuring anticipated to rise due to the withdrawal of monetary support measures for COVID-19. Moreover, an increasing number of companies are facing bankruptcy as they miss the timing for restructuring procedures. There have also been calls to expand the grounds for financial support beyond the scope of new credit provisions.

This amendment aims to expedite the normalization of companies undergoing corporate workout and strengthen the national economy by extending the expiration date of the current act by five years and allowing nonmembers of the Council of Financial Creditors to provide new credits to enterprises upon request, following the council’s deliberation.

Proposed Bill: Partial Amendment to the Financial Investment Services and Capital Markets Act

Proposed by Rep. Ku Ja-keun (People Power Party)

● Despite various efforts to vitalize the local economy, issues related to population, income, and industry centralization remain unresolved, and regional disparities in the economic, social, and cultural capital between the Seoul Metropolitan Area and other regions continue to grow. In response, the government has proposed the Special Act on Promoting Investment to Provincial Areas to foster the balanced development of the country. In line with this legislative development, this amendment aims to introduce new tax incentives for local companies and those relocating to the Opportunity and Development Zone, which are eligible to receive support under the Special Act on Promoting Investment to Provincial Areas.

Pending Bill: Partial Amendment to the Act on Restriction of Special Taxation

Proposed by Rep. Park Yong-jin (Democratic Party of Korea)

● Unfair trade practices, such as the use of material nonpublic information, market price manipulation, and unfair trading, are serious financial crimes that harm investors and damage the pricing capabilities of the capital market.

Despite the penalty provisions in the current act on unfair trade practices, concerns have been raised regarding the leniency of punishment for these violations in comparison to other economic violations. Often justified by the perception that such violations are light in nature, many cases are not even indicted, and those that do get indicted often receive suspended execution of sentence or lenient rulings.

Therefore, this amendment aims to eradicate unfair trade practices and address the absence of sufficient criminal sanctions by imposing monetary sanctions in addition to existing criminal punishments. This amendment also redeems the unfair gains obtained from unfair trade practices.

Promulgated Bill: Framework Act on Local Taxes

Competent Ministry: Ministry of the Interior and Safety

● This amendment aims to improve and supplement deficiencies in the operation of the current system. To strengthen the protection of tenants' house lease deposits, this amendment requires the house sales profits allotted to paying local taxes to be preferentially distributed to paying the tenant’s house lease deposit, provided that the fixed date on the housing lease contract was established before the statutory date.

Administrative Announcement: Partial Amendment to the Enforcement Decree of the Act on Restriction of Special Taxation

Competent Ministry: Ministry of Economy and Finance

● In line with the amendment to the Act on the Restriction of Special Taxation, this amendment establishes the specific scope of technologies within the field of hydrogen and future vehicles while stipulating the eligibility requirements for the special tax exemption of high-yield, high-risk investment trusts and national bonds for private investments. It also extends the scope of items recognized as cultural entertainment expenses of companies, aiming to revitalize the domestic market and support the economy, particularly sectors such as the tourism industry, local microenterprises, and small businesses who are struggling due to the COVID-19 pandemic. Moreover, this amendment adjusts the scope of areas eligible for tax exemption for the benefits to include relocated factories and logistic facilities that would otherwise no longer be eligible for tax exemption after the integration of Gunwi-gun into Daegu Metropolitan City.

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The Korea Herald republishes a weekly legislative report by local law firm DR & AJU LLC to provide the latest information of bills approved, proposed, pending and set to be promulgated. -- Ed.

For any queries about the bills, contact cr@draju.com.