Problems with the Designated Large Business Group System and Ways to Improve It

The designation system for large business groups, implemented since 1987, was introduced to curb the concentration of economic power in a small number of large conglomerates and to prevent the controlling family from engaging in private interest appropriation. Since the system was introduced, however, our economy and corporate environment have changed significantly, raising the need to reexamine the system’s effectiveness and appropriateness.

In particular, as corporate ownership structures have become more complex and shareholdings have been dispersed among family members or diversified by nationality, many have pointed out that the criteria for judgment, including the designation of the same person, are becoming increasingly ambiguous. Excessive regulation can hamper the normal growth of companies. It may also undermine managerial autonomy. In this regard, the current system needs to be adjusted to reflect changing times. Reform in a rational direction that considers the balance between fair competition and market autonomy is urgently needed.

The current designation system for large business groups can be analyzed as having roughly four problems, as follows. First, it has limitations in designating the same person as a natural person. The current method of designating the same person as a natural person (the so-called “owner”) risks entrenching an antiquated one-man control system and imposes excessive legal and administrative responsibility on an individual regardless of actual control.

Second, there is the problem of the excessive scope of related parties to the same person and its mismatch with reality. The current scope of related parties to the same person is out of step with the reality of nuclear families and dispersed governance structures. There are increasing cases in which blood relatives within the sixth degree and relatives by marriage within the fourth degree are subject to regulation despite having no actual influence or economic interest.

Third, there is the problem of unclear standards for shareholding ratios and control, as well as excessive application. Cases in which control is recognized based on the shares of related parties to the same person, or in which shares held in the names of family members engaged in management control disputes are regarded as reflecting the intent of the same person, are leading to overregulation. Legal presumptions unrelated to actual control may also infringe on companies’ fundamental rights.

Fourth, there is the problem of the excessive duty to submit designation materials and of criminal punishment. The current structure, which compels the same person to collect and submit extensive information on relatives and affiliates and even allows criminal punishment for omissions, lacks proportionality and realism. In particular, imposing criminal liability when the same person is not in a position to actually identify or control the relevant materials lacks legal legitimacy.

Accordingly, this study proposes the following measures to improve the designation system for large business groups in line with the times: 1) shifting from a natural-person-centered structure focused on the same person to a unified corporate structure centered on a core company; 2) reducing the scope of related parties by limiting them to spouses and immediate family members, thereby minimizing the targets of regulation; 3) recognizing a company as an affiliate only where actual control is confirmed, while also specifying rebuttal procedures; and 4) simplifying submission obligations and lowering the level of sanctions by replacing criminal punishment with administrative order penalties such as fines.

I. Introduction: The Need to Improve the Large Business Group Designation System, Which Has Continued for More Than 40 Years

Ⅱ. Analysis of the Basic Status of the Large Business Group Designation System

1. Background and Purpose of Introduction

2. Current Status of Large Business Group Designations

Ⅲ. Analysis of the Legal Framework and Problems of the Large Business Group Designation System

1. Analysis of the Legal Framework of the Business Group Designation System

2. Various Problems and Controversies Related to Designating the Same Person as a Natural Person

3. Problems Concerning the Scope of Related Parties to the Same Person and Control

4. Problems Concerning the Shareholding Ratio and Control Requirements of Related Parties to the Same Person

5. The Imposition on the Same Person of the Duty to Collect and Submit Designation Materials, and the Appropriateness of Criminal Punishment for Omission or Non-submission

Ⅳ. Measures to Improve the Large Business Group Designation System

1. Deletion of the Natural Person Provision for the Same Person and Unification Around a Corporate Entity Centered on a “Core Company”

2. Reduced and Readjusted Scope of Related Parties to the Same Person: Limited to Spouses and Immediate Family Members

3. Recognition as an Affiliate Only for Companies Where the Same Person’s Control Has Been Confirmed

4. Improvement of the Data Submission Obligation and Criminal Punishment System for the Same Person (Mitigation to Administrative Fines)

Ⅴ. Conclusion: Seeking Ways to Improve the Large Business Group Designation System in Line with the Times

References

Wiki:

https://www.cfe.org/w/bbsDetail.php?&idx=49

Original title: 대기업집단 지정제도 문제점과 개선방안

Author: Gwang yong Go

Date: 2025-07-14

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=27886