Stronger Measures Against Regulatory Evasion in Holding Company and Business Group Policies, and Improvements to the Independent Management System for Relatives
July 23, 2026
The Korea Fair Trade Commission (KFTC, Chairperson Biung-Ghi Ju) announced that it will solicit public comments on proposed amendments to the Enforcement Decree of the Monopoly Regulation and Fair Trade Act (MRFTA) from July 23 to September 1, 2026.
The proposed amendments are designed to strengthen enforcement against attempts to circumvent regulations governing holding companies and large business groups, while improving the independent management system for relatives. The key revisions are as follows.
1. Strengthening Measures Against Regulatory Evasion Involving Corporate Venture Capital and Debt Guarantee Restrictions
The KFTC proposes to introduce new categories of regulatory evasion involving Corporate Venture Capital (CVC) firms owned by general holding companies and to strengthen provisions preventing circumvention of the prohibition on debt guarantees among affiliated companies within large business groups subject to cross-shareholding restrictions.
Under the MRFTA, general holding companies are prohibited from owning financial institutions under Korea's principle of separating industrial and financial capital. As an exception, however, general holding companies may own CVCs to promote venture investment, provided that certain investment activities are restricted to prevent abuse of this exception.
Currently, prohibited investments include direct investments—such as acquiring shares, bonds, or equity interests—or investments made through venture funds managed by the CVC itself. However, the regulations do not prohibit a CVC from participating as a Limited Partner (LP) in an externally managed investment fund, even if that fund invests in companies financed by the same controlling shareholder.
As a result, while direct investment by a CVC in companies backed by the same controlling shareholder is prohibited, a CVC may effectively achieve the same outcome by investing as an LP in an external fund whose primary purpose is to invest in those companies. This creates a potential loophole that undermines the intent of the law.
To close this loophole, the proposed Enforcement Decree designates as a form of regulatory evasion any investment by a CVC—whether directly or through a fund it manages—in an external investment fund whose principal objective is to invest in companies that the CVC is otherwise prohibited from financing. The amendment aims to prevent CVCs from being used as vehicles for expanding corporate control.
The proposal also strengthens rules concerning debt guarantees within large business groups subject to cross-shareholding restrictions.
Current law prohibits affiliated companies within such business groups from providing debt guarantees for domestic affiliates in connection with loans extended by financial institutions.
However, a regulatory gap exists where a Special Purpose Company (SPC) borrows funds from a financial institution and then lends those funds to an affiliated company, while another affiliate agrees to assume the SPC's debt obligations. Although this arrangement has the same economic effect as a prohibited debt guarantee, it does not fall within the current legal definition.
The proposed amendment therefore classifies such SPC-mediated arrangements as acts of regulatory evasion under the Enforcement Decree, thereby preventing companies from bypassing the prohibition on debt guarantees through intermediary entities.
2. Improving the Independent Management System for Relatives
The proposed amendments also seek to eliminate blind spots in the regulation of unfair private benefit transactions by improving the independent management system for relatives.
Under the current Enforcement Decree, companies independently managed by relatives of a controlling shareholder may be excluded from the controlling shareholder's business group. Those relatives are likewise excluded from the definition of a "person related to the controlling shareholder."
However, under the existing rules, if a company that had previously been separated under the independent management system later rejoins the controlling shareholder's business group, and the relevant relative subsequently serves as an executive of an affiliated company, that relative may still remain excluded from the category of related persons if the grounds for failing to satisfy the independence requirements arose before December 30, 2021.
This creates a regulatory gap. Even where the controlling shareholder's family collectively owns at least 20 percent of a company's shares, the company may fall outside the scope of the MRFTA's prohibition on providing unfair benefits to related parties because the relative is no longer legally classified as a related person.
To address this issue, the proposed amendment establishes a legal basis for revoking a decision excluding a relative from the category of related persons when that individual serves as an executive of an affiliate within the controlling shareholder's business group. The provision will also apply to the reappointment or extension of an executive's term, thereby preventing companies from exploiting restrictions on retroactive application to avoid regulation.
3. Other Revisions
The proposed amendments also include technical revisions to improve legal consistency.
As provisions governing whistleblower rewards have since been incorporated into the Act on Fair Transactions in Large Retail Business, outdated provisions relating to rewards for reporting unfair trade practices by large retail stores will be deleted.
In addition, the accounting term "balance sheet" will be replaced with "statement of financial position" to reflect the adoption of International Financial Reporting Standards (IFRS).
Next Steps
Following the public consultation period, the KFTC will carefully review comments submitted by stakeholders and relevant government agencies. The amendments will then proceed through the required legislative review process, including examination by the Ministry of Government Legislation, before being finalized and implemented.
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