Holding Companies’ Five Percentage Rule May be Mitigated

Kang Chul-kyu, the chief of the Fair Trade Committee (FTC) disclosed on May 27 that “LG Group’s objection against the “five-percentage rule” is reasonable, which sets the limit of a five percent ratio of companies possessing other companies’ shares, and it will be reflected in the discussion procedure of revising the fair trade decree.”

After Kang finished his discussion with the chairman of LG, Koo Bon-moo, he said, “It was the talk to hear the opinions and ask for help about the “Road map for a three year-long market reformation,” at a press conference held at Gwacheon Government Complex.

As for the “five-percentage rule,” he set forth the possibility of a partial mitigation, stating that “LG has expressed its opinion that in the case of jointly-invested companies, this decree may have some problem in direct application. I will follow the decision of the Regulatory Reform Committee (RRC) because the RRC will deal with this.”

He also added that “LG fully comprehends the revision bill of fair trade decree and the road map of market reformation, and has set forth its intention of cooperating with this in earnest. Going through transparent management, they said that they would accelerate their efforts to increase value for stockholders.”

Following his meeting with LG, Kang is scheduled to meet with the chairman of SK, Choi Tae-won, on May 31. He has also planned to place meetings with other conglomerate chairmen such as Samsung and Hyundai Motors in near future.

On the other hand, he said, “We’ve already accomplished the agreement of relevant ministries and reduced the voting rights of the conglomerate-owned banks as to their branch companies’ shares for about five percent a year, step by step, for three years starting in 2006,” adding “We’ve submitted this sort of bill to the RRC.”

According to this, the permitted range of voting rights of banks will be lowered from the existing 30 percent level to 25 percent on April 1, 2006 as the commencement, and will be finally reduced to the 15 percent level on April 1, 2008.

The RRC is scheduled to discuss the revision bill of the fair trade decree by holding the meeting of the 1st Economy department on May 27, and general meeting on May 28.

Chi-Young Shin higgledy@donga.com