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Two-year Grace on Lawsuit for Past Window-dressings

Posted February. 21, 2005 22:54,   


The National Assembly’s legislation and judiciary committee held a sub-committee meeting for legislation deliberation on Monday, February 21, and passed the revised bill for the securities class action law, with the outline that if a company opens to the public its account book to resolve its past window-dressing, it will be exempt from class action of that specific instance until the end of 2006.

According to the revised bill, not only the company which committed the window-dressing in the past, but also the accounting firm or accountant which audited the account books of that company will be exempt from the securities class action for two years.

The revised bill that passed was jointly planned by the Finance and Economy Ministry, the Justice Ministry, the Financial Supervisory Commission, and the Financial Supervisory Service.

The revised bill states that the acts to notify publicly the exact amount on the financial statement from window-dressing without increasing or decreasing it during the grace period, and to decrease the excessively added amount or increase the underreported amount will be excluded from class action lawsuits.

The revised bill limits the subjects of class action lawsuit to “false public notification acts” and not simply “past window-dressing.”

Increasing the window-dressing scale to hide the past window-dressing or window-dressing with a new accounting item will all be considered as “current window-dressing,” which are subjects to the lawsuit.

The ruling and opposition parties deliberate on the revised bill and pass it in a plenary meeting of the legislation and judiciary committee on February 23, and then it will handle the revised bill in the regular session on February 25.

Young-Hae Choi Myoung-Gun Lee yhchoi65@donga.com gun43@donga.com