Legal Issues with regards to 'Specially Related Persons' in The Special Provisions on the Listed Stocks Corporations

Abstract

The Financial Investment Services and Capital Market Act (FISCMA) was legislated in August 2007 which replaced the former Stock Exchange Act in Korea. Due to the new legislation, the special provision on the listed companies was added into the Commercial Act. Some provisions on listed companies in the Commercial Act stipulate the conception of ‘Specially Related Person’. However it is questionable how we can define the term, specially related person, in the special provision on listed companies and whether its scope fits into the global standards. The Korean Law on the scope of specially related person includes rules which define the specially related person based on economic connection. The existing special provision on listed company stipulates its scope based on economic connection. The current provision which includes an individual as a shareholder of the listed company and his relative relations when defining the scope of specially related person is very vague: it is necessary to clarify the relations between the relevant individual and the specially related person in Article 542‐8(1) subparagraph 5. Futhermore, the individual based on the specially related person conception with regards to economic connection can be categorized as investment relation, executives, usage relation, livelihood relation, and dominance relation etc. The designation of scope of specially related person based on economic connection should be understood as an important factor that can narrow the scope of relative‐based definition, and that can also support its clear definition. Accordingly, it is crucial to establish a legal provision that can clearly indicate the categorized economic connection. It is necessary to adjust the scope of regulation based on assessing the transaction with a legal person who can influence the decisions on the product prices or the conditions of transaction, which indicates his or her actual dominant power. Regarding the simple provision of the ‘actual influence’, the lawmakers should make a provision clarifying the economic connection or relation by establishing flawless criteria. The economic connection or relation should be understood as the crucial element that includes an individual as a specially related person and also a legal person or association.