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Laws of the Republic of Korea |
1
FINANCIAL HOLDING COMPANIES ACT
Act No. 6274, Oct. 23, 2000
Amended by Act No. 6692, Apr. 27, 2002
Act No. 7338, Jan. 17, 2005
Act No. 7428, Mar. 31, 2005
Act No. 7529, May 31, 2005
Act No. 8571, Aug. 3, 2007
Act No. 8863, Feb. 29, 2008
Act No. 8906, Mar. 14, 2008
Act No. 9086, Mar. 28, 2008
CHAPTER GENERAL PROVISIONS
Article 1 (Purpose)
The purpose of this Act is to facilitate the establishment of financial holding companies and to soundly manage both financial holding compa- nies and their subsidiaries with the aim of bolstering the financial in- dustry's competitiveness, as well as contributing to the sound develop- ment of the national economy.
Article 2 (Definitions)
(1) The definitions of terms used in this Act shall be as follows: 1. The term "financial holding company" means a company whose primary
business is to control (hereinafter referred to as "control")
companies
engaged in financial business (hereinafter referred to as "financial in-
stitutions") or other companies related closely
to the financial business
operations through the ownership of their stocks (including equity;
hereinafter the same shall apply),
according to the standards pre-
scribed by Presidential Decree, and which controls one or more financial
institutions, and for
which an authorization under Article 3 has been
granted;
2. The term "subsidiary" means a company (including foreign corpo-
rations) controlled by a financial holding company;
3. The term "second-tier subsidiary" means a company (including foreign
FINANCIAL HOLDING COMPANIES ACT
2
corporations) controlled by a subsidiary;
4. The terms "complete holding company" and "complete subsidiary" mean,
in the event that a financial holding company owns the total
number
of stocks issued by a subsidiary, such financial holding company and
such subsidiary, respectively;
5. The term "bank holding company" means a financial holding company
falling under any of the following items, and which controls
one or more
financial institutions:
(a) A financial institution (hereinafter referred to as a "bank") estab-
lished under the Banking Act;
(b) A long-term credit bank under the Long-Term Credit Bank Act;
(c) A financial institution, prescribed by Presidential Decree,
which
runs a banking business under Article 2 (1) 1 of the Banking Act;
and
(d) A financial holding company that controls financial institutions re-
ferred to in items (a) through (c);
6. The term "local bank holding company" means a bank holding company
that does not control any bank or any bank holding company
falling
under the following items:
(a) A bank whose business area covers the whole nation; and
(b) A bank holding company controlling the banks of item (a);
7. The term "same person" means a particular person himself and any
other person in a special relationship therewith, as prescribed
by
Presidential Decree, with the former (hereinafter referred to as a
"specially related person");
8. The term "non-financial contributor" means an entity falling under
any of the following items:
(a) The same person concerned, in cases where the sum of total capital
amount (referring to the amount obtained by subtracting the
total
amount of liabilities from the total amount of assets in the balance
sheet; hereinafter the same shall apply) of the same
person's non-
financial companies (referring to companies in the operation of
business other than the financial business prescribed
by Presi-
dential Decree; hereinafter the same shall apply) is not less than
25/100 of the sum of total capital amount of companies
of the same
person concerned;
FINANCIAL HOLDING COMPANIES ACT
3
(b) The same person concerned, in cases where the sum of total capital
amount of the same person's non-financial companies is not
less
than two trillion won and not less than the amount prescribed by
Presidential Decree; and
(c) The investment company concerned, in cases where a person falling
under item (a) or (b) owns (referring to cases where the same
person holds the voting rights by means of owning stocks under
his/her name or another's name, or by means of contract, etc.; herein-
after the same shall apply) stocks of an investment company under
the Indirect Investment Asset Management Business Act (herein-
after referred to as an "investment company") more than 4/100 of
total outstanding stocks;
9. The term "large stockholder" means a stockholder falling under any
of the following items:
(a) The largest stockholder: The person himself, where he/she and
any person specially related to him/her collectively own the largest
number of outstanding voting stocks of a financial holding company,
no matter whose name the accounts stand under; and
(b) Major
stockholder: A person who owns 10/100 or more of the total
outstanding voting stocks of a financial holding company, and a
stockholder
who exercises de facto influence on major affairs of
management of a financial holding company, its subsidiaries and
second-tier
subsidiaries, by means of appointing, dismissing or
such of executives as prescribed by Presidential Decree; and
10. The term "major investor" means those falling under any of the following
items:
(a) Each person concerned, where the same persons, including one
stockholder of a bank holding company, own more than 10/100
of
the total outstanding voting stocks (15/100, in cases of local
bank holding companies); and
(b) Each person concerned, where the same persons, including one
stockholder of a bank holding company, own more than 4/100 of
the total outstanding voting stocks (excluding non-voting stocks
pursuant to Article 8-2 (2)) of a bank holding company (excluding
local bank holding companies), and the same person concerned is
the largest stockholder, or each stockholder concerned who ex-
FINANCIAL HOLDING COMPANIES ACT
4
ercises de facto influence on major affairs of management of a
financial holding company, its subsidiaries and second-tier sub-
sidiaries, by means of appointing, dismissing or such of executives
as prescribed by Presidential Decree.
(2) The scope of financial business, the scope of companies related closely
to operations of the financial business and the standards
for the primary
business referred to in paragraph (1) 1 shall be determined by Presidential
Decree.
CHAPTER INCORPORATIONS, ETC. OF
FINANCIAL HOLDING
COMPANIES
Article 3 (Authorization)
(1) Any person who intends to run a financial holding company and owns
more financial assets than those determined by Presidential
Decree, shall
obtain authorization thereof from the Financial Services Commission.
(3) The Financial Services Commission may attach conditions to the au-
thorization referred to in paragraph (1).
(4) Any financial holding company shall, where it is granted the authoriza-
tion under paragraph (1), be deemed to have filed a
report in accordance
with Article 8 of the Monopoly Regulation and Fair Trade Act.
Article 4 (Standards for Authorization)
(1) Any person who intends to obtain the authorization under Article 3
shall meet each standard in the following subparagraphs:
1. The business plan is required to be appropriate and sound for a stock
corporation;
2. The business plan of a company that will become a subsidiary or a
second-tier subsidiary (in cases falling under the proviso to
Article
FINANCIAL HOLDING COMPANIES ACT
5
19 (2), a company controlled by a second-tier subsidiary shall be in-
cluded; hereinafter referred to as "subsidiaries, etc.") is
required to
be appropriate and sound;
3. Large stockholders (including any stockholder who is a person specially
related to the largest stockholder, and in cases where
the largest stock-
holder is a corporation, a stockholder prescribed by Presidential De-
cree who exercises de facto influence
on major affairs of management
of the corporation; hereafter the same shall apply in Article 7-2) are
required to be able to make
adequate investments, financially sound
and socially credible;
4. The financial standing and business management of a company that
will become a financial holding company and its subsidiaries,
etc. are
required to be sound; and
5. Where a holding company becomes a complete holding company through
an all-inclusive stock swap pursuant to Article 360-2 of the
Com-
mercial Act (hereinafter referred to as "stock swap") or an all-inclusive
stock transfer pursuant to Article 360-15 of the
same Act (hereinafter
referred to as "stock transfer"), the swap ratio of stocks is required
to be appropriate.
(2) Detailed standards for granting authorization pursuant to para-
graph(1) shall be prescribed by Presidential Decree.
Article 5 (Consultations with Fair Trade Commission)
In granting authorization in accordance with Article 3, the Financial
Services
Commission shall consult in advance with the Fair Trade Com-
mission about matters falling under each of the following subparagraphs:
1. Matters relating to limiting conduct performed by any holding company
under Article 8-2 (2) of the Monopoly Regulation and Fair
Trade Act
and matters relating to limiting the incorporation of holding companies
under Article 8-3 of the same Act; and
2. Matters relating to whether the related market is actually limiting
competition.
Article 5-2 (Obligations to Obtain Authorization)
(1) Companies which fall under the requirements of bank holding compa-
nies of
Article 2 (1) 1 (excluding the requirements for authorization under
FINANCIAL HOLDING COMPANIES ACT
6
Article 3; hereinafter referred to as the "requirements for financial holding
companies") due to unavoidable circumstances prescribed
by Presidential
Decree, such as increase in stock price of a subsidiary (excluding companies
which own total assets of less than
the amount set forth in Article 3 (1);
hereafter referred to as "financial holding companies subject to author-
ization" in this
Article), shall report such fact to the Financial Services
Commission within the period determined by Presidential Decree from the
day of the settlement of accounts of the business year.
(2) Financial holding companies subject to authorization shall obtain
authorization under Article 3, or shall cease to be subject
to the require-
ments for financial holding companies from the day of the settlement of
accounts of the business year until the
period determined by Presidential
Decree: Provided, That the period may be extended by up to one year,
with approval of the Financial
Services Commission, when unavoidable
circumstances exist.
No company which is not a financial holding company shall use words
indicating a financial holding company for its trade name or
title.
[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007]
Article 6 (Publication of Authorization, etc.)
The Financial Services Commission shall, when it grants authorization
under Article 3 or revokes authorization under Article 57
(2), publish
without delay the details thereof on the Official Gazette, and make such
details known to the public, making use of
computer communications net-
work, etc.
7
Financial Services Commission within 7 days from the day of modification.
(2) Where the contents of report under the main sentence of paragraph (1)
violate related Acts and subordinate statutes or may damage
healthy
management of the financial holding company, the Financial Services
Commission shall recommend amendments or supplementation
to the fi-
nancial holding company.
OWNERSHIP, ETC. OF
FINANCIAL HOLDING
COMPANIES
Article 7 (Restriction against Controling Relations between Financial
Institutions and Financial Holding Companies)
(1) No financial holding company shall be in a controling relation (here-
after referred to as "controling relations" in this Article),
prescribed by
Presidential Decree, with any financial institution (including any financial
institution incorporated in accordance
with the foreign Acts and subordinate
statutes): Provided, That the same shall not apply to cases falling under
any of the following
subparagraphs and meeting the requirements de-
termined by Presidential Decree:
1. Where a financial holding company has controling relations with another
financial holding company;
2. Where a financial holding company has controling relations with an
investment company, a private equity fund company or a company
with
investment purpose under the Indirect Investment Asset Management
Business Act; and
3. A foreign financial institution (referring to one founded pursuant to
foreign acts and subordinate statutes and engaged in financial
busi-
ness) determined by Presidential Decree and authorized by the
Financial Services Commission as having controling relations
with a
financial holding company, in light of the capacity, scale and soundness
of its business administration.
FINANCIAL HOLDING COMPANIES ACT
8
(2) Notwithstanding the main sentence of paragraph (1), where a financial
institution gained controling relations with a financial
holding company
due to unavoidable circumstances prescribed by Presidential Decree, such
as exercise of security rights, it shall
withdraw from controling relations
with the financial holding company within the period determined by
Presidential Decree: Provided,
That if unavoidable circumstances exist,
such period may be extended with approval of the Financial Services
Commission by up to
one year.
[This Article Wholly Amended by Act No. 6692, Apr. 27, 2002]
Article 7-2 (Approval on Change of Large Stockholders)
(1) A person
who intends to be a large stockholder by acquiring stocks
of a financial holding company (excluding a bank holding company) shall
satisfy the standards determined by Presidential Decree for healthy man-
agement, from among the standards for large stockholders
under Article
4 (1) 3, and then obtain advance approval of the Financial Services
Commission.
(3) No person who has acquired stocks without approval pursuant to para-
graph (1) shall exercise his/her voting rights on such
stocks acquired
without approval.
(4) Necessary matters for the requirements of approval and order of dis-
position pursuant to paragraphs (1) and (2) shall be prescribed
by
Presidential Decree.
[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007]
Article 8 (Restriction against Ownership of Stocks of Bank Holding
Company)
(1) The same person shall not hold stocks of any bank holding company
in excess of 10/100 of the total number of voting stocks issued
by such
bank holding company: Provided, That the same shall not apply to cases
falling under any of the following subparagraphs,
paragraph (3) of this
Article, and Article 8-2 (3):
1. Where the Government or the Korea Deposit Insurance Corporation
established in accordance with the Depositor Protection Act holds
stocks issued by any bank holding company;
FINANCIAL HOLDING COMPANIES ACT
9
2. Where a financial holding company holds stocks of a bank holding
company under its control; and
3. Where the same person holds less than 15/100 of the total number
of the voting stocks of a local bank holding company.
(2) When
the same person (excluding those prescribed by Presidential
Decree) falls under any of the following subparagraphs, he/she shall
report
to the Financial Services Commission in the manner prescribed by
Presidential Decree: 1. When he/she holds in excess of 4/100 of the total number of outstanding
stocks with voting rights in a bank holding company (excluding
a local
bank holding company; hereafter the same shall apply in this para-
graph);
2. When the same person who falls under subparagraph 1 becomes the
largest stockholder of the bank holding company concerned; and
3. When the proportion of stock holdings of the same person who falls
under subparagraph 1 changes above 1/100 of the total outstanding
stocks with voting rights in the bank holding company concerned.
(3) Notwithstanding the main sentence in the part other than any
sub-
paragraphs of paragraph (1), whenever the same person exceeds the re-
spective limit classified in the following subparagraphs,
he/she may hold
the stocks of a bank holding company with the relevant approval of the
Financial Services Commission: Provided,
That the Financial Services
Commission may approve, only when it regards it necessary in consid-
eration of the possibility of
contribution to the efficiency and soundness
of the banking business, stock distribution among the stockholders of
the bank holding
company concerned, etc., by designating other holding
limits besides the limits stipulated in the following subparagraphs, and
in cases where the same person intends to hold in excess of the approved
limit, he/she shall further obtain a separate approval
from the Financial
Services Commission: 1. Limit stipulated in the main sentence in the part other than any sub-
paragraphs of paragraph (1) (in cases of a local bank holding
com-
pany, the limit stipulated in paragraph (1) 3);
2. 25/100 of the total number of outstanding stocks with voting rights
in the bank holding company concerned; and
3. 33/100 of the total number of outstanding stocks with voting rights
FINANCIAL HOLDING COMPANIES ACT
10
in the bank holding company concerned.
(4) In cases where the Financial Services Commission does not grant
approval pursuant to the provisions of paragraph (3), it shall
provide clear
valid grounds and inform the applicant of it within the time frame pre-
scribed by Presidential Decree.
(6) In cases where an investment company holds stocks of a bank holding
company with approval pursuant to paragraph (3), Article
88 (1) 2 of
the Indirect Investment Asset Management Business Act shall not apply
to the investment company concerned and the asset
management company
which is a corporate director of the investment company.
[This Article Wholly Amended by Act No. 6692, Apr. 27, 2002]
Article 8-2 (Restriction against Ownership of Stocks, etc. of Non-
Financial Contributor)
(1) Notwithstanding Article 8 (1), a non-financial contributor (including
those excluded from the enterprise group, etc. subject
to limitations on
mutual investment under Article 14-2 of the Monopoly Regulation and
Fair Trade Act, and consequently ceasing
to constitute a non-financial
contributor, for whom the period of time prescribed by Presidential Decree
from the date of such
exclusion has not yet elapsed; hereafter the same
shall apply in paragraph (2)) shall not possess in excess of 4/100 (15/100,
in
cases of a local bank holding company) of the total outstanding stocks
with voting rights in a bank holding company.
(2) Notwithstanding paragraph (1), in cases where a non-financial con-
tributor has been approved by the Financial Services Commission
by sat-
isfying the requirements of financial soundness, etc. prescribed by Presi-
dential Decree on condition that it shall not
exercise the voting rights
of the stocks in a bank holding company that it intends to hold in excess
FINANCIAL HOLDING COMPANIES
ACT
11
of the limit of paragraph (1) (excluding cases of a local bank holding com-
pany), it may hold stocks up to the limit stipulated
in the main sentence
in the part other than any subparagraphs of Article 8 (1).
(3) Notwithstanding paragraphs (1) and (2), Article 8 (1) and (3) shall
apply to the non-financial contributors who have filed with
the Financial
Services Commission a plan of changeover (hereinafter referred to as the
"changeover plan") within two years to cease
as being a non-financial con-
tributor and then has been granted approval thereof from the Financial
Services Commission.
(3) In cases where a subject of changeover is not acknowledged to be
executing the changeover plan as the result of an inspection
pursuant to
the provisions of paragraph (2), the Financial Services Commission may
set a time frame of up to six months and order
him/her to execute it.
(4) A subject of changeover who falls under any of the following subpara-
graphs shall not be eligible to exercise the voting rights
of the stocks in
FINANCIAL HOLDING COMPANIES ACT
12
a bank holding company held in excess of the limit stipulated in Article
8-2 (1): 1. A subject of changeover who has been ordered by the Financial Services
Commission to execute pursuant to the provisions of paragraph
(3);
and
2. A subject of changeover who has been ascertained to have been involved
in any illegal dealing with a bank holding company, etc.
as the result
of an inspection by the Governor of the Financial Supervisory Service
pursuant to Article 51-2 (1) 2.
(5) In cases where a subject of changeover falls under any of the following
subparagraphs, the Financial Services Commission may
set a time frame
of up to six months and order him/her to dispose of any surplus stocks
of a bank holding company held in excess
of the limit stipulated in Article
8-2 (1): 1. Where he/she fails to comply with an execution order pursuant to the
provisions of paragraph (3); and
2. Where he/she falls under paragraph (4) 2.
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
Article 9 Deleted.
(2) With respect to any person who fails to observe the provisions of para-
graph (1), the Financial Services Commission may order
him/her to dis-
pose of any stocks held in excess of the stock-holding limit within a fixed
period of not more than six months.
(1) The Financial Services Commission shall, in accordance with Presi-
dential Decree, deliberate whether those holding stocks of
a bank holding
company pursuant to the provisions of Articles 8 (3) and 8-2 (3) (hereafter
referred to as "stockholders' holdings
in excess of the holding limit" in
FINANCIAL HOLDING COMPANIES ACT
13
this Article) continue to satisfy the qualifications and requirements for
approval under Article 8 (5) (hereafter referred to as
the "requirements
of excess holdings" in this Article) even after they hold the stocks
concerned.
(4) Any stockholders who have been ordered pursuant to the provisions
of paragraph (3) shall not be eligible to exercise the voting
rights of the
stocks in a bank holding company held in excess of the limit stipulated
in Article 8 (3) 1 (in cases where the stockholders'
holdings in excess
of the holding limit are non-financial contributors, referring to the limit
stipulated in Article 8-2 (1); hereafter
the same shall apply in para-
graph (5)) till they fulfill such order.
(5) When a stockholder holding in excess of the holding limit fails to fulfill
the order pursuant to the provisions of paragraph
(3), the Financial
Services Commission may set a time frame of up to six months and order
them to dispose of the surplus stocks
of a bank holding company held in
excess of the limit stipulated in Article 8 (3) 1.
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
Articles 11 and 12 Deleted.
Article 14 Deleted.
14
CHAPTER BUSINESS OF FINANCIAL
HOLDING COMPANY AND
INCORPORATION OF
COMPANIES AS
SUBSIDIARIES, ETC.
THEREOF
Article 15 (Business)
Any financial holding company shall be prohibited from engaging in other
profit-making business except for business prescribed by
Presidential
Decree as incidental to managing its subsidiaries.
Article 16 (Approval for Incorporation of Company into Subsidiary,
etc.)
(1) Any financial holding company (excluding any financial holding com-
pany that is controlled by any other financial holding
company; hereafter
the same shall apply in this Chapter) shall, where it incorporates a com-
pany into a new subsidiary and its
subsidiary incorporates a company into
a new second-tier subsidiary, obtain approval thereof from the Financial
Services Commission.
(3) The Financial Services Commission may attach conditions to the ap-
proval given under paragraph (1).
(1) Any financial holding company that intends to obtain the approval
described in Article 16 shall meet the requirements falling
under each of
the following subparagraphs: 1. The business plan of a company incorporated into subsidiaries, etc.
shall be appropriate and sound;
2. The financial standing and business management of such financial
holding company and its subsidiaries, etc. shall be sound; and
3. The swap ratio of stocks shall be appropriate in the event that a com-
pany is incorporated into a subsidiary, etc. through such
stock swap.
FINANCIAL HOLDING COMPANIES ACT
15
(2) In granting approval under paragraph (1), the Financial Services
Commission shall consult in advance with the Fair Trade Commission
as
to whether the incorporation of a company into a subsidiary, etc. sub-
stantially limits competition in the relevant market.
(3) Detailed requirements for granting approval under paragraph (1)
shall be determined by Presidential Decree.
Article 18 (Report on Incorporation of Company into Subsidiary, etc.)
(1) Any financial holding company that has incorporated a
company, as
prescribed by Presidential Decree taking into account the type and charac-
teristics, etc. of such company (hereinafter
referred to as a "company
subject to reporting"), into a subsidiary, etc. shall file a report thereof
with the Financial Services
Commission under the conditions prescribed
by Presidential Decree, notwithstanding the provisions of Article 16 (1).
(2) The Financial Services Commission shall, upon receiving a report
filed under paragraph (1), consult with the Fair Trade Commission
as
to whether the incorporation of a company into a subsidiary, etc. sub-
stantially limits competition in the relevant market.
(3) The Financial Services Commission may, where it is recognized that
a subsidiary, etc. incorporated under paragraph (1) does
not constitute
a company subject to reporting or its incorporation substantially limits
competition in the relevant market, set
a time frame of up to six months
and order the financial holding company involved or the subsidiary in-
volved to dispose of stocks
of the newly incorporated subsidiary, etc.
(5) In cases where a financial holding company or a subsidiary thereof
incorporates a company subject to reporting as a subsidiary,
etc. under
paragraph (1), the provisions of Article 24 of the Act on the Structural
Improvement of the Financial Industry shall
not apply.
FINANCIAL HOLDING COMPANIES ACT
16
Article 19 (Second-Tier Subsidiaries)
(1) Every subsidiary of a financial holding company shall be prohibited
from controlling companies other than a company falling
under any of the
following subparagraphs: Provided, That with respect to a company that
controls other companies at the time when
the former becomes a subsidiary,
the same shall not apply for two years from the date on which the former
becomes a subsidiary:
1. A financial institution, prescribed by Presidential Decree, which is re-
lated in business to the subsidiary concerned; and
2. A company, prescribed by Presidential Decree, which is closely related
to running a financial business.
(2) Every second-tier subsidiary of a financial holding company shall be
prohibited from controlling any other company: Provided,
That with respect
to a company that controls another company at the time when the former
becomes a second-tier subsidiary, the
same shall not apply for two years
from the date on which the former becomes a second-tier subsidiary.
CHAPTER Deleted.
Articles 20 through 37 Deleted.
HOLDING COMPANY
Article 38 (Qualification Requirements for Executives)
(1) No person falling under any of the following subparagraphs shall
become
an executive of any financial holding company, or he/she shall,
if found to fall under any of the following subparagraphs after
becoming
an executive, relinquish his/her position: 1. A minor, incompetent or quasi-incompetent person;
2. A person who has been declared bankrupt, but has not yet been re-
instated;
3. A person who has been sentenced to imprisonment without prison labor
or heavier punishment, and five years have not yet passed
since the
expiration of the term of sentence (including cases where the execution
FINANCIAL HOLDING COMPANIES ACT
17
of the sentence is deemed to have been terminated) or since the decision
to waive such sentence has been made;
4. A person who was sentenced to a fine or a heavier punishment under
this Act, foreign Acts and subordinate statutes related to
financial hold-
ing companies, or other finance-related Acts and subordinate statutes
prescribed by Presidential Decree (including
foreign finance-related
Acts and subordinate statutes corresponding thereto), and five years
have not yet passed since the expiration
of the term of sentence
(including cases where the execution of the sentence is deemed to have
been terminated) or since the decision
to waive such sentence has been
made;
5. A person who is within a period of stay of execution after having been
sentenced to a suspended sentence of imprisonment without
prison labor
or heavier punishment;
6. A person who has been removed from his/her office or dismissed by
disciplinary action under this Act, foreign Acts and subordinate
stat-
utes related to financial holding companies, or other finance-related
Acts and subordinate statutes prescribed by Presidential
Decree
(including foreign finance-related Acts and subordinate statutes corre-
sponding thereto), and five years have not yet passed
since;
7. A person who has worked as an executive or an employee of a corporation
or a company whose business license or authorization,
etc. has been
cancelled (limited to a person prescribed by Presidential Decree, who
was directly or correspondingly responsible
for the occurrence of the
cause of such cancellation) in accordance with this Act, foreign Acts
and subordinate statutes related
to financial holding companies, or
other finance-related Acts and subordinate statutes prescribed by
Presidential Decree (including
foreign finance-related Acts and sub-
ordinate statutes corresponding thereto), and five years have not yet
passed since;
8. A person who is or was an executive or employee (limited to a person
who is directly subject to, or corresponding to, the grounds
for receiving
such corrective measures at an appropriate time and who is prescribed
by Presidential Decree) of a financial institution
under corrective meas-
ures at an appropriate time pursuant to Article 10 (1) the Act on the
Structural Improvement of the Financial
Industry or administrative
FINANCIAL HOLDING COMPANIES ACT
18
measures such as decision of contract transfer of Article 14 (2) of the
same Act (hereinafter referred to as "corrective measures
at an appro-
priate time or such"), and two years have not yet passed since; and
9. A retired executive or employee who would have been notified of advice
to resign (including dismissal) or request to resign under
this Act, fi-
nance-related Acts and subordinate statutes prescribed by Presidential
Decree, if he/she were holding office, and
five years have not yet passed
since the date of such notification (seven years from the date of retire-
ment, if the date turning
five years from the date of notification occurs
later than the date falling seven years from the date of retirement).
(2) An executive
of a financial holding company shall have experience and
knowledge in finance, and he/she shall not be detrimental to the public
interests, soundness of business administration or trade order.
(3) Details on the requirement of an executive of a financial holding com-
pany pursuant to paragraph (2) shall be prescribed by
Presidential De-
cree.
(2) Any executive or employee of a financial holding company may become
an executive of the subsidiary, etc. of such financial holding
company not-
withstanding paragraph (1) and other finance-related Acts and subordi-
nate statutes.
(3) Notwithstanding other Acts and subordinate statutes, executives of
a subsidiary, etc. of a financial holding company may become
executives
of another subsidiary, etc. of such financial holding company, which en-
gages in the same type of business.
Article 40 (Appointment of Outside Directors)
(1) Every financial holding company (limited to any financial holding com-
FINANCIAL HOLDING COMPANIES ACT
19
pany prescribed by Presidential Decree taking into account the assets,
etc. of such financial holding company and its subsidiaries;
hereafter the
same shall apply in this Article, Articles 41 and 42) shall have three or
more outside directors (referring to directors
who are not engaged in ordi-
nary business of the company, and do not fall under any subparagraph
of paragraph (4); hereinafter
the same shall apply), and the number of
outside directors shall not be less than a half of the total number of
directors.
(3) Outside directors shall be appointed at a general meeting of stock-
holders from among persons recommended by the committee
for recom-
mending candidates as outside directors under paragraph (2).
(4) No person falling under any of the following subparagraphs
shall become
an outside director of a financial holding company, or he/she shall, if found
to fall under such provisions after
becoming an outside director, relinquish
his/her position: 1. A minor, incompetent or quasi-incompetent person;
2. A person who has been declared bankrupt and has not yet been re-
instated;
3. A person who has been sentenced to imprisonment without prison labor
or to a heavier punishment, and five years have not yet passed
since
the expiration of the term of sentence or since the decision to waive
such sentence has been made;
4. A person who has been dismissed or removed from his/her position
pursuant to this Act, and two years have not yet passed since;
5. The largest shareholder;
6. Any person specially related with the largest stockholder, as prescribed
by Presidential Decree;
7. A major stockholder, his/her spouse, lineal ascendant or descendant;
8. A person who is or has been a full-time executive or employee of the
financial holding company concerned or an affiliated company
thereof
FINANCIAL HOLDING COMPANIES ACT
20
(referring to an affiliated company pursuant to the Monopoly Regulation
and Fair Trade Act; hereinafter the same shall apply) for
the last two
years;
9. A spouse, lineal ascendant or descendant of a full-time executive of
the financial holding company;
10. A person who is or has been a full-time executive or employee of a
corporation within the last two years, which has important
business
relationship as prescribed by Presidential Decree with the financial
holding company, or which is a competitor or collaborator
of the finan-
cial holding company;
11. A full-time executive or employee of a company for which a full-time
executive or employee of the financial holding company is
working
part-time; and
12. A person who has difficulty in faithfully performing his/her duties as
an outside director, or who may exercise influence over
business ad-
ministration of the financial holding company, as prescribed by Presi-
dential Decree.
(5) Any financial holding company shall, where the makeup of the board
of directors is made inconsistent with the requirements as
described in
paragraph (1) on the grounds of resignation, death or such of any outside
director, make the composition of the board
of directors consistent with
the requirements of paragraph (1) at the first general meeting of stock-
holders called since the
date on which such grounds accrued.
(6) The provisions of the latter part of paragraph (2) shall not apply to
any company that is required to appoint outside directors
due to falling
under the requirements of paragraph (1) for the first time.
Article 41 (Audit Committee)
(1) Every financial holding committee shall establish an audit committee
(referring to the audit committee under Article 415-2 of
the Commercial
Act; hereinafter the same shall apply).
(2) The audit committee shall meet all requirements under the following
subparagraphs: 1. Outside directors shall comprise up not less than 2/3 of the total number
of the members enrolled; and
2. One or more members shall be specialists in accounting or finance pre-
FINANCIAL HOLDING COMPANIES ACT
21
scribed by Presidential Decree.
(3) No person falling under any of Article 40 (4) 1 through 4 and 7 through
9 shall become an internal director member of the audit
committee, and
he/she shall relinquish his/her position, if found to fall under such provi-
sions after becoming such a member:
Provided, That an internal director
member, currently holding office, of the audit committee may be an internal
director member
of the audit committee, although he/she falls under Article
40 (4) 8.
(5) The provisions of the proviso to Article 415-2 (2) of the Commercial
Act shall not apply to the composition of any audit committee
established
in accordance with paragraph (1).
Article 41-2 (Recommendation on Candidates as Members of Audit Com-
mittee)
Candidates as members of the audit committee shall be recommended by
the committee for recommending candidates as members of the
audit com-
mittee, which was comprised of all of outside directors. In this case, the
committee for recommending candidates as
members of the audit commit-
tee shall pass a resolution with the consent of not less than 2/3 of the
number of outside directors
on the register.
[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007]
Article 41-3 (Restriction on Rights to Vote of Person Concerned)
No
outside director, who has special interests in the case concerned, shall
exercise his/her rights to vote at the resolution of the
board of directors.
[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007]
Article 41-4 (Special Cases on Structures of Control
of Complete Subsidia-
ries, etc.)
(1) Where a complete subsidiary or second-tier subsidiary of which total
stocks issued are owned by a complete subsidiary (hereafter
referred to
as "complete subsidiaries, etc." in this Article) falls under the requirement
determined by the Financial Services
Commission as prescribed by
Presidential Decree, such as clarity of management, it may not have outside
FINANCIAL HOLDING COMPANIES
ACT
22
directors or found an audit committee, notwithstanding the provisions on
the board of directors or audit committee pursuant to the
Acts providing
grounds for establishment of the financial institution concerned.
(2) Where complete subsidiaries, etc. do not establish an audit committee
under paragraph (1), they shall appoint full-time auditors.
In this case,
Article 191-12 of the Securities and Exchange Act shall apply mutatis
mutandis.
[This Article Newly Inserted by Act No. 8571, Aug. 3, 2007]
Article 42 (Exercise of Minority Stockholders' Rights)
(1) Any person
who has continued to hold stocks equivalent to not less
than 5/100,000 of the total number of stocks issued by a financial holding
company for not less than six months, as prescribed by Presidential Decree,
may exercise his/her rights as a stockholder in accordance
with the provi-
sions of Article 403 of the Commercial Act (including cases where the
provisions apply mutatis mutandis in Articles
324, 415, 424-2, 467-2 and
542 of the Commercial Act).
(2) Any person who has continued to hold stocks equivalent to not less
than 250/100,000 (not less than 125/100,000 in cases of a
financial holding
company prescribed by Presidential Decree) of the total number of stocks
issued by a financial holding company
for not less than six months, as
prescribed by Presidential Decree, may exercise his/her rights as a stock-
holder in accordance
with the provisions of Articles 385 (including cases
where the provisions apply mutatis mutandis in Article 415 of the
Commercial
Act), 402, and 539 of the Commercial Act.
(3) Notwithstanding the provisions of paragraph (2), any person who has
continued to
hold stocks equivalent to not less than 25/100,000 (not less
than 125/1,000,000 in cases of a bank holding company prescribed by
Presidential Decree) of the total number of stocks issued by a bank holding
company for not less than six months, as prescribed
by Presidential Decree,
may exercise his/her rights as a stockholder in accordance with the provi-
sions of Article 402 of the
Commercial Act.
(4) Any person who has continued to hold stocks equivalent to not less
than 50/10,000 (not less than 25/10,000 in case of a financial
holding
company prescribed by Presidential Decree) of the total number of voting
FINANCIAL HOLDING COMPANIES ACT
23
stocks issued by a financial holding company for not less than six months,
as prescribed by Presidential Decree, may exercise his/her
rights as a
stockholder in accordance with Articles 363-2 and 466 of the Commercial
Act. In this case, the exercise of his/her
rights as a stockholder under
Article 363-2 of the Commercial Act shall be based on voting stocks.
(1) Every financial holding company shall be prohibited from investing
in securities (excluding any securities that are issued by
its subsidiaries,
etc. that belong to the relevant financial holding company; hereafter re-
ferred to as "securities" in this Article)
provided for in the Securities and
Exchange Act in excess of the amount obtained by subtracting the total
amount of investment
in its subsidiaries from its equity capital (hereinafter
referred to as the "limits on the investment"). In this case, the methods
of calculating the equity capital shall be determined by Presidential
FINANCIAL HOLDING COMPANIES ACT
24
Decree.
(2) The provisions of the former part of paragraph (1) shall not apply
to cases where any financial holding company that has not
invested in
securities in excess of the limits on the investment in securities invests
in securities in excess of the limits on
the investment in securities on the
grounds falling under any of the following subparagraphs:
1. A decrease in its equity capital;
2. Fluctuations in the prices of securities;
3. The merger of financial holding companies or the acquisition by transfer
of any financial holding company;
4. The exercise of security rights or the receipt of payment in substitute
form; and
5. Other inevitable cases prescribed by Presidential Decree.
(3) In cases where any financial holding company invests in securities
in excess of the limits on the investment in securities on the grounds referred
to in each subparagraph of paragraph (2), such
financial holding company
shall take measures to bring its investment in securities into conformity
with the limits on the investment
in securities within one year from the
date on which it invests in securities in excess of the limits on the invest-
ment in securities:
Provided, That in cases of grounds of inevitability pre-
scribed by Presidential Decree, the Financial Services Commission may
extend such period by fixing another period.
[This Article Wholly Amended by Act No. 7529, May 31, 2005]
Article 43-2 (Obligation to Own Stocks of Subsidiaries)
(1) A financial
holding company shall own not less than 50/100 (30/100,
if any of its subsidiaries is a corporation listed on the stock market or
on KOSDAQ pursuant to the Securities and Exchange Act; hereafter re-
ferred to as "standard for stock ownership" in this Article)
of total number
of issued stocks of its subsidiary concerned: Provided, That the same shall
not apply, if it fails to meet the
standard for stock ownership due to any
of the following circumstances:
1. Where a financial holding company becomes subject to the requirements
of a financial holding company, it owned less stocks of
its subsidiary
than those of the standard for stock ownership, and two years have
not passed since the date it becomes subject
to the requirements of
a financial holding company;
FINANCIAL HOLDING COMPANIES ACT
25
2. Where a subsidiary, which used to be a corporation listed on the stock
market or on KOSDAQ pursuant to the Securities and Exchange
Act,
failed to meet the standard for stock ownership, and one year has not
passed since the date it failed to meet such standard;
3. Where a subsidiary offers stocks for subscription or sells them, it gives
priority in allotment to an association of employees
as stockholders
pursuant to Article 191-7 of the Securities and Exchange Act, or con-
version is requested for convertible bonds
or the right to subscribe to
new stocks is exercised for the bonds from the preemptive right to new
stocks, which are issued by
the subsidiary concerned pursuant to Article
513 or 516-2 of the Commercial Act, and consequently the subsidiary
fails to meet
the standard for stock ownership and one year has not
passed since the date it failed to meet the standard for stock ownership;
4. Where a non-subsidiary becomes a subsidiary and fails to meet the
standard for stock ownership, and one year has not passed since
the
date it became a subsidiary; and
5. Where a subsidiary has failed to meet the standard for stock ownership
during the process of becoming a non-subsidiary, and one
year has not
passed since the date it failed to meet such standard (limited to cases
where a subsidiary became a non-subsidiary
within one year from the
date on which it failed to meet the standard for stock ownership).
(2) In applying the standard for stock
ownership, a subsidiary that has
issued and listed or registered stocks overseas may be deemed to be a
listed corporation, if the
Financial Services Commission approves it upon
considering stability, mobility and clearness or such overseas market and
the level
of publicity and self-regulation system of the stock exchange in
such foreign country.
FINANCIAL HOLDING COMPANIES ACT
26
(4) Necessary matters for securities markets in foreign countries as set
forth in paragraph (2) and relaxation of the standard for
stock ownership
as set forth in paragraph (3) shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No.
8571, Aug. 3, 2007]
Article 44 (Limits to Holding Stocks of Other Companies)
(1) Any financial holding company may hold stocks
issued by another
company that is not its subsidiary, etc. within the limit of 5/100 of the
total number of stocks issued by such
company: Provided, That the same
shall not apply to cases where the holding of such stocks falls under
Article 8-2 (2) 3 (main
sentence) or 4 of the Monopoly Regulation and
Fair Trade Act (excluding cases where a bank holding company falls under
subparagraph
4 of the same paragraph).
(2) Where a financial holding company holds stocks issued by another
company (excluding a financial institution or any company related
closely
to financial business) in accordance with the main sentence of para-
graph (1), such financial holding company shall exercise
its voting rights
so as not to affect the number of voting stocks derived from subtracting
the number of stocks held by itself
from the total number of stocks issued
by that other company at a general meeting of stockholders of such other
company.
Article 45 (Limit on Credit Extension)
(1) The total amount of credit extended by a financial holding company
(excluding any financial holding company controlled by another
financial
holding company; hereafter the same shall apply in this Article) and its
subsidiary, etc. (hereafter referred to as the
"financial holding company,
etc." in this Article) to the same borrower (referring to the same borrower
net total amount of the
equity capital of the financial holding company,
etc.: Provided, That the same shall not apply to cased falling under any
of the
following subparagraphs, which is prescribed by Presidential Decree:
1. Where it is necessary for the national economy and for securing the
effectiveness of credit extended by the financial holding
company,
etc.; and
2. Where the limit described in the main sentence is exceeded by a change
in the equity capital and the same borrower, etc. although
the financial
holding company, etc. does not extend any additional credit.
FINANCIAL HOLDING COMPANIES ACT
27
(2) The total amount of credit extended by the financial holding company,
etc. to the same individual or the same corporation shall
not exceed 20/100
of the net total amount of its equity capital: Provided, That the same
shall not apply to cases falling under
the cause of the proviso to para-
graph (1).
Article 45-2 (Limit, etc. on Credit Extension for Major Investors of Bank
Holding Company)
(1) The total amount of credit, which a bank holding company, etc.
(excluding a financial holding company controlled by another
bank holding
company; hereafter the same shall apply in this Article and Articles 45-3
through 45-5) can extend to the major investors
(including persons spe-
cially related thereto; hereinafter the same shall apply) of the bank holding
company, shall not exceed
the lesser of the amount equivalent to the value
of the rate, prescribed by Presidential Decree, which is within the extent
of
25/100 of the net total amount of its equity capital, and the amount
equivalent to the value of the investment proportion of such
major investors
of the bank holding company concerned: Provided, That in cases where
FINANCIAL HOLDING COMPANIES ACT
28
the bank holding company, etc. falls under the cause of the proviso to
Article 45 (1), the same shall not apply.
(2) The total amount of credit that a bank holding company, etc. can
extend to all major investors of the bank holding company concerned
shall
not exceed the amount equivalent to the value of the rate, prescribed by
Presidential Decree, which is within the extent
of 25/100 of the net total
amount of its equity capital.
(4) When a bank holding company, etc. intends to extend credit (including
a transaction prescribed by Presidential Decree; hereafter
the same shall
apply in this Article) to the major investors of the bank holding company
concerned in excess of the amount prescribed
by Presidential Decree, it
shall be subject to the prior resolution of the board of directors. In this
case, the board of directors
shall make a resolution by a unanimous vote
of all directors on the register.
(6) A bank holding company, etc. shall publicly announce on a quarterly
basis by means of computer communications networks, etc.
the matters
regarding the credit grants to the major investors of the bank holding com-
pany concerned as prescribed by Presidential
Decree.
(7) The extent of subsidiary, etc., standard of credit grant, method of
calculating the equity capital and the net total amount
of the equity capital
pursuant to the provisions of paragraphs (1) through (6) shall be pre-
scribed by Presidential Decree.
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
Article 45-3 (Limit, etc. on Acquisition of Stocks Issued by Major
Inves-
tors)
FINANCIAL HOLDING COMPANIES ACT
29
(1) A bank holding company, etc. shall not acquire (including acquisition
by trust business operation; hereafter the same shall
apply in this Article)
stocks (including investment equity; hereafter the same shall apply in
this Article) issued by the major
investors of the bank holding company
in excess of the amount equivalent to the value of the rate, prescribed
by Presidential Decree,
within the extent of 1/100 of the net total amount
of its equity capital.
(2) In cases where persons who have not been major investors become
major investors, and consequently a bank holding company, etc.
thereby
exceeds the limit pursuant to the provisions of paragraph (1), such bank
holding company, etc. shall dispose of the surplus
stocks within the time
frame prescribed by Presidential Decree.
(3) When a bank holding company, etc. intends to acquire the stocks issued
by the major investors of the bank holding company concerned
in excess
of the amount prescribed by Presidential Decree, it shall be subject to
the prior resolution of the board of directors.
In this case, the board of
directors shall make a resolution by a unanimous vote of all directors on
the register.
(6) In exercising the voting rights in the stocks issued by major investors
of a bank holding company, etc., the bank holding company,
etc. shall
exercise in a way that does contravene the terms of resolution that can
be carried by the number of stocks obtained
by subtracting the number
of stocks held by the bank holding company concerned, etc. from the number
of stocks of the major investors
attending the general meeting of the
FINANCIAL HOLDING COMPANIES ACT
30
stockholders: Provided, That in cases where it is evidently expected that
loss to the bank holding company concerned, etc. will
occur by such means
as merger of the major investors, transfer and takeover of business oper-
ations, selection and appointment
of executives, and other means equivalent
thereto, the same shall not apply.
No major investor of a bank holding company shall engage in any conduct
falling under any of the following subparagraphs for the
purposes of his/her
personal interests contrary to the interest of such bank holding company:
1. Demanding that the bank holding company concerned, etc. furnish undis-
closed data or information in order to exercise undue influence:
Pro-
vided, That cases falling under the provisions of Article 42 (5) are
excluded;
2. Exercising undue influence on the personnel management or business
operations of the bank holding company concerned, etc. in consultation
with other stockholders on condition of supply of a benefit in return
for an economic gain, etc.;
3. Exercising influence on the business operations of the bank holding
company concerned, etc. such as demanding early withdrawal
of credit
grants, etc. for the purposes of interference with the business activities
of a competing business operator; and
4. Any other conduct equivalent to subparagraphs 1 through 3 and pre-
scribed by Presidential Decree.
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
Article 45-5 (Demands, etc. to Submit Data to Major Investors)
(1)
When the Financial Services Commission suspects a bank holding com-
pany, etc. or its major investors having violated the provisions
of Articles
45-2 through 45-4, it may demand that the bank holding company, etc.
or its major investors submit necessary data.
(2) In cases where the difficulty in financial structure due to an excess
of liability over assets of a major investor (limited
to a company) of a
bank holding company, is apprehended to be substantially detrimental
to the operational soundness of such bank
holding company, etc., and such
FINANCIAL HOLDING COMPANIES ACT
31
cases are prescribed by Presidential Decree, the Financial Services Com-
mission may take measures prescribed by Presidential Decree,
such as
ordering, etc. the bank holding company, etc. to limit credit grants to its
major investors.
Article 47 Deleted.
1. Credit extension for a financial holding company to which such sub-
sidiaries, etc. belong;
2. Holding stocks issued by other subsidiaries, etc. (excluding any company
controlled directly by such subsidiaries, etc.) of a
financial holding com-
pany to which such subsidiaries, etc. belong; and
3. Credit extension for other subsidiaries, etc. of a financial holding com-
pany to which such subsidiaries, etc. belong in excess
of the standards
prescribed by Presidential Decree.
(2) Where subsidiaries, etc. belonging to the same financial holding com-
pany extend credit to each other, such subsidiaries, etc.
shall secure appro-
priate securities according to the standards prescribed by Presidential
Decree: Provided, That the same shall
not apply to cases where such sub-
sidiaries, etc. extend credit to each other for their corporate restructuring
in a manner that
meets the requirements prescribed by the Financial
Services Commission.
32
to transactions necessary for the corporate restructuring of such subsidia-
ries, etc. and other cases meeting the requirements
prescribed by the
Financial Services Commission.
(5) The subsidiaries, etc. of every financial holding company shall be
prohibited from holding stocks issued by such financial holding
company:
Provided, That the same shall not apply to cases where the subsidiaries,
etc. of such financial holding company acquire
stocks issued by such finan-
cial holding company under Article 62-2 (1) of this Act or Article 342-2
of the Commercial Act.
(7) No subsidiaries, etc. of any financial holding company shall, where
holding stocks issued by such financial holding company
or other sub-
sidiaries, etc. (excluding companies directly controlled by the subsidiaries,
etc. concerned) of such financial holding
company, be allowed to exercise
their voting rights thereof.
Article 48-2 (Supply and Management of Personal Credit Information,
etc.)
(1) Notwithstanding the provisions of Articles 23 and 24 (1) of the Use
and Protection of Credit Information Act, a financial holding
company,
etc. may supply credit information regarding a person (hereinafter referred
to as "personal credit information") pursuant
to the provisions of subpara-
graphs 1, 3 and 4 of Article 23 of the same Act to allow the financial
holding company, etc. to which
he/she belongs to utilize it for the purposes
of business operation.
(2) Notwithstanding the provisions of Article 59 of the Securities and
Exchange Act, a securities company, which is a subsidiary,
etc. of a finan-
cial holding company, may supply information regarding the total amount
of money or securities deposited by a
truster who buys and sells securities
through the securities company concerned or intends to do so, to allow
the financial holding
company to which he/she belongs to utilize it for
FINANCIAL HOLDING COMPANIES ACT
33
the purposes of business operation.
(3) In cases where a subsidiary, etc. supplies the personal credit in-
formation and information on the total amount of money or
securities
(hereinafter referred to as "personal credit information, etc.") pursuant to
the provisions of paragraphs (1) and (2),
the provisions of Article 24 (2)
of the Use and Protection of Credit Information Act shall not apply.
(4) A financial holding company,
etc. shall appoint not less than one person
from among the executives under its control to act as a person in charge
of the management
of personal credit information, etc. (hereinafter referred
to as "credit information manager") for the strict management of such
in-
formation, etc.
(5) Each credit information manager shall prepare a business guidebook
as set up by the Financial Services Commission for the strict
management
of personal credit information, etc. and report the contents thereof to the
Financial Services Commission.
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
Article 48-3 (Prohibition, etc. on Taking Bribes, etc.)
(1) No executive
or employee of any financial holding company shall re-
ceive any gift, or offer or take or promise any bribe in connection with
his/her duties.
(2) No person who is or has been an executive and employee of a financial
holding company shall disclose the information that they
became aware
of in the course of his/her duties to others or utilize it for purposes other
than his/her business operations.
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
CHAPTER SUPERVISION OF
FINANCIAL HOLDING
COMPANIES
Article 49 (Supervision)
FINANCIAL HOLDING COMPANIES ACT
34
(1) The Financial Services Commission may issue orders necessary to
supervise financial holding companies, etc. for the sound management
thereof.
Article 50 (Management Guidelines)
(1) Financial holding companies shall observe the management guidelines
set by the Financial Services Commission according to Presidential
Decree
with respect to matters falling under each of the following subparagraphs
in order to maintain the sound management thereof:
1. Matters relating to the financial standing of financial holding compa-
nies and their subsidiaries, etc.;
2. Matters relating to the current status of management of financial holding
companies and their subsidiaries, etc.; and
3. Other matters necessary to secure the sound management thereof.
(2) The Financial Services Commission may, when any financial
holding
company fails to observe the management guidelines referred to in para-
graph (1) and is feared to greatly undermine the
soundness of its manage-
ment, order such financial holding company to take necessary measures,
such as the submission of a management
improvement plan, an increase
in capital, limits on dividends, and disposal of stocks of its subsidiaries,
in order to improve
its management.
(1) Every financial holding company and its subsidiaries, etc. shall undergo
audits conducted by the Governor of the Financial Supervisory
Service
(hereinafter referred to as the "Governor of the Financial Supervisory
Service") with respect to their business and assets.
(2) The Governor of the Financial Supervisory Service may, when he/she
deems it necessary to conduct an audit, ask any financial
holding company
and its subsidiaries, etc. to report on their business or assets, furnish
data and get officials in charge to be
present and state their opinions.
FINANCIAL HOLDING COMPANIES ACT
35
(3) Persons who conduct the audit under paragraph (1) shall carry certifi-
cates indicating their authority and show them to persons
concerned.
(4) The Governor of the Financial Supervisory Service may ask auditors
appointed by any financial holding company and
its subsidiaries, etc.
under the Act on External Audit of Stock Companies to furnish information
they have learned in the course
of audits of such financial holding company
and its subsidiaries, etc. and other data pertaining to the soundness of
their management.
(5) The Governor of the Financial Supervisory Service shall, when he/she
conducts an audit in accordance with paragraph (1), file
a report thereof
with the Financial Services Commission. In this case, such report shall,
when this Act, finance-related Acts and
subordinate statutes, dispositions
taken in accordance with this Act and the regulations of the Financial
Services Commission are
found to have been violated, be appended by a
statement of views with respect to the measures for dealing with such
violations.
Article 51-2 (Inspection on Subjects of Changeover)
(1) In any case of the following subparagraphs, the Financial Services
Commission
may cause the Governor of the Financial Supervisory Service
to inspect the operation and property status of the subjects of changeover
within the minimum extent necessary for its duty:
1. Where it is necessary to ascertain the results of inspection pursuant
to the provisions of Article 8-3 (2); and
2. Where it is acknowledged that the subjects of changeover are highly
likely to engage in illegitimate dealings with a bank holding
company,
etc. due to unhealthy financial status, such as rapid increase in debt
and occurrence of huge loss.
(2) The definite extent, method and other necessary matters regarding
the inspection pursuant to the provisions of paragraph (1)
shall be set
by the Financial Services Commission.
36
[This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]
Article 52 (Alloted Charges)
(1) Any financial holding company that has undergone any audit con-
ducted by the Financial Supervisory Service shall pay alloted
charges to
the Financial Supervisory Service to cover expenses incurred by audits.
(2) Necessary matters concerning rates, limits
and payments of alloted
charges referred to in paragraph (1) shall be determined by Presidential
Decree.
Article 53 (Accumulation of Revenue Reserves)
Every financial holding company shall accumulate not less than 10/100
of net earnings, whenever net profits on the settlement of
accounts are
divided, until the reserve amounts to the total amount of the capital.
Article 54 (Business Report)
(1) Every financial holding company shall prepare a business report de-
scribing business results, financial standing and other
matters prescribed
by Presidential Decree for 3 months, 6 months, 9 months and 12 months
from the date on which each business year
begins and file it with the
Governor of the Financial Supervisory Service within one month from the
closure of each period. In
cases where inevitable causes are recognized
to exist, the Governor of the Financial Supervisory Service may extend
the deadline.
Article 55 (Publication of Financial Statements)
Every financial holding company shall publish a balance sheet, an income
statement for the current period for the settlement of
accounts, and docu-
ments prescribed by the Financial Services Commission among the con-
solidated financial statements required
by the Act on External Audit of
Stock Companies, all compiled as of the date of the settlement of accounts,
according to forms
prescribed by the Financial Services Commission, within
3 months from the date of the settlement of accounts: Provided, That with
respect to any document which cannot be published within 3 months from
the date of the settlement of accounts due to unavoidable
reasons, its pub-
lication may be delayed on approval of the Financial Services Commission.
37
Article 55-2 (Submission, etc. by Electronic Documents)
When a financial holding company submits or announces in public the
data
pursuant to the provisions of Articles 54 and 55, it may do so by
means of electronic document under the conditions prescribed by
the
Governor of the Financial Supervisory Service or the Financial Services
Commission.
Every financial holding company shall publish matters necessary to protect
depositors and investors of its subsidiaries, etc., which
are prescribed by
Presidential Decree, in a manner prescribed by the Financial Services
Commission.
(1) The Financial Services Commission may, where any financial holding
company, etc. may undermine the soundness of its management
by violat-
ing this Act or orders issued under this Act, take measures falling under
any of the following subparagraphs: 1. Cautions and warnings to the financial holding company, etc. or demand
to cautions, warns and reprimands its executives and employees;
2. An order issued to correct the violation in question;
3. Deleted; 4. Recommendation to dismiss any executive or suspend his/her duties
and appointment of an agent to act on behalf of any executive;
4-2. Request to an employee to resign; and
5. Suspension of part of the business of its subsidiaries, etc. which have
committed a violation, for not more than six months.
(2) The Financial Services Commission may, where any financial holding
company, etc. falls under any of the following subparagraphs,
order such
financial holding company, etc. to suspend the whole of its business for
a period of not more than 6 months or dispose
of stocks of its subsidiaries,
etc., or cancel the authorization granted to such financial holding com-
pany, etc.: 1. Where it has obtained the authorization of Article 3 in a fraudulent
or other unlawful manner;
2. Where it has failed to execute an order issued to correct a violation
under paragraph (1) 2;
FINANCIAL HOLDING COMPANIES ACT
38
3. Where it runs its business during a business-suspension period under
paragraph (1) 5;
4. Where, in addition to subparagraphs 1 through 3, it is feared to greatly
undermine the interests of depositors or investors of
its subsidiaries,
etc. by violating this Act or orders issued or dispositions taken under
this Act; and
5. Where it ceases to fall under the provisions of Article 2 (1) 1 due to
a decrease in stocks holdings, increase or decrease in
assets, etc. during
the business year concerned.
(3) Where the authorization of a financial holding company is revoked
under paragraph (2), it shall cease to be subject to the requirements
of
a financial holding company within three months.
Article 57-2 (Notification to Retired Executives, etc. of Measures Taken)
(1) The Financial Services Commission may have the Governor
of the
Financial Supervisory Service to notify the heads of relevant financial
holding companies of the measures deemed to be taken,
if a retired execu-
tive or employee of the financial holding company, who would have been
notified of measures falling under Article
57 (1) 4 or 4-2, if he/she were
holding office.
(2) The head of relevant financial holding company who receives such
notification pursuant to paragraph (1) shall notify the relevant
executive
or employee, record and retain it.
[This Article Newly Inserted by Act No. 8906, Mar. 14, 2008]
Article 58 (Corrective Measures, etc.)
(1) The Financial Services Commission may order a person, who has
violated Article 3 (1), 5 -2 (2), 7 or 57 (3), to take any corrective
measure
falling any of the following subparagraphs:
1. Submission of plans, or modification of such plans, to rectify current
violation of Acts;
2. Cautions or warnings to companies involved in violation;
3. Request for cautions, warnings, or reprimands on executives or employ-
ees of a company involved in violation;
4. Disposition of all, or a part of, stocks; and
5. Other measures necessary to rectify current violation of Acts.
FINANCIAL HOLDING COMPANIES ACT
39
(2) A person, who has been ordered to dispose of stocks pursuant to the
provisions of paragraph (1) 4, shall not exercise the voting
rights in such
stocks ordered to be disposed of from the date of receipt of such order.
The Financial Services Commission shall, where it intends to cancel the
authorization granted to a financial holding company in
accordance with
Article 57 (2), hold hearings.
PROVISIONS
Article 60 (Authorization for Merger, etc.)
(1) Any financial holding company shall, when it intends to dissolve itself
or merge with another company, obtain authorization
from the Financial
Services Commission under the conditions prescribed by Presidential
Decree.
(2) In determining whether to grant or deny authorization under para-
graph (1), the Financial Services Commission shall examine
whether such
dissolution or such merger limits competition or disrupts sound order in
the financial market and other matters prescribed
by Presidential De-
cree.
(3) The provisions of Article 3 (2) and (3) shall apply mutatis mutandis
to the authorization of paragraph (1).
Article 61 (Matters to be Reported)
Any financial holding company shall, when it falls under any of the following
subparagraphs, report without delay such fact to the
Financial Services
Commission: Provided, That the same shall not apply in cases of reporting
under Article 8 (2):
1. Where an executive is changed;
2. Where the largest stockholder is changed;
2-2. Where a major investor of a bank holding company is changed;
2-3. Where stocks
owned by large stockholders or a person specially re-
lated thereto changed not less than 1/100 of total voting stocks issued;
3. Where the trade name is changed;
4. Where a ground for dissolution occurs;
FINANCIAL HOLDING COMPANIES ACT
40
5. Where a financial holding company, or its subsidiaries, lose control
over its subsidiaries, or second-tier subsidiaries; and
6. Where the soundness of the management of a financial holding com-
pany, etc. is expected to be undermined, as prescribed by Presidential
Decree.
Article 62 (Relation with Other Acts)
(1) Every financial holding company shall be governed by the Commercial
Act and the Monopoly Regulation and Fair Trade Act except
as specially
provided for in this Act.
(2) Deleted.
Article 62-2 (Special Cases for Stock Swap and Stock Transfer)
(1) When a subsidiary acquires stocks of a financial holding company
or
when a second-tier subsidiary acquires stocks of a subsidiary by means
of stock swap or stock transfer, in applying the provisions
of Article 342-2
of the Commercial Act to the stocks of a financial holding company or a
subsidiary allocated as compensation in
exchange for its own stocks which
fall under any of the following subparagraphs among the stocks concerned,
"six months" in paragraph
(2) of the same Article shall be regarded as
"three years": 1. Its own stocks acquired by the exercise of the appraisal right of the
stockholders opposing the stock swap or stock transfer;
and
2. Among its own stocks acquired pursuant to the provisions of Article
189-2 (1) and (2) of the Securities and Exchange Act, those
purchased
from the date of resolution of the board of directors regarding the
approval on the stock swap contract or on the stock
transfer until the
expiry date of the exercise of the appraisal right of stockholders.
(2) In applying the provisions of the Commercial
Act to the stock swap
or stock transfer to establish a financial holding company (including cases
where a financial holding company,
etc. transfers a company newly into
a subsidiary or a second-tier subsidiary; hereafter the same shall apply
in this Article) or
to own all stocks of an existing subsidiary or second-tier
subsidiary, "two weeks" in Articles 354 (4) (main sentence), 360-4 (1),
360-5 (2), 360-9 (2), 360-10 (4), 360-17 (1), and 363 (1) of the same Act
shall be regarded as "seven days", "twenty days" in Articles
360-5 (1)
and 360-5 (2) of the same Act as "ten days", "before one month" in Article
360-8 (1) of the same Act as "before five
days", "when notifying of his/
FINANCIAL HOLDING COMPANIES ACT
41
her intent to be opposed to the stock swap" in Article 360-10 (5) of the
same Act as "when notifying of his/her intent opposing
the stock swap
within seven days from the date of notification or public announcement
stipulated in paragraph (4)", "within the
period specified for over one
month" in Article 360-19 (1) 2 of the same Act as "within the period
fixed for a duration of five
days or longer", and "within two months" in
Article 374-2 (2) of the same Act as "within one month".
(3) In cases where agreement is not reached between the stockholders
opposing the stock swap or the stock transfer to establish
a financial holding
company or to own all stocks of an existing subsidiary or second-tier sub-
sidiary and the company over the
stock purchase price, the stock purchase
price shall be the amount calculated in accordance with the classification
of the following
subparagraphs, notwithstanding the provisions of Article
374-2 (4) and (5) of the Commercial Act applied mutatis mutandis in the
Article 360-5 (3) of the same Act: 1. Where the company concerned is a listed company on the stock market
or on KOSDAQ pursuant to the Securities and Exchange Act:
The
amount calculated by a method prescribed by Presidential Decree which
is based on the trading price of the stocks concerned
traded on the
securities market before the day of resolution by the board of directors
on the approval of stock swap contract or
stock transfer; and
2. Where the company concerned is other than the one in subparagraph
1: The amount calculated by an accounting expert. In this case,
the
level of accounting expertise and the procedures of appointment shall
be prescribed by Presidential Decree.
(4) In cases where a company intending to swap stocks or transfer stocks
to establish a financial holding company or to own all
stocks of an existing
subsidiary or second-tier subsidiary, or the stockholders holding not less
than 30/100 of the number of stocks
requested for appraisal pursuant to
Article 360-5 of the Commercial Act, opposes the stock purchase price
calculated pursuant to
the provisions of paragraph (3), the company or
the stockholders concerned may apply to the Financial Services Com-
mission for
arbitration up until ten days prior to the day the purchase
pursuant to Article 374-2 (2) of the Commercial Act is to be completed.
42
Article 63 (Entrustment of Authority)
The Financial Services Commission may entrust part of its authority under
this Act to the Governor of the Financial Supervisory
Service under the
conditions prescribed by Presidential Decree.
CHAPTER IMPOSITION AND
COLLECTION OF PENALTY
SURCHARGES
Article 64 (Penalty Surcharges)
The Financial Services Commission may, where any financial holding
company and its subsidiaries, etc. violate the provisions of
Article 43
through 45, 45-2, 45-3, 46, 48 or 62-2 (1), impose penalty surcharges
on them according to the classification falling
under any of the following
subparagraphs: 1. Where the investment is made in securities in excess of the limits on
the investment in securities in violation of the provisions
of Article
43 (1) or (3) or no measures are taken to bring the investment in
securities into conformity with the limits on the
investment in securities
within one year: Not more than 10/100 of the excess investment
amount;
2. Where the limit on stock holdings under Article 44 is exceeded: Not
more than 10/100 of the total book value of the stocks in
excess holdings;
3. Where the limit on credit grants under Article 45 (1) through (3) is
exceeded: Not more than 10/100 of the amount of excess credit
granted;
4. Where the limit of credit grants pursuant to the provisions of Article
45-2 (1) and (2) is exceeded: Not more than 20/100 of the
amount
of excess credit granted;
5. Where the limit of stock acquisition pursuant to the provisions of 45-3
(1) is exceeded: Not more than 20/100 of the total book
value of the
stocks acquired in excess;
6. Where the limit on stock holdings under Article 46 is exceeded: Not
more than 10/100 of the total book value of the stocks in
excess holdings;
7. Where subsidiaries, etc. extend credit to their financial holding com-
FINANCIAL HOLDING COMPANIES ACT
43
pany in contravention of Article 48 (1) 1: Not more than 10/100 of
the amount of credit extended;
8. Where stocks of subsidiaries, etc. are held in contravention of Article
48 (1) 2: Not more than 10/100 of the total book value
of the stock
holdings;
9. Where the limit on cross extension of credit between subsidiaries, etc.
is exceeded in contravention of Article 48 (1) 3: Not
more than 10/100
of the excess amount of credit extended;
10. Where credit is extended without securing appropriate security in con-
travention of Article 48 (2): Not more than 10/100 of
the amount of
credit granted;
11. Where dishonored assets are traded in contravention of Article 48 (3):
Not more than 10/100 of the book value of such assets;
12. Where stocks are held in violation of the provisions of Article 48 (5):
Not more than 2/100 of the total book value of the stock
holdings;
13. Deleted; and 14. Where stocks are held in violation of Article 62-2 (1): Not more than
2/100 of the total book value of the stock holdings.
Article
65 (Imposition of Penalty Surcharges)
(1) The Financial Services Commission shall, when it imposes penalty
surcharges in accordance with Article 64, take into account
matters falling
under each of the following subparagraphs:
1. Nature and extent of the violation;
2. Period and frequency of the violation; and
3. Scale of profits earned by the violation.
(2) The Financial Services Commission may, where a company that has
committed a violation
of the provisions of this Act merges with another
company, regard the violation committed by such company as committed
by the company
surviving such merger or the company newly incorporated
by such merger, and impose and collect penalty surcharges.
(3) Standards for imposing penalty surcharges under paragraph (1) and
other matters necessary for imposing penalty surcharges shall
be de-
termined by Presidential Decree.
Article 66 (Presenting Opinions)
FINANCIAL HOLDING COMPANIES ACT
44
(1) The Financial Services Commission shall provide a party or an inter-
ested person, etc. with an opportunity to present his/her
opinion prior
to imposing any penalty surcharges on him.
(2) The party or the interested person, etc. referred to in paragraph (1)
may be present at a meeting of the Financial Services
Commission to state
his/her opinion or submit necessary data.
Article 67 (Raising Objections)
(1) Any financial holding company, etc. that is dissatisfied with a dis-
position taken to impose penalty surcharges on it under
Article 64 may
raise an objection to the Financial Services Commission, citing the reasons
thereof, within 30 days from the date
on which it was notified of such
disposition.
(3) Any person who is dissatisfied with the decision made under para-
graph (2) may file an administrative appeal.
Article 68 (Extension of Time Limit for Payment of Penalty Surcharges
and Installment Payment)
(1) The Financial Services Commission may, when a person who is subject
to the imposition of penalty charges (hereinafter referred
to as a "person
liable for penalty surcharges"), is found to have difficulty in making a
lump sum payment of the total penalty
surcharges due to reasons falling
under any of the following subparagraphs, extend the payment time limit
or allow him/her to make
installment payments. In this case, the Financial
Services Commission may, where it is deemed necessary, have the person
liable
for such penalty surcharges offer security therefor:
1. Where his/her property is significantly damaged by disaster, etc.;
2. Where his/her business is in serious crisis due to the aggravation of
business conditions;
3. Where the lump sum payment of his/her penalty surcharges is expected
FINANCIAL HOLDING COMPANIES ACT
45
to weaken significantly his/her funding position; and
4. Where any other cause corresponding to subparagraphs 1 through 3
occurs.
(2) Any person liable for penalty surcharges shall, when he/she intends
to get the time limit for payment of his/her penalty surcharges
extended
or his/her penalty surcharges paid in installments under paragraph (1),
file an application therefor with the Financial
Services Commission at least
10 days prior to the payment time limit.
(3) The Financial Services Commission may, when any person liable for
penalty surcharges, the payment time limit for which has been
extended
or payment of penalty surcharges in installments has been allowed under
paragraph (1), falls under any of the following
subparagraphs, cancel
his/her decision to extend the payment time limit and to allow him/her
to pay the penalty surcharges in installments,
and then collect the penalty
surcharges in a lump sum: 1. When he/she fails to pay penalty surcharges that have been allowed
to be paid in installments within the installment payment time
limit;
2. When he/she fails to execute orders issued by the Financial Services
Commission for changing his/her security or preserving his/her
security;
3. When he/she is subject to compulsory execution, commencement of auc-
tion, adjudication of bankruptcy, dissolution of a corporation,
and a
disposition taken to collect national or local taxes in arrears, or the
whole or part of his/her penalty surcharges are recognized
as being
unable to be collected; and
4. When any other cause corresponding to subparagraphs 1 through 3
occurs.
(4) Necessary matters with respect to the extension of the payment time
limit, the payment of penalty surcharges in installments,
or security, etc.
under paragraphs (1) through (3) shall be determined by Presidential
Decree.
Article 69 (Collection of Penalty Surcharges and Disposition on Arrears)
(1) The Financial Services Commission may, where any person
liable for
penalty surcharges fails to pay his/her penalty surcharges within the pay-
ment time limit, collect additional dues
prescribed by Presidential Decree,
which are imposed on a period ranging from the date following the date
FINANCIAL HOLDING COMPANIES
ACT
46
of the payment time limit to the date preceding the date of the payment.
(2) When any person liable for penalty surcharges fails to pay his/her
penalty surcharges within the payment time limit, the Financial
Services
Commission may serve a demand notice, fixing a period for payment of
such penalty surcharges in arrears, and when the
person liable for penalty
surcharges fails to pay the penalty surcharges and additional dues under
paragraph (1) within the fixed
payment period, such penalty surcharges
and additional dues may be collected in the manner of a disposition taken
to collect national
taxes in arrears.
Article 69-2 (Charges to Compel Execution)
(1) When a person who has been ordered to dispose of stocks pursuant
to Article 7-2 (2), 8-3 (5), 10 (2), 10-2 (5), 18 (3) or 58
(1) 4 fails to
execute such order within the fixed period of time, the Financial Services
Commission may impose a charge to compel
execution thereof within the
extent not exceeding the amount obtained by multiplying the book value
of the stocks subject to disposal
by 3/10,000 for each day elapsing.
(3) In cases where the execution is not carried out even after the elapse
of ninety days from the expiration of execution period
set up in the stock
disposal order, the Financial Services Commission shall collect the charges
to compel execution on the basis
of each ninety-day period elapsing, count-
ing from such expiration day.
47
CHAPTER PENAL PROVISIONS
Article 70 (Penal Provisions)
(1) A person who falls under any of the following subparagraphs shall
be punished by imprisonment for not more than five years or
by a fine
not exceeding two hundred million won: 1. A person who meets the requirements for a financial holding company,
and fails to obtain authorization in violation of Articles
3, 5-2 (2) (main
sentence), or 57 (3) or did not cease to meet the requirements for a
financial holding company;
2. A person who has extended credit for major investors, and such major
investors who have been offered an extension of credit in
violation of
the provisions of Article 45-2 (1) through (3);
3. A person who has acquired stocks issued by the large stockholders in
violation of the provisions of Article 45-3 (1);
4. A person who has violated the provisions of Article 45-4;
5. A person who has violated the provisions of Article 48-3 (1);
6. A person who has disclosed the information that he/she became aware
of in the course of his/her duty or utilized it for purposes
other than
performance of duty in violation of the provisions of Article 48-3 (2);
and
7. An executive or employee of a financial holding company, etc. who has
furnished or disclosed personal credit information, etc.
that he/she
became aware of in the course of his/her duty to those other than such
financial holding company, etc., or utilized
personal credit information,
etc. for purposes other than business operations.
(2) A person who falls under any of the following
subparagraphs shall
be punished by imprisonment for not more than three years or by a fine
not exceeding one hundred million won:
1. A person who has, or did not withdraw from, controling relations with
a financial holding company in violation of Article 7 (1)
or (2);
1-2. A person who owns stocks of a subsidiary less than those of the
standard for stock ownership or that loosened by the
Financial Services
Commission in violation of Article 42 (2) 1 or (3) (latter part);
2. A person who has acquired stocks in excess of the stock-holding limit
FINANCIAL HOLDING COMPANIES ACT
48
in violation of Article 44; and
3. A person who has extended credit grants in excess of the credit grant
limit in violation of Article 45.
(3) A person who falls under any of the following subparagraphs shall
be punished by imprisonment for not more than one year or
by a fine not
exceeding thirty million won: 1. A person who has violated the provisions of Article 15;
2. A person who has incorporated subsidiaries, etc. into his/her company
without obtaining approval therefor in violation of Article
16;
3. A person who has incorporated second-tier subsidiaries, etc. into his/
her company in violation of the provisions of Article 19;
4. A person who has invested in securities in excess of the limits on invest-
ment in securities in violation of Article 43 (1) or
(3) or has failed
to take measures to bring the investment in securities into conformity
with the limits on investment in securities
within one year;
5. A person who has acquired stocks in excess of the stock-holding limit
in violation of Article 46;
6. A person who has violated the provisions of Article 48; and
7. A person who has dissolved his/her company or merged his/her com-
pany with another company without obtaining authorization pursuant
to the provisions of Article 60.
(4) A person who has incorporated subsidiaries, etc. into his/her company
without reporting thereon in violation of Article 18 shall
be punished by
imprisonment for not more than six months or by a fine not exceeding
ten million won.
[This Article Wholly Amended by Act No. 6692, Apr. 27, 2002]
Article 71 (Joint Penal Provisions)
If the representative of a corporation or the agent, the employed or any
other employee of a corporation or an individual commits
a violation of
Article 70 in connection with the business of the corporation or the in-
dividual, such corporation or such individual
shall be fined in addition
to the punishment of the offender.
Article 72 (Fines for Negligence)
(1) Any person who falls under any of the following subparagraphs shall
be punished by a fine for negligence not exceeding fifty
million won: