The Japanese Corporation Act was enacted in 2005, and there is much debate today on the Interim Proposal made by the Ministry of Justice of Japan to amend the Corporation Act. The Core subjects of the discussion are first corporate governance and second framework for the parentsubsidiary relationship regulation.
This paper regards the regulatory regime for parent-subsidiary companies, there is much attention on the multiple-derivative lawsuits.
The current Commercial Act of Korea has only the provisions regulating independent individual companies, and the construction theories of such provisions do not care about the relationship of a parent company and its subsidiaries almostly. Due to these circumstances, the definite means do not exist to regulate the powers and liability of a parent company in connection with the performance of business by its subsidiaries as well as to protect the subsidiaries’ minority shareholders.
For appropriate operation of the affiliate companies, the relationship between parent and subsidiary companies needs to be definitely settled through construction of theories of the laws concerned or enaction of new regulations.
When parent company decided to proceed with any project in favour of parent company, but in detriment of subsidiary, the shareholders of subsidiary would suffer damage through going down of stock price they hold. Such a decision would have positive effect for conglomerate in the whole, but could be against subsidiary’s interests. It is important, therefore, to protect minor shareholders of subsidiary within conglomerate.
To make the conglomerate function well, systematic policy measures should be taken to enable a enterprise group of parent-subsidiary companies to govern and guarantee its subsidiaries, formally and substantially. In due consideration of these circumstances, this paper provides some reviews of major issues concerning the operation of each subsidiary belonging to the enterprise group of a holding company, such as the powers and liability of the parent company’s and rights of shareholders, the protection of each subsidiary’s minority shareholders and duty of disclosure of the parent company.
This paper examines the recent discussion of the possible amendment to the Japanese Corporation Act contained in the Proposal and examines how the Japanese debate can become an additional context and ground for further reform in relation to the regulation of parent-subsidiary companies on the Korea Commercial Act.