economy
Entered 2024.04.29 18:28 Modified 2024.04.30 01:35 Paper A1
Government promotes ‘Corporate Succession Special Act’
Oh Young-joo, the Minister of Small and Medium Enterprises and New Businesses, announces the take-off strategy on small and medium enterprises at the Korea Federation of Small and Medium Enterprises in Yeongdeungpo-gu, Seoul on the morning of the 29th. Photo = Yonhap News The government is pushing for the enactment of the ‘Special Law on the Corporate Succession of Small and Medium Businesses’. This is a measure to support around 350,000 businesses that are at risk of going out of business even though they are making a profit due to an inability to continue the family business. We intend to foster long-lived companies by expanding the concept of succession from ‘(relative) family business succession’ to ‘corporate succession’ through mergers and acquisitions (M&A).
Oh Young-joo, the Minister of Small and Medium Businesses and New Businesses, announced on the 29th the ‘Five Strategies for Promoting Small and Medium Businesses and 17 Action Tasks’ with these contents as their core. The Special Act on Corporate Succession, which comes into force next year, focuses on helping small and medium-sized businesses that have difficulty succeeding relatives to achieve sustainable management. In order to support small and medium-sized enterprises seeking corporate succession through M&A, a dedicated organization to establish a comprehensive M&A platform will be established within the Korea Technology Finance Corporation, a policy financial institution. The government is preparing various support measures, including M&A between large corporations and start-ups, transactions between small and medium-sized businesses, and M&A restructuring of the kind.
Aging of Chinese manufacturing CEOs is serious… “Choosing to sell or close business due to inheritance tax burden”
From Young-joo, “350,000 businesses will close in 10 years… Promote a special succession law before it’s too late.”
The Ministry of Small and Medium Enterprises and New Businesses is pushing for the enactment of the ‘SME Succession Special Act’ to help maintain the management of aging SMEs. According to the Korea Federation of Small and Medium Businesses, the proportion of mid-term manufacturing CEOs aged 60 or older has risen sharply from 14.1% in 2012 to 31.6% in 2022. There is an increasing number of cases where companies put the best for succession and choose to sell or close their businesses due to the highest inheritance tax burden among the main member countries of the Organization for Economic Co-operation and Development (OECD). In another survey conducted by the Korea Federation of SMEs and Startups this year, half (48.6%) of respondents said they would sell the business if they could not pass it on to their children.
The Technology Finance Fund plays a key role in operating a comprehensive platform related to corporate succession. As a policy financial institution with contact with companies, KOTEC plays a role in finding companies that wish to buy or sell. Based on this, a database is built. It will also act as a source of funding for mergers and acquisitions (M&A). In the private sector, approximately 60 M&A-related brokerage firms, including legal and venture capital (VC) firms, will generate profits by assisting with corporate M&A. The government is responsible for registering and managing private M&A intermediary agencies. In line with the campaign to enact a special law on corporate succession, attention is being paid to see if measures to ease inheritance tax will be seriously discussed. Minister of Small and Medium Enterprises and New Businesses Oh Young-joo (pictured) said, “Given the aging situation of CEOs of small and medium manufacturers, more than 350,000 companies will go out of business in 10 years given the resulting unemployment, the social cost is very large, so a special law needs to be enacted before it’s too late.” “An M&A platform needs to be established,” he stressed.
In order to strengthen the SME ecosystem, the number of innovative companies is also increasing. We will increase the number of innovative SMEs (currently 73,000) to 100,000 by 2027 and help SMEs in traditional industries to start a ‘second business’ in a new industry. We are also looking at the corporate growth ladder. 95% of domestic companies are small business owners, the remaining 4.9% are small and medium enterprises, and only 0.1% are large corporations and medium-sized companies, which is like a thumb structure, but the plan is to change this into a stable pyramid structure. Between 2015 and 2021, 89,000 companies had levelled, such as growing from small to medium-sized businesses, or just 1.5% of all small and medium-sized businesses. The intention is to increase this to more than 150,000 by 2027.
Workforce support measures were also announced. In order to solve the labor shortage in small and medium-sized businesses, this plan is to support the visa conversion of 190,000 foreign students living in Korea and link them to employment in domestic companies. According to a survey last year by the Small and Medium Enterprises Business Corporation, 88.7% of international students wanted to work in Korea after graduation.
Reporter Min Ji-hye spop@hankyung.com
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