Rep. Kangil Lee Proposes Mandatory Notification of Employment Plans in Private Equity Fund Acquisitions

A bill has been proposed that would require private equity funds (hereinafter referred to as "private funds"), which are reserved for institutional investors, to share essential information such as employment plans with employees during the process of acquiring a company.

On March 17, Kangil Lee, a lawmaker from the Democratic Party of Korea, announced that he had sponsored an amendment to the Act on Capital Markets and Financial Investment Services, which aims to secure greater operational transparency for private funds and protect the right to know of stakeholders such as employees during company acquisitions.

The current law is insufficient in terms of disclosure and reporting rules on the ownership structure and outsourced work status of private funds, which has limited the ability to ensure transparency in investment structures.

In particular, when a private fund becomes the largest shareholder of a company, there is no obligation to inform the company’s employees about employment-related plans. This has led to ongoing concerns about employment instability and restricted access to information for stakeholders.

The amendment includes the following key provisions: expanding the scope of operational reporting requirements for private funds; introducing an obligation to notify employee representatives of information during company acquisitions; and strengthening accountability and reliability for general partners who execute fund operations.

Specifically, the bill seeks to enhance transparency by explicitly adding the current status of equity holdings and the status of outsourced tasks related to collective investment asset management to the matters that private funds must report to the Financial Services Commission. Notably, when a private fund becomes the de facto largest holder of voting shares in a company, a new mandatory provision would require the fund to notify the company’s employee representatives of both the purpose of the share acquisition and any employment-related plans.

Furthermore, to ensure the reliability of general partners who actually operate private funds, the registration requirements would be amended to require that major shareholders possess a level of social credibility as defined by Presidential Decree.

Assemblyman Lee emphasized, "As private funds take on a larger role in the capital market, there is a growing demand for corresponding social responsibility and transparency. In particular, by ensuring that employees are provided with essential information such as employment plans during company acquisitions, the aim is to strengthen the healthy market monitoring function of capital and establish a transparent governance structure."

This content was produced with the assistance of AI translation services.