» Samsung Group employees talk with one another outside the conglomerate’s new headquarters in Seocho-dong on November 17.

It has been confirmed that Samsung Group has been asking the government and the ruling Grand National Party to make changes to a proposed law revision in order to keep Samsung Electronics, the group’s crown jewel, from having to become part of the holding company structure.

On December 2, a government official who asked not to be named, spoke about a recent move by the government and the ruling party during the regular session of the National Assembly to revise the law governing financial holding firms. “I have learned that Samsung is asking the Financial Services Commission, the Fair Trade Commission and the Grand National Party to revise the law in a direction that would allow Samsung Electronics, an affiliate of Samsung Life Insurance, to be excluded from the holding company structure, even though Everland and Samsung Life Insurance would be designated by the group as holding companies under the proposed law revision.”

Officials at the FSC and the FTC confirmed this, saying Samsung outlined specific measures that would prevent Samsung Electronics from being included in the holding company structure. The request, the officials said, was made through various channels, including Samsung Economic Research Institute and the office of business support under the committee of chief executives of Samsung Group.

Under the current law, the parent company of a subsidiary is defined as both an affiliate and the largest shareholder. Samsung wants to tighten the definition so the parent company is defined as an affiliate and a shareholder with a stake in the subsidiary that is greater than 10 percent.

Last month, the FSC proposed a bill to change the law banning an industrial conglomerate from owning a majority stake in banks while increasing the cap on ownership from 4 percent to 10 percent. Under the proposed bill, securities holding companies would control non-financial subsidiaries and sub-subsidiaries and insurance holding companies would be restricted to controlling only non-financial subsidiaries. The bill was submitted to the National Assembly by the GNP. Samsung is now demanding additional measures.

Samsung Life Insurance is currently the single largest shareholder of Samsung Electronics with a 7.2 percent share in the company, which is the world’s largest maker of computer memory chips. If Samsung Everland and Samsung Life Insurance become holding companies for Samsung Group, Samsung Electronics will become a subsidiary of Samsung Life Insurance. In that case, Samsung Life Insurance will have no choice but to reduce its stake in Samsung Electronics because both the current law and the proposed revision ban insurance holding companies like Samsung Life from owning non-financial subsidiaries like Samsung Electronics. But doing that will be burdensome and indicates that Samsung should instead change the group’s complex ownership structure.

Government officials say Samsung’s demands have prompted the GNP to discuss whether to change the proposed law revision again so as to help Samsung convert its financial affiliates into holding companies. FSC and FTC officials have said Samsung thinks it will be at a disadvantage if the law is revised to ban insurance holding companies from owning non-financial subsidiaries while leaving the definition of a parent company unchanged.

While the GNP says it is planning to review the matter when the proposed revision comes up for review in the National Assembly, officials from the FSC and the FTC are both pessimistic about the likelihood that the proposal will be changed again, saying that Samsung’s demand is akin to a request for “special treatment.” Both organizations have said Samsung is asking the government for an exception to the law that would allow them to operate as though Samsung Life Insurance does not legally control Samsung Electronics, even though it does.

In response, a Samsung official said, “As far as I know, (Samsung Group) has not directly presented an opinion to the government and the ruling party or made a request for law revisions.”

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