Subsidiary's electronic financial business registration requirements legal review

Law firm Veat received a request from a subsidiary A company (hereinafter referred to as "the client company") that is a group company’s affiliate and subsidiary, and proceeded with a review of whether to register as an electronic financial business.

The Fair Trade Act restricts a group company from owning shares of a subsidiary engaged in financial and insurance businesses. Therefore, if a subsidiary engages in an electronic financial business, it is necessary to determine whether this constitutes a financial or insurance business.

Law firm Veat reviewed the client company's business content in various aspects, in accordance with relevant laws and precedents, including the Electronic Financial Transactions Act and the Fair Trade Act.

Review of the subsidiary’s electronic financial business registration requirements

An electronic financial business refers to an industry that utilizes information and communication technology to provide traditional financial services in digital form. An electronic financial business is regulated by the Electronic Financial Transactions Act and includes various forms of digital financial services such as internet banking, mobile payments, electronic money, and online asset management services.

If the subsidiary engages in an electronic financial business in accordance with the Electronic Financial Transactions Act, the group company’s act of owning shares of the subsidiary may be deemed a prohibited act under the Fair Trade Act, and the group company’s subsidiary may find it difficult to engage in and register for the electronic financial business. However, if certain conditions are met, the subsidiary may not be deemed to have engaged in a prohibited act, and further details need to be confirmed.

First, it is necessary to confirm whether an electronic financial business constitutes a financial or insurance business. Whether an electronic financial business constitutes a financial or insurance business is determined based on the standard industrial classification criteria. The standard industrial classification criteria, in accordance with the Statistics Act, classify the types of industry and determine the legal status of each sector based on this. According to the standard industrial classification criteria, financial and insurance businesses include traditional financial services and insurance businesses, while electronic financial businesses include the provision of digitally-based financial services.

Also, according to the Electronic Financial Transactions Act, a company engaged in an electronic financial business must have the legal requirements and obtain approval from the Financial Supervisory Service.

Law firm Veat's e-commerce team swiftly and accurately resolves complex legal issues related to e-commerce faced by startups and companies, and will continue to provide comprehensive legal advice to support client companies in stably expanding their businesses.

If you require legal advice regarding electronic financial businesses, financial and insurance businesses, the Electronic Financial Transactions Act, or the Fair Trade Act, please contact Law firm Veat.

Thank you.
Law firm Veat