Reasons for Proposal
The recently widening gap between large and small and medium enterprises makes the business environment more difficult for small and medium enterprises and self-employed persons and threatens the balanced development between economic actors.
The current Act introduces a win-win model where large enterprises (commissioning enterprise) and small enterprises (commissioned enterprise) set common goals together, including cost reductions, and share outcomes if the goals are reached. But the model is not very effective in a situation where large enterprises have the upper hand in negotiations due to a market structure where they dominate demand.
In addition, suitable business types in the National Commission for Corporate Partnership are agreed voluntarily, and it is difficult to ensure effectiveness if no agreement is reached for such business types.
In this regard, this Act aims to define the profit-sharing model as a mutually beneficial cooperation model that is capable of narrowing the widening gap by improving the effectiveness in the designation of suitable business types for small and medium enterprises and promoting balanced development between economic actors.
Details
A. Define the concept of the “profit sharing model” where commissioning and commissioned enterprises work together toward achieving their agreed goals and commissioning enterprises share the profits exceeding the agreed goals with commissioned enterprises in accordance with the agreed rules (Article 2 subparagraphs 12 and 13 newly inserted).
B. Allow the government to establish and implement policies to promote the profit-sharing model and establish the Profit-Sharing Model/Win-Win Model Promotion Head Office as a supporting institution (Article 8 paragraphs 1 through 3).
C. Allow public corporations and quasi-governmental agencies to restrict qualification for bidding participants, designate participants for competitive bidding, and make a private contract when necessary to promote the profit-sharing model, while reducing or exempting taxes for commissioning enterprises who implement the profit-sharing model or the win-win model (Article 8 paragraphs 5 and 6).
D. Allow the National Commission for Corporate Partnership or organizations of small-medium enterprisers to request the Minister of SMEs and Startups to designate suitable business types and items if no agreement is reached (Article 28-3 newly inserted).
E. Ban large enterprises from acquiring, starting, or expanding suitable business types but allow an exception for large enterprises if they obtain approval from the Minister of SMEs and Startups (Article 28-4 newly inserted).
F. Impose up to 100 million won in administrative fines if a large enterprise acquires, starts, or expands a suitable business type (Article 43 paragraph 1).
