Proposals for Revising the Oversupply Criteria in South Korea's Special Act on Corporate Revitalization

In South Korea, the Special Act on the Corporate Revitalization (ACR), originally a temporary measure passed in 2016, became a permanent law as of July 2024. The law stipulates provisions for supporting proactive corporate restructuring. Originally, the law was designed to address the problem of oversupply and support restructuring for underperforming firms in several of South Korea’s flagship industries, such as steel, shipbuilding, and petrochemicals, which were at the time buckling under the dual threats of slowing economic growth and increasing competition from China. The law facilitates restructuring by streamlining relevant procedures and regulations and by providing various forms of assistance, including tax benefits, financing, and support for research and development (R&D). This law was amended once in 2019 prior to becoming permanent in 2024. Both amendments expanded the scope and term of eligibility and made various reforms to related institutions. In 2019, Fourth Industrial Revolution (4IR) technologies were beginning to fuel rapid change in markets, but regional industries in Korea were struggling. And so the law was amended to include new criteria for eligibility. Firms that were located in designated “industrial crisis” regions and firms active in select new markets, for example, were made eligible for support, and the duration of this support was extended from three to five years. The law was amended and made permanent in 2024 to address new challenges facing Korean industries, including the acceleration of digital transformation (DX), the international push for carbon neutrality, and the reorganization of global supply chains amid the emergence of a bipolar international order, as well as to ensure consistency in policy implementation over the long term. The revision to the law added two new eligibility categories: one concerning supply chain stability and future business restructuring categories. In this paper, we analyze the limitations of some of the law’s criteria, and specifically the oversupply criteria. Based on this analysis, we identify some areas for improvements.