1. Changes of the SMEs Policies in Constitutional Law
Contents | |
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Fifth Revision (1962) | Article 115 The government shall foster cooperative based on the self-help of the farmers, fishermen, and small business, and ensure their political neutrality. |
Seventh Revision (1972) | Article 120 ① The government establish the plan based on the self-help of the farmers and fishermen for the developments of farming and fishing community, and pursue the balanced developments of local community. ② The government shall foster self-help organizations of farmers, fishermen, and small business. |
Eighth Revision (1980) |
Article 124
① The government establish the plan based on the self-help of the farmers and fishermen for the developments of farming and fishing community, and pursue the balanced developments of local community.
② The government shall foster self-help organizations of farmers, fishermen, and small business. ③ shall foster cooperative based on the self-help of the farmers, fishermen, and small business, and ensure their political neutrality. |
Ninth Revision (1987) | Article 123 ① The government shall establish a comprehensive development of agricultural and fishing community for fostering agriculture and fisheries protection. ② The government has a duty to foster local economy for the balanced developments. ③ The government shall foster SMEs. ④ The government shall protect the interests of farmers and fishermen by establishing price stabilization through the improvement s of the equilibrium between demand and supply and distribution of structure of agricultural and marine products. ⑤ The government shall foster self-help organizations of farmers, fishermen, and small business, and ensure their independent activities and development. |
##MORE_LAYER_BOX_END## Among them, Article 10, 34, 119 and 123 state the fundamental principles of the economy of Korea.
The Constitutional provisions related to the SMEs were adopted for the first time in the 5th Revision in 1962. ##MORE_LAYER_BOX## Article 115 under then-Constitution addressed that the government should promote cooperatives consisting of the SMEs and securing political neutrality of cooperatives. ##MORE_LAYER_BOX_END## The revision in 1962 became the foundation for enactment of the Basic Act for the SMEs in 1966, which was the first statute reflecting the Constitutional principles for the SMEs.
The 8th Revision of the Constitution created Article 124 Section 2 providing that the government shall be obliged to protect and promote businesses of the SMEs.
2. Legislative Intent behind the SMEs-Related Laws
Reasons for enactment and revisions | |
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Enactment (1961. 7. 1, No.641) | · To establish for supporting financing to SMEs · To enhance the economic activity of SMEs |
Second revision (1964. 12. 31, No.1682) | · To adjust the scope of small business · To allow the Bank to issue SME financing bond |
Third Revision (1968.3.7, No.1988) | · To supplement the function of Industrial Bank of Korea for effective financing to SMEs |
Fifth revision (1975.12.22, No. 2797) | · To increase the amount of legal capital of Industrial Bank of Korea for active support of financing |
Sixth revision (1979.12.28, No. 3195) | · To increase the amount of legal capital of Industrial Bank of Korea for active support of financing |
Seventh revision (1980.12.31, No.3299) | · To increase the amount of legal capital of Industrial Bank of Korea from 93 million in US dollar to 279 million in US dollar for active support of financing |
Eighth revision (1991.12.31, No.4467) | · To foster the competitiveness of Industrial Bank of Korea in accordance with liberalization in the international economy |
Tenth revision (1997.8.28, No. 5373) | · To maintain regulations due to Exclusion of Industrial Bank from government-funded institutions · To improve managerial autonomy by raising the amount of legal capital and issue limit of bond |
Fourteenth revision (2003. 12. 11, No.6993) | · Deregulation of asset management of Industrial Bank responding to harsh competition in SME financing |
Fifteenth revision (2005. 12. 14, No.7717) | · To establish a penalty provision for wrongful use of the title of Industrial Bank |
Seventeenth revision (2009. 2.6, No.9460) | · To increase of the amount of legal capital of Industrial Bank (9.3 billion US Dollar) after sub-prime mortgage crisis |
Eighteenth revision (2010. 3. 12, No.10065) | · Rewrite the statutory jargons in plain Korean |
Reasons for enactment and revisions | |
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Enactment (1961. 12. 27, No.884) | · To support establishing cooperative business organization for activity of the SMEs |
Second revision (1973. 1. 15, No.2438) | · Redesigning this Act responding to the economic environment changes |
Third revision (1976. 12. 31, No.2997) | · To support strengthening the organization of the cooperative |
Fourth revision (1978. 12. 5, No.3129) | · To expand the business district of cooperative · To add loan business to work of cooperative |
Fifth revision (1982. 12. 31, No.3654) | · To install Small Business Deduction Fund to support the collaborative work, prevention of bankruptcy, and smooth payment of severance pay of cooperative |
Eighth revision (1993. 12. 27, No.4624) | · To expand the scope of the cooperative joint venture · To heighten the efficiency of supporting SMEs by strengthening the capabilities of Korea Federation of Small & Medium Business |
Fifteenth revision (2002.3.30, No.6684) | · To strengthen the political neutrality of SME cooperatives · To describe the disqualifications of SME cooperative officers |
Twenty second revision (2006. 9. 27, No.8000) | · To introduce the deduction system for the small business and small business owners for providing the chance of comeback to running business |
Twenty third revision(2007.1.3, No.8195) | · To ease the withdrawal requirements from SME cooperatives · To clarify range of inspection by authority administrator in the case of mergers |
Twenty Fourth revision (2007.4.11, No.8363) | · Rewrite the statutory jargons in plain Korean |
Twenty ninth revision (2009.12.30, No.9893) | · To give the authority of price inspection and adjustment function of subcontract payment to SME cooperative |
Thirty revision (2010.6.8, No. 10355) | · To support SMEs in suffering a temporary financial difficulties even though they are not running business over 1 year |
Thirty first (2011.7.25, No.10953) | · To support SMEs to secure an outstanding workforce |
Revision | Background of Revision | Revision of Other Related Statutes |
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First amendment (1976.12.31, No.2996) | Redefining the SMEs responding to the economic environment changes such as the wholesale pricing index, the size of firms, debt –asset ratio of firms. | |
Second amendment (1978.12.5, No.3125) | Redefining the SMEs subject to the SMEs Act responding to the economic environments. | |
Third amendment (1982.12 .31, No.3650) | Redefining the SMEs and strengthening the entire policies supporting the SMEs. | |
Fourth amendment (1993. 3. 6, No.4541) | Integrate the Ministry of Commerce-Industry and the Ministry of Power and Energy into the Ministry of Commerce, Industry and Energy due to revision of the Government Code | |
Fifth amendment (1995. 1. 5 , No.4897) | Redesigning the SMEs Act as responses to the domestic and international economic climate changes in order to effectively execute the SMEs policies. | |
Sixth amendment (1997.12. 13, No.5454) | Reform the Ministry of Trade and Industry to Ministry of Commerce, Industry and Energy | |
Seventh amendment (1998. 2. 28, No.5529) | Establish Presidential Commission on Small and Medium Enterprises | |
Eighth amendment (2007.4.11, No.8360) | Rewrite the statutory jargons in plain Korean. | |
Tenth amendment (2008. 12. 26, No.9184) | Creating the statutory basis enabling the government survey on business difficulties and complaints of the SMEs; and establishing the Ombudsman system to survey business burdens on the SMEs for the purpose of deregulation. | |
Eleventh amendment (2011. 7. 25, No.10952) | Strengthening the economic policies for the SMEs such as including social companies in the definition of the SMEs subject to the SMEs Act; specifying the government’s duties for aiding the SMEs; requiring the government to set up the specific policy for the SMEs and submit evaluation report to the National Parliament; and protecting the whistleblower submitting comments or opinions to improve the SMEs. |
Reasons for enactment and revisions | |
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Enactment (1974. 12. 21, No.2695) |
- To modify credit guaranty system
- To establish Trust Guarantee Funds by integrating dispersed funds to financial institutions in order to guarantee debts of SMEs
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First revision (1979. 12.28, No.3190) |
- To mitigate debt burden to guarantee bond of financial institutions for facilitating use of credit guarantee system |
Second revision (1984. 8. 7, No.3748) |
- To lengthen the term of investing to the Fund for extending the credit guarantee to SMEs that lacks security capacity |
Third revision (1990. 12. 31, No.4287) |
- To lengthen the term of investing to the Fund for extending the credit guarantee to SMEs that lacks security capacity |
Fifth revision (1995. 8. 4 , No.4953) |
- To lengthen the term of investing to the Fund for extending the credit guarantee to SMEs that lacks security capacity
- To extend total credit guarantee limit
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Eleventh revision (2000. 12. 30, No.6324) |
- To remove the time limit for investing of financial institutions for providing stable credit guarantee
- To improve the management of Trust Guarantee Funds Committee
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Seventeenth revision (2009.2.6, Nno.9458) |
- To support SMEs to finance in capital markets by making the system of a company (specialized in securitization) permanent after financial crisis |
Twenty first revision (2011. 5.19, No.10689) |
- Rewrite the statutory jargons in plain Korean |
Reasons for enactment and revisions | |
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Enactment (1984. 12. 31, No.3779) |
- To contribute to the sound development of the national economy by establishing fair order in subcontract transactions so that the principal contractor and subcontractor may complement each other and develop balance on equal terms
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Third revision (1992. 12. 8, No.4514) |
- To impose penalty interest on principal contractor for late payment of subcontract payment
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Fourth revision (1995. 1. 5, No.4860) |
- To establish fair subcontract transactions by adjusting the scope of principal contractor
- To extend the scope of subcontract transactions to new industry including software development and engineering activity
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Sixth revision (1996. 12. 30, No.5234) |
- To establish payment guarantee system for subcontract of construction work
- To impose fine on violation
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Eleventh revision (1999. 2. 5, No.5816) |
- To supplement payment and settlement system for subcontract transactions due to great importance of settlement bill and insolvency
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Sixteenth revision (2005. 3. 31, No.7448) |
- To improve subcontract transactions in the fields of service-sectors including advertisements and carriage of goods
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Eighteenth revision (2007. 7. 19, No.8539) |
- To diversify settlement methods due to the importance of business purchase credit card and revolving charge account as alternative of promissory note
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Twentieth revision (2008. 3. 28, No.9085) |
- To facilitate adjustment of subcontract price due to price fluctuation after signing a contract
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Twenty first revision (2010.1.25, No.9971) |
- To introduce the presumptive subcontract system due to rampant subcontract customs without a written contract paper
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Reasons for enactment and revisions | |
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Enactment (1994. 1. 7, No.4722) |
- To contribute to the reasonable utilization, development and preservation of the nation territory, by realizing regional development potentialities and inducing voluntary participation of the private sector in regional development projects so that they may be effectively carried out
- To contribute the balanced development of the national territory by actively supporting small and medium enterprises in local areas so that they may revitalize the local economy, and thereby, induce people to settle down in local areas
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Fifth revision (1999. 2. 5, No.5799) |
- Deregulation in the area of community development |
Ninth revision (2002. 1. 26, No.6641) |
- To support developments of Culture and Tourism business |
Eighteenth revision (2005. 11. 8, No.7695) |
- To support tourism business under Tourism Promotion Act
- To support regional comprehensive development district
- To relocate of government agencies
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Forty fourth revision (2011.5.30, No.10762) |
- Rewrite the statutory jargons in plain Korean |
Reasons for enactment and revisions | |
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Enactment (1994. 12. 22. No.4825) |
- To strengthen the competitiveness of small and medium enterprises through their structural advancement, and expand the business sphere for small and medium enterprises, thereby contributing to the balanced development of the national economy |
First revision (1995. 11. 22, No.4979) |
- Integration of SME Promotion Fund, Entrepreneurship Promotion Fund, Local SME Promotion Fund, and Agricultural and Fishing Community Support Fund for effective fund management |
Third revision (1996. 12. 12, No.5186) |
- To financially support to the technical consultant service for SMEs |
Fourth revision (1997. 12. 13, No.5445) |
- To expand issue limit of Small and Medium Business Promotion Bond
- To introduce quality certification system for SME products
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Fifteenth revision (2000. 12. 23, No.6285) |
- To adjust the scope of public institutions that should purchase SME products for strengthening the competitiveness of small and medium enterprises and promoting distribution channels |
Twenty fourth revision (2004. 3. 22, No.7208) |
- Small and Medium Business Administration may certify procurement system for SME products for effectiveness of SMEs
- Regulation of subcontract transactions
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Thirty first revision (2007. 1. 26, No.8287) |
- To improve the competitiveness of SMEs responding the globalization in Trade and Environment
- Pooling professional and competitive MEs for collaborative business
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Forty fourth revision (2009. 12. 30, No.9888) |
- To expand issue limit of Small and Medium Business Promotion Bond
- To financially support SME business activities
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Reasons for enactment and revisions | |
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Enactment (1997. 4. 10, No. 5331) |
- establishment for preventing bankruptcies of small business - Deregulation of small business activities - Setup insurance accounts preventing bankruptcies of small business - Formulation of range of small business and supporting tax benefits and promotion of small business |
Third revision (2000. 12. 29, No. 6314) |
- Adjusting the range of small business for substantial support of small business - Supporting Small Commercial Businessmen |
Sixth revision (2003. 7. 29, No. 6950) |
- Improvement of Negotiable Instruments Insurance System - Introduction of Institutional Arrangements for SME’s Credit Risk Management |
Eighth revision (2005. 12. 23, No. 7743) |
- Supporting small business by increasing standards for exemptions of various charges - Establishment of Small Business Agency for performing a systematic and ongoing support to small business |
Fourteenth revision (2008. 3. 28, No.9015) |
- Preparing Presidential Decree on special care for new plant construction area or equivalent area of the workplace for small business |
Sixteenth revision (2009. 12. 30, No.9890) |
- Preparing provisions in order to avoid the confusion of small business founder or administrative agencies tasks |
Eighteenth revision (2011. 5. 24, No.10710) |
- Improving better understanding legal terms |
Nineteenth revision (2012. 1. 17, No.11174) |
- Set up the Small Business and Entrepreneurship Promotion Fund and establishment Small Business Association for supporting small business owners |
Reasons for enactment and revisions | |
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Enactment (1997. 8. 28, No.5381) |
- Supporting establishment of new ventures and conversion of existing SME venture companies because there was the limitation in achieving sustainable economic development only by conglomerates activities.
- Deregulation on venture companies in order to ensure all factors of production to supply effectively and to facilitate the restructuring of ventures
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Fourth revision (1998. 12. 30, No.5607) |
- To foster investment funds to support continuous economic growth and to facilitate the reorganization in the field of technology-intensive and knowledge |
Eighth revision (2000. 1. 21, No.6195) |
- To establish Dasan Venture Company to support development of ventures - To encourage high-density regions of venture company through collectivization and cooperation of ventures by the designation of Venture Business Promotion District |
Ninth revision (2000. 2. 3, No.6416) |
- To design new registration system of private investment group that invest on ventures - To protect the property of the investor on private investment group through preventing unfair or illegal activities - To simplify the procedure of stock option so that ventures quickly acquire high quality personnel |
Fourteenth revision (2002. 8. 26, No.6723) |
- To reform the criteria for identification of ventures to comply with the original properties of the ventures - To prepare grounds of post-control of ventures for cancellation of illegal or improper ventures - To introduce of stock exchange for facilitating strategic alliance between venture to promote competitiveness of ventures - To simplify procedures for merger between venture companies |
Eighteenth revision (2004. 1. 20, No.7091) |
- To expand the scope of the venture company that can exchange stocks for promoting investment to ventures and facilitating restructuring of ventures - To replace the approval of the general shareholders’ meeting with the approval of the Board of Directors if the number of shares issued does not exceed 50/100 of the total number of shares in the case of stock exchange - To simplify the procedures of mergers or transfer of business between venture and other type of company |
Nineteenth revision (2004. 12. 31, No.7288) |
- To establish SME investment partnership for promoting development of venture capital markets and supplying long-term stable investment - Introduction of registration system and expansion of Korea Venture Investment Partnership for promoting development and follow-up management of venture capital - To facilitate cancellation of designation of ‘Venture Business Promotion District’ |
Twenty second revision (2005. 7. 29, No.7633) |
- To downgrade the minimum capital of venture company from 20 to 5 million won to facilitate the entry of venture firms and start-up activity - To establish a special company to promote investment on ventures for development of the growth of SMEs and ventures - To support the tenants founder of Incubation Center by allowing registration of plant |
Twenty third revision (2006. 3. 3, No.7868) |
- To change recognition authority from the Small and Medium Business Administration to private institutions for market-friendly policy - To include the assurance or loan from private financial institutions into criteria for designating venture - To improve the venture designation system by reviewing past operation |
Twenty sixth revision (2007. 1. 26, No.8284) |
- To establish a professional company of new technology start-up to take advantage of human and material resources for entrepreneurship and business of ventures - To establish ‘Integrated New Technology Start-up District’ in universities and research institutes - To mitigate entrepreneurship requirements for university instructors and researchers - To ease restrictions on investment for developments of overseas expansion of small business |
Thirty first revision (2007. 8. 3, No.8602) |
- To extend the effective period of this Act(10 years more) for improving competitiveness of ventures - To fostering restructuring procedures by allowing short-form merger and small-scale merger |
Thirty eight revision (2009. 1. 30, No.9367) |
- Introduction of short-form transfer of business for fast transfer - To allow research institutions in Daedeok Research Development District to establish a company specializing in technology venture |
Forty second revision (2010. 1. 27, No.9984) |
- Improvement of venture company recognition system - To expand the scope of the company specializing in technology venture - To simplify approval process of founding factory by ventures in ‘Integrated New Technology Start-up District’ - To provide the opportunity to participate as general partner to some investors such as foreign investment institutions - To allow executive member if Korea Venture Investment Partnership is established for the purpose of investment on SMEs and ventures |
Reasons for enactment and revisions | |
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Enactment (1999. 2. 5, No.5818) |
- To contribute the development of the national economy by enhancing women’s economic activity through promoting gender equality in the field of economy and supporting the activities of women entrepreneurs and women’s entrepreneurship |
Third revision (2005. 5. 31, No.7557) |
- To enhance women’s economic activity by expanding the scope of women entrepreneur |
Seventh revision (2009. 5. 21, No.9684) |
- Reorganize Women’s Entrepreneurial Activity Committee to Promoting Balanced Growth Committee for effective enforcement
- To set minimum percentage of products made by women entrepreneurs when public institutions purchase SME products
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Ninth revision (2009. 12. 30, No.9892) |
- To promote rulemaking in plain Korean |
Reasons for enactment and revisions | |
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Enactment (2001. 5. 24, No.6482) |
- To Foster technological innovation SMEs through the support of tax, public finance, and credit guarantee |
Second revision (2005. 12. 23, No.7753) |
- To establish a plan for promoting the SME cycle of technological innovation - To provide substantial support for the development of the technological innovation by the SMEs - To establish Technology and Information Promotion Agency for the SMEs to build effective supporting system for the SMEs |
Sixth revision (2007. 8. 3, No.8604) |
- To foster management innovation of the SMEs and to intensify international technological cooperation for the purpose of improving the competitiveness of the SMEs
- To provide grounds for supporting project for business-university collaboration
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Eighth revision (2009. 1. 30, No.9378) |
- To create the Small Business Innovation Support Group to aid the activities of the SMEs - To authorize the Head of Small and Medium Business Administration to advise the government and public institutions to provide the SMEs with certain percentage of research and development budget - To impose disciplinary sanctions, such as confiscation of financial aids, on technological innovation project participants committing wrongful conduct |
Eleventh revision (2011. 4. 14, No.10597) |
- To provide the rulemaking in plain Korean |
Reasons for enactment and revisions | |
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Enactment (2003. 9. 29, No.6975) |
- To establish a comprehensive and systematic support policy for the SMEs to relieve the shortage of labor force |
Third revision (2006. 3. 3, No.7867) |
- To support the SME employees for housing
- To ease eligibility of getting National Housing Supply from ten year work career to five year work career
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Seventh revision (2007. 8. 3, No.8605) |
- To improve the ground plan for the SME support officials for effective enforcement of supporting labor force to the SMEs
- To expand the inflow of workforce into the SMEs by providing benefits to long-time employees
- To establish the organization for support personnel to the SMEs
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Twelfth revision (2010. 4. 5, No.10234) |
- To allow professors and researchers to take a leave to work for the SMEs for a designated period |
Sixteenth revision (2011. 4. 4, No.10532) |
- Introduction of the SME Certification Scheme for getting good workforce personnel
- To promote the rulemaking in plain Korean
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Reasons for enactment and revisions | |
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Enactment (2004. 10. 22, No.7235) |
- To improve business environments and facilities of the traditional markets for fostering small and medium distribution industry
- To protect petty dealer by promoting traditional markets through modernization of commercial transactions and managerial strategy
- To contribute to the development of the national economy by achieving the balanced developments and vitalization of local business
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Second revision (2006. 4. 28, No.7945) |
- To supplement and improve the supporting system to the SMEs by modernization of commercial transactions and commercial facilities
- The national and local governments should try to propel special plans for vitalization of the markets and shopping centers
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Sixth revision (2007. 12. 27, No.8803) |
- To support the policy on the market maintenance |
Eleventh revision (2008. 12. 19, No.9159) |
- To improve market maintenance plan by mitigating the requirements of the plan
- To grant National Merchants Association to appoint an agent who has authority on judicial or non-judicial actions
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Fourteenth revision (2009. 12. 30, No.9887) |
- To install a commercial district management organization for propelling the development plan of local business |
Seventeenth revision (2010. 6. 8, No.10356) |
- To promote rulemaking in plain Korean |
Eighteenth revision (2011. 3. 30, No.10503) |
- To improve facilities of traditional markets and support educational programs for the disabled, the elderly, and pregnant women, etc., to easily and conveniently access the markets |
Twenty first revision (2012. 1. 17, No.11177)(Effective on 2013. 1. 1) |
- To install small commerce promotion account by revising the Act on Special Measures for Support to Small Enterprises and Small Commercial and Industrial Businessmen for the support of managerial stability and restructuring of the SMEs |
Reasons for enactment and revisions | |
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Enactment (2005. 7. 29, No.7632) |
- To contribute to the development of the national economy by promoting activities of the disabled entrepreneurs
- To prepare definition of the disabled entrepreneurs
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Fourth revision (2008. 3. 28, No.9012) |
- To support budget to establish guarantee system for the disabled entrepreneurship
- To purchase in favored terms and conditions products from the disabled entrepreneurs
- To grant Head of Small and Medium Business Administration the authority to force the public institutions to purchase products from the disabled entrepreneurs
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Sixth revision (2009. 12. 30, No.9891) |
- To promote the rulemaking in plain Korean |
Eighth revision (2010. 4. 5, No.10233) |
- To promote the business activities of the disabled entrepreneurs by providing the total services for financing, information, technology, labor, and distribution
- To grant favored opportunities to the disabled entrepreneurs
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Reasons for enactment and revisions | |
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Enactment (2006. 3. 3, No.7866) |
- To sponsor the business transformation of the SMEs that suffer difficulties due to changes in the economic environment, which will enhance the competitiveness of the SMEs and upgrade the industrial structure |
Sixth revision (2008. 12. 26, No.9181) |
- To expand the scope of business conversion and to repeal former regulation
- To rewrite rules in plain Korean
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Reasons for enactment and revisions | |
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Enactment (2006. 3. 3, No.7864) |
- Repeal the ‘Act on the Protection of the Business Sphere of Small and Medium Enterprises and Promotion of Their Cooperation’ and enact a law that requiring win-win cooperation |
Second amendment (2007. 5. 17, No.8454) |
- Correct unfair transaction practice between commissioned enterprises and commission enterprises
- Establish a consultative council of commissioned enterprises by commission enterprise, by region and by business type in order to maintain equal relationship of transactions with the commission enterprises and to facilitate the exchange of technical information and the joint development of technologies, etc.
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Fifth amendment (2009. 1. 7, No. 9331) |
- Develop a plan to support small and medium enterprises and prepare the performance records of such plan every year to submit them to the Minister of Knowledge Economy |
Seventh amendment (2010. 1. 27, No.9978) |
- Guarantee the autonomy in win-win cooperation between conglomerates and small and medium enterprises
- Facilitate win-win cooperation which contributes to the mutual interests of conglomerates and small and medium enterprises
- Enhance the public sector’s leading role in cooperation between public institutions and small and medium enterprises
- Rewrite the statutory jargons in plain Korean
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Ninth amendment (2010. 12. 7, No.10399) |
- Protect the SME’s technology and ensure their stable use
- Improve the effectiveness of business mediation system between conglomerates and small and medium enterprises by including chain-stores operating by conglomerates
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Tenth amendment (2012. 1. 17, No.11173) |
- Provide legal basis of National Commission for Corporate Partnership
- Grant the authority to National Commission for Corporate Partnership to select the categories that are appropriate to the SMEs
- The SMEs may apply to the Administrator of Small and Medium Business Administration for the matters of SME business adjustment dispute
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