Amid rapid changes in laws and regulations applied to businesses, calls have emerged for support measures, as the legal response systems of small and medium-sized enterprises (SMEs) and mid-sized firms are insufficient.
The Korea Chamber of Commerce and Industry (KCCI) said Wednesday that 75.3% of SMEs and mid-sized firms do not have a dedicated legal organization or staff, according to the results of its "Survey on Legal and Institutional Response Capacity and Difficulties," conducted on 300 SMEs and mid-sized firms.
Among the responding firms, 35.3% answered they have "no dedicated staff and rely on external advice when necessary," while 22.7% responded that "staff from other departments handle legal work concurrently." Firms with "no separate response system" stood at 17.3%.
By contrast, firms that "have both a dedicated legal organization and staff" accounted for 14.0%, and those with "dedicated staff only" came to just 10.7%.
The smaller the firm, the weaker its legal response system. Among SMEs, 83.5% had no dedicated legal organization or staff, compared with 59.0% of mid-sized firms. The average number of dedicated legal staff at responding firms was 0.7, with SMEs at just 0.4 and mid-sized firms at 1.3.
When asked about the "typical point at which they become aware of new or amended laws and institutions," 52.7% said they recognize them "after the law or institution has taken effect." Only 13.7% of firms answered that they "recognize and monitor them from the legislative notice or National Assembly deliberation stage."
Some firms had faced sanctions or punishment due to inadequate legal response systems. Two in 10 SMEs and mid-sized firms (17.0%) said they "have experienced administrative sanctions such as fines or criminal punishment over the past three years for failing to comply with laws and regulations." Regarding the reasons, misinterpreting whether a rule applied to their company or how to comply accounted for 31.3%, and being unaware of the creation or amendment of a law or institution accounted for 11.8%, bringing responses related to "recognition and interpretation of laws" to 43.1%. Other reasons included difficulty complying due to industry practices (33.3%), a shortage of dedicated response staff (11.8%), and the burden of facility investment and system construction costs (5.9%).
The area where firms felt the greatest burden in responding to legal matters was "labor and employment" (63.3%). "Industrial safety" (38.3%), "fair trade and subcontracting" (31.7%), and "taxation" (29.0%) were also cited.
"In the case of SMEs and mid-sized firms, many are unaware of the very fact that a law or institution has been created or amended, or misinterpret whether it applies to their company and how to comply," a KCCI official said. "Since a lack of awareness of laws is leading to unintended legal violations, there is a need to prepare easy-to-understand legal interpretation guidelines suited to the field conditions of SMEs and mid-sized firms, and to expand their promotion."
Indeed, SMEs and mid-sized firms emphasized the need for effective legal and institutional support policies. As a representative policy task, they cited the preparation of customized legal guidelines for SMEs and mid-sized firms (51.0%). This was followed by guaranteeing a sufficient grace period before a law takes effect and strengthening advance notice (47.0%), expanding low-cost legal consultation and advisory services (44.3%), expanding education and seminars on legal response measures (29.0%), and providing consulting support for establishing compliance systems (18.0%).
"As SMEs and mid-sized firms lack the capacity to attend to laws and institutions in detail, there is a need, along with the government's efforts to rationalize regulations, to create a predictable regulatory environment and to sufficiently reflect the voices of SMEs and mid-sized firms in the field when laws are introduced," said Kang Ho-jun, head of the KCCI's Corporate Policy Team.
Meanwhile, the KCCI plans to strengthen firms' legal and institutional response capacity through a nationwide roadshow in the second half of the year, together with major law firms.
