The economic think tank for the lobbying group of South Korea's big businesses on Tuesday called on the government to streamline corporate restructuring rules to reflect global trends.

According to a report by the Korea Economic Research Institute (KERI) under the Federation of Korean Industries, the government needs to provide more options for companies who have to implement corporate restructuring efforts, especially since more and more companies are facing difficult times.

It said policymakers and parliament needs to revise rules governing corporate workout programs, creation of private equity funds (PEF) and tax breaks.

The KERI said South Korea should adopt out-of-court workout schemes that are generating interest abroad and can augment the current court receivership program.

"Out-of-court workouts can be implemented when management realizes they are in trouble and want to restrict losses," the research institute said.

It also said that there is a need to harmonize the country's corporate restructuring promotion act with its corporate bankruptcy law.

In the case of the restructuring promotion act, management can hold onto control of a company in trouble, in most circumstances, but such clauses are not in the bankruptcy law.

Another issue is that there is no clear cut guideline for moving forward on workout programs.

"All the rules say is for the company and creditor banks to work out a mutually acceptable way on workouts without giving any guidelines," KERI said. It claimed this system leads to inconsistencies, confusion and complications in settling disputes.

On PEFs that are critical for handling large restructuring deals and mergers, the think tank recommended easing rules governing minimum investment and payment guarantees that are not found in other countries.

"The U.S. and European Union have regulations governing PEF operators, but not on the fund itself which is the practice in South Korea," it said.

KERI then said that tax rules governing restructuring are not consolidated under one legal code that causes complications.

"It is scattered under corporate law, tax exemption and reduction laws and other areas," the institute said.

It added that some tax breaks offered at present are laws with set expiration dates.

"In the case of the temporary restriction of tax reduction and exemption act, the government and lawmaker should make it into a permanent law," it said. The institute said in the long run, all related restructuring clauses should be merged with the country's corporate law, which can improve consistency and predictability. (Yonhap)