SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
holding changes, the person must report the change to the FSC and the relevant securities exchange within five business days from the date of such change. In addition, directors and officers (whether registered or not) and major shareholders of a listed company (ie, a holder of, directly or indirectly, 10% or more of the total voting interests or a person who exercises de facto influence over material business decisions of the company) must report to the Securities and Futures Commission (SFC) and the relevant securities exchange the number of shares beneficially owned by them within five business days after they become a director, officer or major shareholder. They must also report any change in the number of shares held by them to the SFC and the relevant exchange within five business days from the date of such change. Under the amended FSCMA, effective as of 24 July 2024, an officer or a major shareholder (ie, an insider) of a listed company who intends to engage in a large- scale transaction (ie, trading of at least 1% of the total number of issued and outstanding shares, or in an amount of at least KRW5 billion on a combined basis for the past six months) of certain securities (eg, com- mon shares, non-voting preferred shares, convertible bonds, bonds with warrants and exchangeable bonds) issued by the listed company has a pre-transaction disclosure obligation. The insider must report their transaction plan to the SFC and the relevant securi- ties exchange, specifying the purpose, amount and period of the transaction at least 30 days prior to the expected trading date. However, financial investors (including foreign investors), transactions that are not likely to involve the use of material, non-public infor- mation, and transactions arising from external factors (eg, inheritance, stock dividends, M&A transactions involving a change in the largest shareholder, and mergers/spin-offs) are not subject to this pre-trans- action disclosure requirement. 4. Cancellation and Buybacks of Shares 4.1 Cancellation A company may cancel its shares by way of capital reduction or the acquisition of its own shares within
the scope of distributable profits and subsequent can- cellation. • Capital reduction: The KCC requires a special resolution of shareholders at a general sharehold- ers’ meeting approving such acquisition to be obtained. The special resolution must be adopted by the affirmative votes of no less than two-thirds of the shareholders present at the meeting, which should represent no less than one-third of the total number of the issued and outstanding shares of the company. The KCC also requires a company intending to reduce its stated capital to undertake procedures to protect its creditors. Notwithstand- ing the foregoing, in case of capital reduction to cover deficits (ie, capital reduction without consid- eration), the KCC requires that general resolution of shareholders at a meeting approving such acqui- sition to be obtained, and procedures to protect creditors are not required. • Cancellation of treasury shares: A company may, by resolution of the board of directors, cancel its own shares acquired within the scope of distrib- utable profits (see 4.2 Buybacks for detail). In this case, procedures to protect creditors are not required, and there is no change in the company’s capital despite the cancellation of shares. 4.2 Buybacks Under the Korean law, a company may acquire its own shares through the following two methods. • Acquisition of own shares within the scope of distributable profits: A company may acquire its own shares within the scope of distributable profits calculated under the KCC by a resolution of the general meeting of shareholders or the board of directors (if the company is a listed company or if the AOI stipulates that dividends may be dis- tributed by a resolution of the board of directors). In such case, the company’s own shares shall be acquired (i) at the market price on the Korea Exchange (KRX), (ii) under equal terms and condi- tions in proportion to the number of shares held by the shareholders by giving notice or public notice to all shareholders, or (iii) through a tender offer. • Acquisition of own shares for a specific purpose: A company may acquire its own shares for a specific
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