SOUTH KOREA Law and Practice Contributed by: Ki Wook Kang, Kyung Chun Kim, Junghae Kang and Do Kyeom Kim, Lee & Ko
6.2 Mandatory Offer Threshold If the shares of a listed company are to be acquired from ten or more persons outside the KRX by an inves - tor within a six-month period and the total sharehold - ing ratio of such investor (including specially related persons and other parties acting in concert) reaches or exceeds 5%, a tender offer must be made. There is no special requirement for unlisted companies. 6.3 Consideration Cash is more commonly used as consideration in comparison to shares. Shares are often used as con - sideration in the case of internal reorganisation; for example, a merger or comprehensive share exchange with an affiliated company. In order to bridge value gaps between parties, deals with high valuation uncertainty often adopt: • a purchase price adjustment mechanism whereby the purchase price is adjusted at or after the clos - ing of the transaction to reflect changes in working capital or net assets; • an earn-out method in which partial payment of the purchase price is made at closing and the remain - ing amount is paid in accordance with business performance levels for a certain period after clos - ing; or • a locked-box mechanism where unpermitted leak - age which occurs after a certain valuation date can be claimed for as damages. 6.4 Common Conditions for a Takeover Offer A person who intends to conduct a tender offer must disclose the following information: • details of the tender offeror and related parties thereof; • the tender offer agent; • the issuer of the shares subject to the tender offer; • if there are any agreements for purchase of the shares prior to the tender offer and if so, the terms thereof; • the type and number of shares subject to the ten - der offer; • method of tender offer; • purpose of tender offer;
• terms of the tender offer including the tender offer period, price and settlement date; • future plans of the company for which the tender offer is being conducted; and • the location at which the tender offer statement and the tender offer prospectus can be accessed. As a general principle, the tender offeror must, without delay, purchase all shares tendered during the tender offer period in accordance with the terms and conditions of the tender offer that are set forth in the tender offer statement. However, the tender offeror does not need to acquire all tendered shares if the tender offer public notice and the tender offer statement indicate that: • none of the tendered shares will be acquired if such shares fall below the number being sought; or • when more shares are tendered than what is sought, the tender offeror will purchase from the tendered shares on a pro rata basis and not pur - chase any of the remaining shares. 6.5 Minimum Acceptance Conditions When a tender offer is launched by a bidder to obtain a controlling stake in a public company, the below control thresholds are considered, and minimum acceptance conditions are often included in the ten - der offer statement. In respect of control thresholds: • if a shareholder owns at least 30% of the shares of a listed company, such shareholder is generally recognised to have control; • an ordinary resolution is adopted at a general meeting of shareholders by an affirmative vote (whether in person or by proxy) of a majority of the voting shares represented at such meeting, which vote shall also account for at least one-fourth of the total issued and outstanding voting shares of the company; and • a special resolution is adopted by an affirmative vote (whether in person or by proxy) of at least two-thirds of the voting shares represented at such meeting, which vote shall also account for at least one-third of the total issued and outstanding voting shares of the company.
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