SOUTH KOREA Law and Practice Contributed by: Ki Wook Kang, Kyung Chun Kim, Junghae Kang and Do Kyeom Kim, Lee & Ko
There is no statutory requirement related to the tender offer that the bidder’s financial statements be subject to generally accepted accounting principles, Inter - national Financial Reporting Standards or any other accounting standards at the time of the tender offer. However, if the bidder is a listed company in Korea, there is a general obligation to prepare the financial statements according to K-IFRS standards. With respect to financial information of the target company, all companies listed on the KRX (either KOSPI or KOS - DAQ) are required to prepare financial statements in accordance with K-IFRS. 7.4 Transaction Documents In the case of a merger, the merger agreement, the merger ratio estimation report and the company’s latest balance sheet and income statement must be made available for a shareholder or creditor’s review at the principal office of the constituent companies two weeks prior to the shareholders’ meeting for the merger approval. Furthermore, there are also circumstances in which transaction documents such as the SPA, business transfer agreement (or asset purchase agreement) or merger agreement are required to be disclosed to the public. Specifically, those companies (including publicly listed companies) subject to disclosure obli - gations of their annual report must submit a material fact report which describes the major terms of the contemplated transaction to the FSS upon their deci - sion to enter into a transaction to acquire businesses or assets (including shares) in which the purchase price of the transaction or book value of the assets (as of the most recent fiscal year-end) is not less than 10% of the total assets of the company, or upon their decision to enter into a merger agreement. The material fact report should include a copy of the relevant transaction documents such as the SPA, business transfer agreement (or asset purchase agreement) or merger agreement. In the past, the FSS has not actively enforced obligations to submit transaction documents in the material fact report, and the submitted transaction documents, if any, have not been disclosed to the public. However, from 29 April 2019, following a system change of the FSS, material fact reports are accepted only if the relevant trans -
action documents are also submitted and disclosed to the public (provided that confidential and sensitive information such as classified military information, personal information, NCT and trade secrets may be redacted). In addition to the above, transaction documents may also be required to be submitted as part of the filings to regulators, such as the KFTC, the KRX or the Bank of Korea. Under the current Korean Commercial Code, directors owe fiduciary duties (that is, duty of care and loyalty) to the company. It is a well-established principle in Korea (and recognised by the Korean courts) that a director owes a fiduciary duty to the company and not to the shareholders of the company even if the company is wholly owned by a single shareholder on the grounds that the shareholders and the company are separate legal persons. However, the recent amendment to the Korean Com - mercial Code added shareholders as beneficiaries of directors’ duty of loyalty. This change was introduced in recognition of the limitations of the prior statuto - ry framework – which required directors to faithfully perform their duties for the benefit of the company – in adequately protecting shareholders in situations where no damage is incurred by the company but losses are suffered by all shareholders, or where cer - tain shareholders benefit while others suffer losses. Although judicial precedents interpreting the amended provision are not yet well-established, it would be nec - essary to pay close attention as the current interpre - tations regarding directors’ duties may evolve follow - ing the amendment (see 3.2 Significant Changes to Takeover Law ). 8.2 Special or Ad Hoc Committees Because a target company is usually not involved in the takeover bid process, it is not common for boards of directors to establish special or ad hoc committees in business combinations in Korea. Even in business 8. Duties of Directors 8.1 Principal Directors’ Duties
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