SOUTH KOREA Law and Practice Contributed by: Kyu Seok Park, Dahye Cho and Justin Kim, Lee & Ko
and the board of directors during the delisting phase of the transaction. Relationship agreements between the buyer and the target are uncommon in Korea. 7.2 Material Shareholding Thresholds and Disclosure in Tender Offers In the case of listed companies, the FISCMA stipulates that holders of 5% or more of the shares in listed com - panies must disclose various matters, including the quantity and class of shares, security provision status, unit prices at the time of acquisition and disposition, and counterparties in the acquisition and disposition transactions. The 5% is calculated by aggregating the shares held by a shareholder and its specially related parties (including affiliates and joint holders). On the other hand, shareholders of an unlisted company do not bear these obligations. Shareholders of listed companies holding 10% or more on an individual basis must disclose their share - holding status. Holders of 5% or more shares must report on the change to shareholding where there is a change of 1% or greater to the shareholder’s share - holding ratio. Holders of 10% or more shares must report on the change to the number of shares held where the change is in relation to 1,000 shares or more. In order to make a tender offer including private equi - ty-backed bidders, one must first publicly disclose the tender offer and file a tender offer statement and a prospectus thereof, which includes the following: • matters concerning the tender offeror and related persons; • the issuer of the securities subject to the tender offer; • the purpose of the tender offer; • the class and number of the securities subject to the tender offer; • the terms and conditions of the tender offer, includ - ing the period, price and payment date of the tender offer; • the provisions of a contract for purchase (or other transaction) of the securities without the tender offer after the public notice date of the tender offer, if such a contract exists; and
• the details of the purchasing fund and other mat - ters prescribed by Presidential Decree as neces -
sary for the protection of investors. 7.3 Mandatory Offer Thresholds
The FISCMA stipulates that a mandatory offer is trig - gered where a buyer and its affiliate(s) hold 5% or more of the shares issued by the target by purchasing shares from ten or more persons within a six-month period. In this case, even if the transactions were not made at a stock exchange, they are deemed over- the-counter unless they were made via blind auction. The Financial Services Commission announced new revisions to the FISCMA during 2023, including a mandatory threshold for tender offers to secure more than 50% plus one share when proposing to acquire 25% or more of the shares of the target issuer. Pri - vate equity funds in Korea are closely monitoring this development. 7.4 Consideration In most cases, the consideration is cash. No minimum Until 2022, listed company transactions were rare - ly conducted via a tender offer. Most Korean listed companies have a controlling shareholder, and M&A transactions on such listed companies are conducted by purchasing shares over-the-counter from the con - trolling shareholder. Until recently, there have been rare exceptions of the buyer making a tender offer on the remaining shares following the above-mentioned transaction and going private. Over-the-counter trans - actions with a controlling shareholder include the same conditions as a general private M&A and, as such, financing is rarely included as a condition and the offer conditions cannot include those beyond the limited conditions allowed under the law (eg, certain portion of the shares to be tendered). price rules apply to tender offers. 7.5 Conditions in Takeovers From the first half of 2023, there have been several takeovers by private equity backed buyers of listed companies by tender offer. A financing condition is not legally permitted since the tender offer statement must be accompanied by a document substantiating the balance of deposits in financial institutions or any
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