SOUTH KOREA Trends and Developments Contributed by: Je Won Lee, Kyu Seok Park, Dahye Cho and Justin Kim, Lee & Ko
Recent Updates to the Regulations on Private Equity Funds Amendment to the Commercial Code: directors’ fiduciary duties Effective 22 July 2025, the Korean Commercial Code was amended to expand directors’ fiduciary duties. Directors are now required not only to act in the inter - ests of the company, but also to protect and treat the interests of all shareholders fairly, including minority shareholders. This marks a departure from the previ - ous legal standard, which focused solely on the com - pany’s interest and permitted differential treatment of shareholders if justified. This change aligns with Korea’s ongoing efforts to enhance minority shareholder protections under both the Commercial Code and the Capital Markets Act. Common issues such as unfair merger ratios, post– spin-off stock price drops, and treasury share dispos - als favouring controlling shareholders have spurred legal reforms. Recent responses include stronger dis - closure rules for mergers, mandatory appraisal rights in physical spin-offs, and tighter regulations on treas - ury share use. The amendment codifies a broader fiduciary principle, requiring directors to manage potential shareholder conflicts more carefully, particularly in restructur - ings. Directors must now conduct more robust inter - nal reviews to meet their legal obligations. While the reform strengthens shareholder protections, some critics warn it could overly restrict directors’ business judgement. As the new law has only recently come into force, its real-world impact remains under active scrutiny. Updates on merger filing Previously, under the Monopoly Regulation and Fair Trade Act, the establishment of a private equity fund required a business combination report to be filed with the Korea Fair Trade Commission. However, the Monopoly Regulation and Fair Trade Act was amended on 6 February 2024, and the amended Act came into effect on 7 August 2024. According to the amended Monopoly Regulation and Fair Trade Act, if a company required to file a business combination report jointly participates with another company in the establishment of a private equity fund under the FIS -
CMA and becomes the largest investor, this participa - tion will be excluded from the business combination report requirement. Consequently, starting from 7 August 2024, business combination reports for the establishment of private equity funds are no longer required. However, this exemption only applies to the establishment of new private equity funds, and the business combination report will still be required in the following cases: • a private equity fund invests in a target company; or • a new limited partner invests in an already estab - lished private equity fund, or an existing limited partner makes an additional investment or acquires the interest of another limited partner. However, in the case of a new limited partner invest - ing in an already established private equity fund, or an existing limited partner making an additional invest - ment or acquiring the interest of another limited part - ner, a simplified review process applies, making the procedure less burdensome than for a private equity fund investing in a target company. Updates on tender offers If a private equity fund intends to invest by way of a tender offer, it must proceed in compliance with the procedures prescribed by the FISCMA. One of these requirements is to provide evidence of funds sufficient to satisfy accepted offers prior to the commencement of the tender offer, which in practice is burdensome for private equity funds due to the nature of the timeline of their capital calls (ie, within a certain period leading up to closing). In the recent Osstem Implant transaction, a landmark tender offer deal in South Korea, Lee & Ko provided evidence of funds to regulators in the form of letters of commitment (which led to the regulators later revising the relevant regulations to expressly allow this form of evidence). In this way, investments by way of tender offer have become a more considered option for pri - vate equity funds. However, these letters of commit - ment must be issued by reputable domestic institu - tions such as pension funds or financial institutions. In practice, 20% of the total tender offer funds should
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