SOUTH KOREA Trends and Developments Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
its treasury stocks to the Spin-Off Company. Furthermore, in the case of a merger involv - ing a listed company, the surviving company is prohibited from allocating new shares to the shares of the non-surviving company held by the surviving company, or to the treas - ury stocks held by the non-surviving com - pany. The transfer of treasury stocks in such instances from the surviving company to the non-surviving company is also prohibited. These amendments are expected to prevent abuse of merger and spin-off mechanisms by controlling shareholders to strengthen their control. • In addition, under the amended Enforcement Decree of the FSCMA, disclosure obligations have been strengthened with respect to the acquisition and disposal of treasury stocks. The regulatory framework has also been revised to address and eliminate regulatory deficiencies associated with acquiring or disposing of treasury stocks via trust, which were subject to less stringent regulations compared to direct acquisitions of treasury stocks. Prior Disclosure Requirement for Insider Transaction of Listed Companies Effective 24 July 2024, executives (including directors) and major shareholders (holding 10% or more) of listed companies are now required under the amended FSCMA to disclose planned transactions involving certain securities (eg, equity securities, convertible bonds, bonds with warrants, and related depositary receipts) of their companies at least 30 days prior to expected trading date. Previously, the FSCMA only required post- transaction disclosure by major shareholders and executives upon disposal of securities. The revised regime aims to enhance transparency
in insider transactions and ensure fairness for general investors. • Scope of insiders – includes not only direc - tors and officers but also de facto executives (including anyone with substantial influence over key managerial matters including the appointment and dismissal of executives), but excludes financial investors, such as certain investment vehicles and special purpose companies. • Scope of transactions – the transaction must be disclosed if it involves the purchase, sale, or other disposition of shares or other relevant securities issued by a listed com - pany. However, the disclosure requirement is exempted if both of the following conditions are met: i) the aggregate number of shares (or relevant securities) traded over the past six months (based on the transaction com - mencement date) and during the transaction period is less than 1% of the total number of the issued and outstanding shares of the listed company; and ii) the aggregate trans - action amount is lower than KRW5 billion. In addition, transactions conducted pursuant to the applicable laws and regulations (eg, statu - tory acquisitions or sales), M&A transactions conducted by transfer of shares, and acquisi - tions or disposals resulting from mergers or spin-offs are also exempt from the disclosure requirement. • Procedures the transaction plan, includ - ing details such as purchase price, number of shares and transaction period, must be reported at least 30 days prior to the transac - tion commencement date. The transaction must be completed within 30 days from the scheduled commencement date, and devia - tions from the submitted transaction plan are permitted only within 30% range of the previ - ously planned transaction amount.
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