SOUTH KOREA Law and Practice Contributed by: Ie Hwan Yoo, Hang Jin Chang and Da Eun Jung, Kim & Chang
The Bank Act prohibits any one person from acquiring more than 10% of outstanding voting shares of any commercial bank (including any shares held by any specially related persons of that person) unless either approval is obtained from the Financial Services Commission (FSC) or some other limited exception under the Bank Act is applicable. In addition, if any person acquires more than 4% of the voting shares of any commercial bank, this person must file various reports regarding their acquisition of the interests with the FSC. The FSC’s approval is also necessary for a person to become a major shareholder of insurance com- panies, securities companies, mutual savings banks or other financial institutions. Various restrictions are also imposed on the fol- lowing. • The eligibility of shareholders for broadcast- ing companies governed by the Broadcasting Act or the Telecommunications Business Act. The acquisition of any controlling interests in a broadcasting company also requires the approval of the Korea Communications Com- mission. • The eligibility of shareholders for telecommu- nications companies governed by the Tele- communications Business Act. The aggregate amount of shares held by foreigners in any given telecommunications company must not exceed 49% of the total number of outstand- ing shares. 9.2 Listed Targets The acquisition of a listed target company must comply with the special provisions under the Financial Investment Services and Capital Mar- kets Act (FSCMA). Acquisitions of listed target companies are usually conducted by purchas-
ing the shares from the controlling shareholders over the counter. This is done to circumvent the various restrictions under the FSCMA (except for certain disclosure requirements) in relation to the sale and purchase of listed shares. However, where the number of sellers exceeds ten, the public tender offer procedure must be used. Further, if the seller shareholder is a for- eigner, the shares held by the seller should have been acquired as “foreigner investment” under Korea’s Foreigner Investment Promotion Law. Otherwise, the shares held by the foreign seller cannot be sold over the counter without the approval of the FSC. If there are no controlling shareholders in the listed target, a public tender offer under the FSCMA can be used to acquire the controlling shares. For a public tender offer, the offeror must submit an application to the FSC and the Korea Exchange containing certain information regard- ing: • the identity of the offeror and the target; • the purpose of the tender offer; • the types and number of shares to be pur- chased; • key terms (duration, price, execution date and so on); and • the funding plan for payment. Under the FSCMA, before launching a tender offer, the offeror must submit to the FSC evi- dence that it has the funds necessary to satisfy a full acceptance of its offer. In general, a cer- tificate of deposit balance is submitted as the proof of funds. It is also possible to submit a debt commitment letter issued by a domestic financial institution, a letter of capital commit- ment issued by certain qualifying domestic LPs (namely limited partners to private equity funds
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