When the total amount of 'newly acquired shares, existing shares, and assumed liabilities' exceeds 600 billion KRW in a corporate merger, notification is required

Fair Trade Commission Announces Administrative Notice on Amendment to Corporate Merger Notification Guidelines

[Sejong=Asia Economy Reporter Joo Sang-don] From now on, when the total amount of the acquisition cost of newly acquired shares, the book value of existing shares, and the assumed debt exceeds 600 billion KRW in a corporate merger, the Fair Trade Commission must be notified of the merger.

On the 8th, the Fair Trade Commission announced that it has prepared a revision of the "Corporate Merger Notification Guidelines (Notice)" containing this content and will conduct an administrative notice for about 20 days until the 28th.

This revision aims to specify the method of calculating the transaction amount and the criteria for determining the substantiality of domestic activities to implement the transaction amount-based notification system introduced by the full revision of the Monopoly Regulation and Fair Trade Act last year.

Until now, the notifying company was required to report a corporate merger if its assets or sales were 300 billion KRW or more, and the counterparty's assets or sales were 30 billion KRW or more. However, even if the size of the target company is currently less than 30 billion KRW, if it is a company with high potential growth such as holding patented technology (small-scale acquired company), it may affect market competition, so notification is required if the transaction amount exceeds 600 billion KRW.

First, the transaction amount for stock acquisition and ownership is defined as the sum of the value of the acquired and owned shares and the assumed debt. For example, if Company A, which holds 5% of Company B's shares (book value 4.5 billion KRW), acquires 50% of the shares for 590 billion KRW, the transaction amount is the sum of the newly acquired amount of 590 billion KRW and the existing share book value of 4.5 billion KRW, totaling 594.5 billion KRW. Company B's debt (10 billion KRW) is also reflected proportionally at 55% of the shareholding, which is 5.5 billion KRW. Accordingly, the total transaction amount becomes 600 billion KRW.

In addition, in the case of a merger, the transaction amount is the sum of the value of shares issued as merger consideration and the assumed debt; in the case of business acquisition, the sum of the acquisition price and assumed debt; and in the case of company establishment participation, the investment amount of the largest investor under the joint venture agreement is considered the transaction amount.

For determining the "substantiality of domestic activities," the criterion "having sold or provided goods or services to more than 1 million people monthly in the domestic market over the past three years" will be applied based on monthly active users (MAU) or monthly unique visitors for internet-based services such as content and social networking services (SNS). Also, for cases where the company has leased domestic R&D facilities or utilized research personnel over the past three years with related budgets exceeding 30 billion KRW annually, the annual ordinary R&D expenses and development costs (intangible assets) of the acquired company, as accounted for, will be summed and used for judgment.

A Fair Trade Commission official said, "By specifying the contents of the revised law, we expect to eliminate blind spots in the company size-based notification criteria and efficiently monitor corporate mergers that may affect the market by acquiring newly established companies with high growth potential at large amounts." He added, "We plan to finalize and implement the revision after fully collecting stakeholders' opinions during the administrative notice period."

This content was produced with the assistance of AI translation services.