Abolishing 'Kkamkkami' M&A... Disclosure of Board Meeting Details in Capital Market Act Amendment

Financial Authorities, Legislative Notice and Regulation Change Notice

The M&A system will be improved to require the disclosure of board of directors' discussions during mergers of listed companies. This is in response to concerns that the voices of common shareholders are not sufficiently reflected in decision-making processes that significantly impact companies.

On the 4th, the Financial Services Commission announced the legislative notice and regulatory change notice for the amendment of the Enforcement Decree of the Capital Markets and Financial Investment Business Act and the amendment of the Regulations on the Issuance and Disclosure of Securities, which include these provisions.

The amendment was prepared to protect the rights and interests of common shareholders during corporate M&A processes and to enhance the global consistency of the merger system. Until now, the board discussions regarding mergers were not disclosed, making it difficult for common shareholders to be informed.

Going forward, a "Board Opinion Statement" must be prepared, including the board's opinions on the appropriateness of transaction terms such as the purpose of the merger, merger price, and merger ratio, as well as reasons if there are directors opposing the merger. The amendment requires attaching the Board Opinion Statement to merger-related securities reports and major event reports for disclosure.

The amendment to the Enforcement Decree establishes conduct regulations to ensure that external evaluation agencies maintain independence, objectivity, and fairness for objective external evaluations during mergers. It prohibits external evaluation agencies from simultaneously performing merger price calculation and evaluation tasks, and especially in the case of mergers between affiliates, mandates that the selection of the external evaluation agency must be approved by the audit committee or with the consent of the auditor.

Based on strengthened disclosure of mergers and mandatory external evaluations, the amendment excludes mergers between non-affiliated companies from the application of the merger price calculation formula. The current capital market laws have been criticized for directly regulating specific merger price formulas, which hinder structural improvements through autonomous negotiations between companies.

The amendment will be open for legislative notice from the 5th until the 15th of next month, and after review by the Regulatory Reform Committee, the Ministry of Government Legislation, and approval by the Deputy Ministerial Meeting and Cabinet Meeting, it is scheduled to be implemented in the third quarter.

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