Fair Trade Commission Mandates Disclosure of RSUs from This Year to Prevent Major Shareholder Abuse

Revision of Large Business Group Status Disclosure

'Restricted Stock Units (RSU)' and other stock compensation methods, which have been criticized for being potentially abused as means for controlling shareholders to transfer management rights, will be included in the disclosure obligations of the Fair Trade Commission (FTC).

On the 16th, the FTC announced that it has added a disclosure form to the corporate group status disclosure under the section 'Securities Transaction Status with Related Parties,' which includes the details of stock compensation transaction agreements such as RSUs.

Starting this year, if a stock compensation transaction agreement is made with related parties (the controlling family and executives) during the previous fiscal year, companies must disclose once a year the ▲grant date ▲type of agreement ▲type of stock ▲quantity ▲other key agreement details.

This disclosure revision follows concerns that stock compensation transaction agreements have been exploited as a means for the controlling family to increase their shareholding. Under the current disclosure format, only the sale price at the time the stock is actually granted to related parties is disclosed, making it difficult to understand the details of stock compensation transaction agreements by corporate group.

By disclosing the details of stock compensation transaction agreements, it will be possible to identify the conditions of stock grants and the agreed quantity of stock granted at the time of agreement for stock grants such as stock grants and Restricted Stock Awards (RSA), where stocks are granted at the time of agreement, as well as RSUs, where stocks are granted upon fulfillment of future conditions after the agreement.

The FTC expects that "information on changes in shareholding by the controlling family due to stock compensation transaction agreements and the potential for future shareholding changes can be provided to the market."

The Financial Supervisory Service (FSS) already revised its disclosure format last December to include the details of stock compensation agreements in business reports. The FTC explained that it prepared the disclosure format in line with the FSS disclosure items to minimize the disclosure burden on companies. The FTC’s status disclosure applies not only to listed companies subject to business report disclosures but also to unlisted companies.

Kim Minji, head of the FTC’s Disclosure Inspection Division, explained, "This revision of the disclosure format is part of the market monitoring system concerning economic power concentration, viewing RSUs and similar instruments as mechanisms that can affect corporate group governance, and thus requiring disclosure of their details." She added, "Unlike the FSS disclosure, this includes unlisted companies as well as listed companies."

Additionally, in this revision of the disclosure manual, the purchase details disclosure format under 'Logistics and IT Service Transaction Status' was deleted, improving the format to disclose only sales details. The FTC stated, "Considering that it is sufficiently possible to understand the status of internal transactions in the logistics and IT service sectors through companies’ sales details, this change reduces the disclosure burden on companies while providing more consistent information to the market."

For domestic unlisted companies belonging to disclosure-subject corporate groups, the 'Debt Guarantee Balance by Debtor' section, which must be completed when disclosing 'Decisions on Debt Guarantees for Others,' has had the 'Debt Guarantee Period' field removed. Instead of disclosing the debt guarantee period, which is not essential for understanding the debt guarantee status, only the total debt guarantee balance by debtor will be disclosed.

Furthermore, the 'Changes in Executives' section has been removed from disclosure items due to amendments to the Fair Trade Act, and disclosure obligations will no longer apply from August 7, the effective date of the amended law.

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