Rep. Yoon Han-hong Introduces Capital Markets Act Amendment Bill... Strengthening Protection and Rights of Minority Shareholders

On the 3rd, Yoon Han-hong, a member of the People Power Party and chairman of the National Assembly's Political Affairs Committee, took the lead in proposing a partial amendment to the (hereinafter referred to as the Capital Markets Act) that imposes an obligation on the board of directors of listed companies to make efforts to protect shareholder interests during capital transactions such as mergers.

Assemblyman Yoon Han-hong.

This is a follow-up measure to the government's announcement on the 2nd regarding the "Direction for Amending the Capital Markets Act to Strengthen the Protection of Ordinary Shareholders' Interests."

As cases infringing on the interests of minority shareholders, such as unfair mergers and listings after physical division, have been repeatedly occurring, the need for improving corporate governance and strengthening the protection of minority shareholders has been steadily raised, and this issue has been continuously pointed out during the National Assembly's audit.

Accordingly, the amendment prepared by Chairman Yoon in consultation with financial authorities contains provisions to sufficiently protect minority shareholders while minimizing side effects such as management contraction.

First, when a listed company conducts a merger or similar transaction, its board of directors must make efforts to protect the legitimate interests of shareholders by preparing and disclosing an opinion statement on the purpose, expected effects, and appropriateness of the valuation of the merger, etc. In addition, it stipulates that the valuation should be determined based on fair value, not valuation standards, not only for mergers between non-affiliated companies but also for mergers between affiliated companies. It also mandates evaluation and disclosure by external appraisal agencies for all mergers and similar transactions, and establishes grounds for parent companies to preferentially allocate public offering new shares to ordinary shareholders when a subsidiary is listed after a physical division, thereby enhancing the effectiveness of shareholder interest protection.

The amendment to the Commercial Act, which the Democratic Party is promoting as a party policy, applies to all transactions of over one million corporations. In contrast, the government's and ruling party's amendment to the Capital Markets Act limits the scope to about 2,400 listed companies and targets only four types of acts stipulated by the Capital Markets Act (mergers, significant business or asset transfers, comprehensive stock exchanges or transfers, and splits or split mergers). This is evaluated as reducing management uncertainty for companies by supplementing the problems of the Commercial Act amendment, which has been criticized for being broad and ambiguous.

Chairman Yoon said, "Through this amendment to the Capital Markets Act, we expect to further strengthen the protection of minority shareholders, which has been insufficient so far, and create an investment environment for value-up in the capital market," and urged, "The Democratic Party should stop promoting the Commercial Act amendment, which has a significant negative impact on the legal system and the market, and actively participate in discussions on the Capital Markets Act."

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