Stricter Disclosure Requirements for Listed Companies' Treasury Stock... Biannual Reporting for Holdings Over 1%

Going forward, if a listed company holds 1% or more of its total issued shares as treasury stock, it will be required to disclose its holdings and plans for disposition every six months. In addition, companies must also publicly compare their previously disclosed disposition plans with the actual status of implementation. Financial authorities have announced that repeated violations of these disclosure requirements by listed companies will result in increased penalties.

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On September 25, the Financial Services Commission announced that it would begin a legislative notice period for proposed amendments to the Enforcement Decree of the Capital Markets Act, the Securities Issuance Disclosure Regulations, and the Capital Markets Investigation Regulations from the following day until November 5. The key feature of these amendments is to improve the system by strengthening market oversight and checks on the arbitrary holding and disposal of treasury shares, thereby enabling listed companies to voluntarily use treasury stock for purposes such as enhancing shareholder value.

The amendment strengthens the existing rule, which required listed companies to disclose once a year if they held 5% or more of their total issued shares as treasury stock, by lowering the threshold to 1% and requiring disclosures twice a year. The relevant corporate disclosure forms will also be revised. At the same time, companies will be required to compare their previously disclosed treasury stock disposition plans with the actual status of implementation over the past six months and disclose the results. If there is a discrepancy of 30% or more between the plan and actual implementation, companies must provide a detailed explanation for the difference.

A Financial Services Commission official explained, "Based on a review of related disclosures in 2024 business reports, we found that many companies failed to specify the purpose of holding treasury stock or simply stated 'no plans for future disposition,' indicating insufficient disclosure. There were also cases where the content of disclosures differed from actual implementation, undermining the predictability for the market and investors," explaining the background for the amendment.

Sanctions will also be strengthened in cases of repeated disclosure violations. Although there have been cases where companies omitted counterparties or failed to include important details when disposing of treasury stock, such violations have often been resolved through voluntary corrections, raising concerns about the effectiveness of sanctions.

Accordingly, the amendment provides for the active use of various sanctions for violations of treasury stock disclosure, including recommendations for dismissal of executives, restrictions on securities issuance, fines, and criminal penalties. It also establishes a basis for increased penalties in the event of repeated violations.

A Financial Services Commission official stated, "This will serve as an opportunity for listed companies to shift their perception of treasury stock from a tool for specific shareholders to a means of returning value to all shareholders," adding, "We will actively participate in National Assembly discussions on amendments to the Commercial Act and other initiatives to improve the treasury stock system, so that the system can be reformed to respect shareholder value and ensure corporate management autonomy."

The amendments to the Enforcement Decree, the Securities Issuance Disclosure Regulations, and the Investigation Regulations will go through the legislative notice and regulatory change notice period until October 5, followed by review by the Regulatory Reform Committee, review by the Ministry of Government Legislation, and approval by the Vice Ministers' Meeting and Cabinet Meeting, with implementation scheduled for the fourth quarter of this year.

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