'Fair Value' Required in Listed Company Mergers... Capital Markets Act Amendment Passes Political Affairs Subcommittee

An amendment to the Capital Markets Act, which requires the introduction of a "fair value" that comprehensively considers not only stock prices but also other asset values during mergers of listed companies, passed the National Assembly's Political Affairs Committee subcommittee on May 12.

On this day, the Political Affairs Committee held its first subcommittee on bill review and approved a partial amendment to the "Act on Capital Markets and Financial Investment Business (Capital Markets Act)" containing these provisions. The main point of the amendment is that, in cases of mergers and acquisitions (M&A) between affiliates, the merger price must be separately calculated by reflecting asset value, stock value, and income value, and an external evaluation is made mandatory.

Under the current law, the merger price between a listed company and its affiliate has been calculated based on the market stock price. As a result, there have been criticisms that the intrinsic value of the company is not properly reflected. Furthermore, there has been ongoing criticism that companies may leave the stock price of the target company low in order to secure a merger ratio favorable to the major shareholder, which is disadvantageous to minority shareholders of the target company.

A representative example is the case in 2024, when Doosan Group withdrew its merger plan between Doosan Bobcat and Doosan Robotics after facing opposition from Doosan Bobcat shareholders and pressure from the Financial Supervisory Service.

The amendment aims to prevent such problems by requiring the merger price to be determined based on fair value, and also strengthens the board of directors' responsibilities, including requiring the board to make efforts to protect the legitimate interests of shareholders during the merger. In addition, for mergers between affiliates, the amendment requires an evaluation by an external professional evaluation agency, as well as disclosure of the evaluation report and the board's opinion statement.

However, provisions that would have imposed liability for damages on the company, directors, or auditors if investors suffer losses due to unfair merger prices, and a provision that would have deemed the merger ratio fair if a majority of minority shareholders (excluding controlling shareholders) agree to the merger, were omitted from the amendment.

Kang Junhyun, Democratic Party secretary of the Political Affairs Committee, stated, "With this legal amendment, the introduction of the fair value concept, which comprehensively reflects the company's intrinsic value, will help establish a more rational and fair capital market environment."

On the same day, the subcommittee also approved a partial amendment to the "Special Act on Prevention of and Refund of Damages from Telecommunication Financial Fraud Crimes" (Telecommunication Fraud Damage Refund Act), which is aimed at responding to voice phishing crimes. A key provision is the introduction of a "leniency system" (judicial cooperation punishment reduction system), under which a person who committed a telecommunication financial fraud such as voice phishing can receive a reduced sentence if they testify or submit other materials that help clarify another person's crime in the same case.

Additionally, a partial amendment to the Insurance Business Act was approved, stipulating that individuals who have violated insurance fraud-related laws or the Act on the Regulation of Conducting Similar Businesses are prohibited from soliciting insurance.

The Political Affairs Committee plans to hold a plenary meeting on May 14 to vote on the bills that passed the subcommittee on this day.

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