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Feb 28, 2023
- Fast-Track System to be Utilized Effectively in Investigation of Unfair Trading Activities
- The FSC, the FSS, the Korea Exchange and Seoul Southern District Prosecutors Office held a joint council meetingon February 27. At the meeting, authorities discussed and reviewed the outcome of operating the fast-track system in handling unfair trading activities in 2022. The fast-track system, introduced in 2013, is an emergency measure by Chair of the Securities and Futures Commission (SFC) in which a case deemed urgent and significant can be referred to the prosecutors office without going through the SFCs deliberation. If a case under investigation by the FSC or the FSS is deemed to have urgent need of the prosecutors investigation due to concerns about a suspect fleeing or a potential destruction of evidence, SFC Chair can decide to quickly refer the case to the prosecutors office after consulting with relevant authorities. In 2022, the FSC and the FSS referred a total of 20 casesto Seoul Southern District Prosecutors Office through the fast-track system, leading to prosecution of numerous offenders within short periods of time. In order to more effectively respond to unfair trading activities, which are becoming more sophisticated and organized, authorities will strengthen cooperation among related agencies and concentrate more investigative capacity on major cases that have a potential to inflict significant losses to investors. By utilizing the fast-track system, authorities will take swift and stern responses against major cases involving unfair trading activities, and make continuous efforts to improve the operation of the fast-track system. Major Fast-Tracked Cases in 2022 [Case #1] Case involving circulation of false information about COVID-19 test kit and sale of company stocks at high price for profiteering (Case Summary) The offenders (a) acquired a KOSDAQ-listed company (company A) through a leveraged buyout (LBO: MA without own capital), (b) then spread a rumorabout company As COVID-19 test kit to drastically push up its stock price,and (c) sold the
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Feb 10, 2023
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Feb 09, 2023
- Household Loans, January 2023
- In January 2023, the outstanding balance of household loansacross all financial sectors declined KRW8.0 trillion (m-o-m) and the growth rate also dropped at a faster pace (down 1.0 percent, y-o-y), showing a strong trend of decline. Financial authorities will ensure stable management of household debt and continue to seamlessly implement the normalization of relevant loan regulations to help non-speculative homebuyers. (Overall) Household loans across all financial sectors dropped KRW8.0 trillion in January 2023. The year-on-year growth rate (down 1.0 percent) declined at a faster pace compared to the previous month (down 0.5 percent), showing a continuous trend of slowing down. (By Type) Mortgage loans went down month-on-month for the first time since relevant statistics became available in 2015, and the rate of decline for other types of loans has also increased. - (Mortgage Loans) Mortgage loans fell KRW0.6 trillion in January, led by jeonse loans (down KRW1.8 trillion) and home-backed mortgage loans from nonbank sectors (down KRW0.6 trillion) such as mutual finance. - (Other Types of Loans) Other types of loans fell KRW7.4 trillion, as the rate of the decline increased compared to the previous month (down KRW5.2 trillion), led by credit loans. (By Sector) Household loans edged down in both the banking and nonbanking sectors. -(Banking Sector) Household loans in the banking sector declined KRW4.6 trillion in January. Regarding mortgage loans, banks saw a growth in government-sponsored mortgage lending (up KRW1.7 trillion) and group lending for new apartment subscription (up KRW0.3 trillion), but a drop in jeonse loans (down KRW1.8 trillion).Other types of loans from banks dropped KRW4.6 trillion, declining at a faster pace from a month ago (down KRW2.9 trillion) led by credit loans (down KRW3.8 trillion). -(Nonbanking Sector) In January, nonbanks saw a drop of KRW3.4 trillion in household loans with a slight rise in savings banks (up KRW0.1 trillion) but declines
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Feb 06, 2023
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Jan 31, 2023
- Authorities Plan to Improve Rules Regarding Dividend in Line with Global Standards
- The FSC and the Ministry of Justice announced measures to improve rules regarding dividend to make companies procedures for distributing dividends more consistent with international standards. First, by issuing an authoritative interpretation on the Commercial Act and revising the Financial Investment Services and Capital Markets Act (FSCMA), authorities will make improvements to the current procedure for distributing dividends to enable investors to invest after checking dividend amounts to receive. Second, authorities will pursue diverse measures to induce voluntary and active adoption of the improved dividend distribution procedure from companies by revising and notifying the model articles of incorporation for listed companies, requiring companies to disclose whether they have adopted the improved dividend distribution procedure on their corporate governance reports, etc. Authorities expect that these measures will help to alleviate factors contributing to the so-called Korea discount, promote dividend investing and bolster companies dividend payout ratios, and create an environment where more investors are encouraged to turn to long-term dividend investing for regular dividend income which will help to ease volatility in stock markets. Background Most companies in Korea designate shareholders who will receive dividends at the end of each year prior to determining dividend amounts at general shareholders meetings held in the following spring. As a result, investors invest in companies without knowing how much they will receive in dividends, and they have no choice but to accept the decision on dividends that will be made a few months later. These rules and practices, which discourage dividend investing of earning regular dividend income, remain inconsistent with global standardsand have been pointed out as a factor contributing to the so-called Korea discount, an undervaluation of the Korean stock market by foreign observers. Therefore, dividend investing in Kor
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Jan 30, 2023
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Jan 26, 2023
- SFC Imposes Penalty Surcharge on Overseas-based Financial Investment Entity for Market Disturbance
- The Securities and Futures Commission (SFC), a sub-commission of the FSC responsible for the oversight of the securities and futures market, decided on January 26 to impose a penalty surcharge of KRW11.88 billion on an overseas-based financial investment business entity (securities firm A hereinafter) for disturbing market order with its high-frequency algorithmic trading activities. This is the first instance in Korea where authorities reached a decision to impose a penalty surcharge for market disturbance caused by high-frequency algorithmic trading activities.With the growth in the volume of high-frequency algorithmic transactions recently, financial authorities will continuously strengthen the administration of market risks associated with them. Overview The SFC recognized that securities firm A engaged in an activity of disturbing market order in its transactions of a total of 264 stock items in 6,796 trading periods via a Seoul-based securities firm (securities firm B) between October 2017 and May 2018, and decided to impose a penalty surcharge of KRW11.88 billion on securities firm A, pursuant to the Article 429-2 of the Financial Investment Services and Capital Markets Act (FSCMA). Violation Securities firm A engaged in trading activities using its algorithmic trading system, which enables it to acquire and analyze data on price quotation and trade executions as well as submit buy and sell orders via direct market access (DMA)more quickly than ordinary retail investors. In the process, securities firm A placed orders intensively and repetitively within a short period of time in the following pattern(a) placing immediate-or-cancel (IOC)buy market orders to exhaust all quantities of best ask prices in succession, and (b) submitting buy limit orders on any remaining unfilled quantity where there is no bid price given in order to newly generate the best bid price (inflating bid price) and then cancelling such transactions. Thus, a suspicion was raised that secur
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Jan 25, 2023
- FSC Announces Measures to Improve Foreign Investors' Access to Korean Capital Markets
- The FSC announced on January 25 a set of measures intended to improve foreign investors access to Korean capital markets by seeking bold improvements of the regulations that have been impediments to global investors investments in Korean markets. The measures include (a) abolishing the foreign investor registration requirement, (b) facilitating the use of omnibus account for foreign investors, (c) enabling more convenient OTC transactions by foreign investors and (d) expanding English disclosures in phases. Authorities expect that these measures will enhance the investment environment for foreigners on a par with international standards, which will provide important grounds to boost foreign investment in Korean markets. Background The foreign investor registration system and the constraints on foreign investors OTC (over-the-counter) transactions were introduced in 1992 when authorities began to allow foreign investors to invest in locally-listed stocks. While permitting foreigners to invest in locally-listed stocks, authorities established the total foreign investment cap and individual foreign investor cap of 10 percent and 3 percent, respectively, for each investment item, and began to require prior registration for foreign investors as well as to restrict their OTC transactions to monitor their observance. With the abolishment of foreign investors stock holding limit for ordinary companies in 1998, there currently exist foreign investors stock holding limits placed on only 33 items in key industries among 2,500 listed companies. However, the foreign investor registration system has continued to exist for the past three decades without a significant change. In addition, authorities introduced omnibus account for foreign investors in 2017 to provide a convenient way to invest in Korean markets, but it has not been utilized ever since its inception. The availability of English disclosures, which serve as essential information for foreign investors decisions on inve
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Jan 19, 2023
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Jan 12, 2023
- Authorities Hold Meeting to Monitor Financial Market Situation and Discuss Stabilization Measures
- FSC Vice Chairman Kim So-young presided over a meeting with the Financial Supervisory Service and policy financial institutions on January 12 to check the corporate bond and CP (commercial paper) market situations and discuss the effects of market stabilization measures currently in place as well as the support plan for 2023. At todays meeting, participants shared a common assessment that the corporate bond and CP market conditions have been improving recently as interest rates on corporate bonds and CPs are continuing to decline, and in particular, as the level of purchase demand surpassed the volume of newly issued higher-grade corporate bonds and CPs.Also, in order to ensure that recent market movement toward stability can become sturdier, authorities agreed on the need to maintain active implementation of the market stabilization programs, and shared a common view on the need to boost the effectiveness of support on higher-grade corporate bonds and CPs and strengthen support for non-higher-grade corporate bonds and CPs, so that the movement toward stability can spread to non-higher-grade corporate bonds and CPs as well. The market stabilization programs introduced last year still have a total of KRW40 trillion or more in their support capacity, and thus, authorities will continue to actively put them into use going forward. a) The bond market stabilization fund currently has about KRW6.4 trillion in its remaining capacity (additional capital call of KRW9 trillion possible), and it will continue to reinforce market demand for higher-grade corporate bonds, while authorities consider an expansion of both the target and the size of purchase. b) The corporate bond and CP purchase program run by the Korea Development Bank (KDB) and Industrial Bank of Korea (IBK) currently has about KRW7.6 trillion in its remaining capacity, and it will continue to actively operate to purchase corporate bonds and CPs with a focus on non-higher-grade ones. c) The P-CBO (primary collater
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Jan 12, 2023
- Household Loans, 2022
- The outstanding balance of household loansacross all financial sectors dropped KRW8.7 trillion in 2022, declining for the first time since relevant statistics became available in 2015.Household loans in December 2022 fell KRW3.4 trillion, showing a continuing trend of a slowdown.Financial authorities will work to seamlessly implement the normalization of loan regulations, while continuing to stably managehousehold debt. Household Loan Trend in 2022 (Overall) Household loans across all financial sectors dropped KRW8.7 trillion in 2022. The growth rate (down 0.5 percent, y-o-y) fell for the first time since relevant statistics began to be collected in 2015. (By Type) Mortgage loans grew at a slower rate and the balance of other types of loans edged down, which led to the overall drop in household loans in 2022. - (Mortgage Loans) Mortgage loans grew KRW27.0 trillion in 2022, led by group lending for new apartment subscription and jeonse loans, but the pace of growth decelerated compared to the previous year (up KRW69.2 trillion). - (Other Types of Loans) Other types of loans fell KRW35.6 trillion in 2022, due to drops in credit loans and non-housing collateral loans. The increase of KRW38.3 trillion in the previous year turned to a decline. (By Sector) Household loans in both the banking and nonbanking sectors dropped compared to the end of last year. - (Banking Sector) Banks saw a drop of KRW2.7 trillion in household loans in 2022. Mortgage loans from banks grew KRW20.0 trillion, led by group lending for new apartment subscription (up KRW9.4 trillion) and jeonse loans (up KRW8.4 trillion),but edged lower compared to the previous year (up KRW56.9 trillion). Other types of loans from banks fell KRW22.8 trillion, as credit loans edged down KRW18.8 trillion, switching to a decline from the growth of KRW14.7 trillion last year. - (Nonbanking Sector) In 2022, nonbanks saw a drop of KRW5.9 trillion in household loans with increases in insurance companies (up KRW3.7 trillion
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Jan 11, 2023
- Government Prepares KRW80 Trillion Financial Support Programs to Help SMEs Overcome Crisis
- The FSC and the Ministry of SMEs and Startups (MSS) held talks with policy financial institutions, the Korea Federation of Banks and major industry groups representing SMEson January 11 and announced their joint plans to provide financial support for SMEs to help them overcome the complex crisis situation they face currently. A total of KRW80 trillion of policy financial supports (KRW50 trillion from the FSC and KRW30 trillion from the MSS) will be newly supplied. This KRW80 trillion financial supports are designed to help them overcome the current triple-highs (interest rate, inflation and USD to KRW exchange rate) risky situation, to support growth of innovative businesses and to assist the recovery or re-start of vulnerable firms. After the announcement, the FSC and the MSS listened to complaints and suggestions from field industry groups for SMEs. Financial Support for SMEs (KRW80 Trillion) I. Background High interest rates and concerns about a global recession rapidly increase managerial burdens on SMEs, and this condition is expected to continue for some time in the near future. With the increase in loan balances, SMEs face added burdens for interest expenses due to rate hikes, and there are more SMEs struggling with increased production costs following rising in raw materials prices and global supply chain reshuffles. To improve the potential growth in our economy, SMEs need to get into the new growth sectors and secure their own competitiveness through business conversion. However, with the challenging economic situation recently, it is necessary to support the growth of innovative businesses and the resurgence or re-start efforts of vulnerable SMEs through policy finance. II. Overall Direction The government will supply a total of KRW80 trillion via policy funds (KRW50 trillion from the FSC and KRW30 trillion from the MSS) and seek system improvements in diverse areas to bolster the crisis-response capacity and growth potential of SMEs, and to expedite norm
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Jan 11, 2023
- Application for Fixed-rate Government-sponsored Mortgage Loan Available from January 30
- The FSC announced that special Bogeumjari Loan,which integrates Relief Conversion Loanand Conforming Loanwith existing Bogeumjari Loan, will be available for one year starting from January 30, 2023. For houses valued at KRW900 million or less, eligible applicants can borrow up to KRW500 million in loans, irrespective of their income, within the maximum loan-to-value (LTV) and debt-to-income (DTI) ratios. Interest rates that are lower than those for conventional mortgage loans will be applied from the end of January (4.65~4.95 percent for borrowers with house valued at KRW600 million or less and total married couples income of KRW100 million or less, 4.75~5.05 percent for borrowers with house valued in excess of KRW600 million and income surpassing KRW100 million), while adjustment will be made, when it becomes necessary, depending on the status of market interest rate, funding availability of Korea Housing Finance Corporation, etc. Background With increases in market rates gradually being reflected in interest rates on loans, interest burdens are rising rapidly on lower income households and non-speculative homebuyers. Therefore, in order to provide assistance to lower income households and non-speculative homebuyers for their home ownership and improve the qualitative structure of household debt by making them less sensitive to changes in interest rates, it is necessary to expand the availability of government-sponsored mortgage loans with fixed interest rate. Details of Special Bogeumjari Loan I. Eligibility a) (House Price) Up to KRW900 million b) (Income) Unlike the income requirement for existing Bogeumjari Loan (up to KRW70 million income threshold), there will be no income restriction applied. c) (Purpose) For purchasing a new house, replacing existing loans or returning security deposits d) (Homeownership Status) No-home owners (for purchasing a new house) and one-home owners (for replacing existing loans or returning security deposits) can apply. II. Detail
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Dec 27, 2022
- FSC Launches Organizational Shift to Create Divisions Working to Stamp out Securities Frauds
- The FSC announced on December 27 that the Capital Market Fraud Investigation Unit was reorganized into two divisionsin order to set up a system that facilitates effective investigation of securities frauds. Background As unfair trading practices in capital markets recently become more sophisticated and intelligent, it is necessary to set up new divisions dedicated to conducting investigations into violations of capital market laws as well as adding personnel to root out securities frauds. Against this backdrop, the FSC established the Capital Market Investigation Unit in September 2013 and has since cooperated with the Prosecutors Office, the Financial Supervisory Service, the Korea Exchange, and others to counteract such fraudulent activities. Despite such concerted endeavors, it remains difficult to effectively act against such unlawful activities only with a single unit, because securities frauds have become more complicated due to a significant expansion in the size of capital markets, the rising number of market participants, and the utilization of social network services. Details of Organizational Reshuffle The FSC has worked to launch an organizational reshuffle to reinforce divisions exclusively responsible for investigation into potential frauds in capital markets. As a result, the Capital Market Investigation Unit will be expanded into two divisions: the Capital Market Investigation Coordination Division and the Capital Market Investigation Division. The newly created Capital Market Investigation Coordination Division will be charged with planning, overall management and coordination in investigating unfair trading activities in capital markets, classification of unfair trading cases, performance of duties assigned to judicial police officers of capital markets, and external relations related to investigation into capital market frauds. The Capital Market Investigation Division will be responsible for wide-ranging tasks such as investigation and measures r
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Dec 26, 2022
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Dec 26, 2022
- FSC Plans to Bolster Support to Promote Sustained Growth of Fintech Businesses
- The FSC announced a set of measures to strengthen support for fintech businesses, which is confirmed after discussion and deliberation at the 5th financial regulatory innovation committee meeting held on December 20. Against the backdrop of the current industrial situation where fintech businesses face funding shortages amid interest rate hikes, waning impetus of industrial growth and difficulties in expanding their business into overseas markets, these measures will expectedly boost multiple facets of fintech business supports, such as funding or promotion of startups. Key Measures I. Strengthen Support through Investment and Policy Funds a) (Increasing the Size of Fintech Innovation Fund) The size of the fintech innovation fund, initially planned as KRW500 billion for four years (2020-2023), will be increased to KRW1 trillion by adding KRW500 billion for another four years (2024-2027). Authorities will improve operation methods by (a) ensuring continuous operation of the early-stage fintech investment fund, which has been operated intermittently, and (b) newly creating a commercialization fund intended to make investment in those who seriously prepare business expansion at the commercialization stage. b) (Increasing Support through Policy Financial Institutions) Tailored support for fintech businesses will be made in the form of loans and guarantees from policy financial institutions in the amount of at least KRW200 billion a year. c) (Establishing Comprehensive Fintech Support System) Authorities will set up and operate Fintech Support Council, consisting of representatives form 14 institutionsthat currently operate their own fintech support programs, to make their support programs more systematic and effective. The participating institutions will establish a common databaseto monitor the growth history as well as the record of support provided for each fintech business. A fintech focused investor relations (IR) event will be held at least once every half a year.
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Dec 22, 2022
- FSC Unveils Measures to Improve Corporate Financial Data Infrastructure to Support More Businesses
- The FSC announced a plan to make improvements to the corporate financial data infrastructure to assist micro-enterprises, SMEs and innovative businesses for which the availability of relevant data infrastructure has been inadequate thus far. The key measures include (a) revamps of the corporate data management system operated by the Korea Credit Information Services (KCIS), (b) expansion of data sharing with financial sectors on innovative businesses in new industries, (c) improvement of the entry regulation for business credit bureaus (business CBs) more reasonable and enablement of CBs for data-specialized institutions and (d) reviewing a launch of MyData service tailored to the needs of sole proprietors. As these measures have been discussed at the 5th financial regulatory innovation committee meeting held on December 20, authorities will seek prompt implementation of the detailed measures. Background Financial authorities have successfully introduced various systems, including the financial MyData service and improvements to the personal credit rating system, to bring about innovation in consumer finance. In corporate finance, too, authorities have subdivided business CBs into several licensing unitsand lowered their entry requirement.However, there still exists insufficiency of credible data on micro-enterprises, SMEs and innovative businesses. For SMEs and micro-enterprises, there is not enough data being produced and distributed to be utilized in corporate finance, and business CBs capabilities of data management remain inadequate. As such, even when a company has decent repayment capacity, it may be asked for an excessive level of collateral or guarantee, or face the burden of unfavorable borrowing conditions such as a low level of maximum loan amount or high interest rate. For innovative businesses, due to inadequate information on new industries, financial institutions face difficulties in evaluating the growth potential and the innovativeness of new indus
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Dec 22, 2022
- Korea Appointed as Inaugural Member of IFRS Sustainability Standards Advisory Forum
- The Financial Services Commission (FSC) and the Korea Accounting Institute (KAI) have been appointed by the International Financial Reporting Standards (IFRS) Foundation as inaugural member institutions of the Sustainability Standards Advisory Forum (SSAF) representing Korea on December 21, 2022. The SSAF is established to support the International Sustainability Standards Board (ISSB) to develop and revise IFRS sustainability disclosure standards. It will be comprised of relevant government authorities and standard-setting institutions from around the world. Including those from Korea, thirteen representatives of jurisdictions and regions from around the worldthe European Union, the UK, Canada, China, Japan, Brazil, etc.have been appointed as SSAFs inaugural members. The U.S. Securities and Exchange Commission (SEC), the European Commission (EC), the International Organization of Securities Commission (IOSCO) and the Global Reporting Initiative (GRI) will also participate as official observers. From Korea, the FSC and the KAI have been appointed as joint members to the SSAF, and the Korean delegation will be led by Director Kim Kwang-il of the FSCs Fair Market Division. The FSC and the KAI will attend the SSAF meetings four times annually. In the standard-setting process, authorities will effectively relay various opinions from domestic industries, academia and experts on sustainability disclosure. The first meeting of the SSAF will be held at the ISSB head office in Frankfurt, Germany in the first quarter of 2023, and presumably, the final standards for the general sustainability-related disclosure requirements and the climate-related disclosure requirements that were previously announced in March 2022 as well as the ISSBs future standard-setting directions will be discussed. * Please refer to the attached PDF for details.
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Dec 21, 2022
- FSC Holds Seminar and Unveils Measures to Protect General Shareholders in M&As via Stock Transfer
- The FSC held a seminar with the Korea Exchange (KRX) and the Korea Capital Market Institute (KCMI) on December 21 and announced measures to protect general shareholders in corporate mergers and acquisitions (MAs) via stock transfer. In his opening remarks, FSC Vice Chairman Kim so-young spoke about the purpose of the seminar and suggested the governments policy direction as follows. Summary of Vice Chairmans Remarks Corporate mergers and acquisitions in domestic market mostly take place in the form of stock transfers. However, it has been suggested that ways to protect general investors in that process havebeen inadequate thus far. The European Union and Japan, for example, provide protection for general investors by mandatory bid rules, while the United States protects the rights of general shareholders through the strengthened role of board of directors and the advanced system of civil procedure. As such, when a change in the ownership status of management right takes place, the government plans to grant the shareholders of the acquired company an opportunity to sell their shares to the acquiring company. This will help improve the principle of equal treatment of shareholders by enabling general shareholders to share the control premium of the company just like the controlling shareholder. In the meantime, the government will seek a balanced approach to promoting MAs while protecting general shareholders at the same time. In this regard, authorities will prepare compensatory measures to ensure that there is no weakening of the positive function of MAs, which is creating synergistic effects between businesses. With todays announcement, the new administrations policy initiatives to protect general investors in capital markets have all been introduced. For the measures requiring a legislative process, authorities will prepare relevant bills to ensure prompt implementation. Key Measures I. Background and Overview When an entity acquires control of a listed company thr
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Dec 20, 2022
- Government Approves Revision Bill to Strengthen Rights of General Shareholders in Split-off of Listed Company
- The government approved an amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) at the state council held on December 20. This amendment is a follow-up to the measures to improve protection for general shareholders in IPO of split-off subsidiary announced on September 5. Key Details and Anticipated Effect Until the end of this year, all three layers of general shareholder protection system regarding IPO of split-off subsidiary become established and begin operation. With this system, it is expected that companies will pay sufficient attention to the rights and interests of general shareholders when they pursue a split-off and losses incurred to general shareholders in a split-off of a subsidiary, which has been pointed out repeatedly, will be effectively prevented. a) (Enhanced Disclosure) From October 18 this year, companies seeking to split off a subsidiary disclose their business restructuring plan including the purpose of split-off, anticipated effect, shareholder protection measures and listing plan on their material fact reports. - As a result, general shareholders and investors can get adequate information related to the split-off and make informed decisions at general meetings of shareholders, when exercising the right to request companies to purchase their shares and when making investments. b) (Right to Request Company to Purchase Shares) The amendment approved today grants shareholders, who dissent from the companys split-off decision, a rightto request that company purchase his or her stocks when the companys board of directors reaches a resolution to make a split-off. - If a majority of general shareholders is opposed to the split-off or that a potential drop in company value is triggered, pursuing a split-off in itself can be difficult. Therefore, in essence, listed companies can pursue a split-off only when they prepare shareholder protection measures in place and have convinced general shareholders
