M&A deals to face stricter disclosure obligations

The Financial Services Commission (FSC), the country’s top financial regulator, is pushing for a stronger disclosure obligation in the corporate mergers and acquisitions (M&A) process, aiming to better protect and enhance general shareholders’ rights. The financial authority also plans to impose expanded responsibilities to a corporate board to ensure more transparency in their decision-making process on M&A deals.

These are some of the new regulations announced during Tuesday’s meeting held at the Seoul office of the Korea Exchange (KRX), which was chaired by Kim So-young, the FSC’s vice chief. The FSC has been closely consulting with experts and industry professionals since last May to draw up measures to bring Korea’s corporate M&A regulations more in line with global standards.

“Undertaking M&As is a corporate decision that greatly influences a company’s controlling structure as well as the equity value of the company. Nevertheless, there has been criticism that the voices of general shareholders have not been sufficiently reflected in the M&A process,” FSC Vice Chairman Kim So-young said during the meeting.

He emphasized that due to the lack of timely and sufficient provisions concerning information about the board’s judgment process or the reasons for the M&A, general shareholders are put in a position of information asymmetry. This imbalance in the amount of available information on deals has sometimes led to merger deals that unfairly favor only controlling shareholders at the expense of general shareholders.

Kim added that the M&A measures announced Tuesday are also aiming for what the government has consistently strived for during the past year, which is to improve the shareholder value of Korean stocks.