Rep. Kim Nam-geun, secretary of South Korea's National Assembly K Capital Market Special Committee, announced three legislative priorities for the second half of the parliamentary session in a recent interview marking the one-year anniversary of Commercial Act revisions. The Democratic Party lawmaker identified mandatory tender offer system implementation, fair value calculation in mergers and acquisitions, and legal prohibition of dual listing as top agenda items. Kim stated the initiatives aim to address shareholder protection gaps in specific cases following last year's Commercial Act amendments that strengthened investor rights. The lawmaker emphasized all three priorities directly relate to resolving Korea Discount factors affecting the nation's capital markets.
Kim Prioritizes Mandatory Tender Offer System for Shareholder Protection
Kim designated mandatory tender offer system implementation as the top legislative priority. The system would require acquirers of listed company management control to make public tender offers for a portion of remaining shareholder stakes, protecting minority shareholder rights. Kim explained that M&A processes historically involved paying high prices only to controlling shareholders while acquiring remaining shares at low valuations, causing significant losses for general shareholders. The lawmaker noted that even the business community no longer strongly opposes the measure, viewing it as a potential defense mechanism against hostile takeovers. The initiative aligns with a national policy agenda of the Lee Jae-myung administration.
Capital Market Act Amendment on Fair M&A Valuation Awaits Plenary Vote
Kim identified fair value calculation in listed company mergers as the second priority, noting the relevant Capital Market Act amendment passed the National Assembly's Political Affairs Committee in May. The lawmaker stated the measure aims to prevent shareholder losses from unfair merger ratios, citing the Samsung C&T-Cheil Industries merger case. Kim said the amendment addresses shareholder protection in conglomerate affiliate mergers and stands ready for plenary session processing. Current Capital Market Act provisions require companies to calculate merger values based on stock prices, which critics argue fails to properly reflect companies' intrinsic value. The lawmaker noted concerns that some controlling shareholders exploit this system to determine merger values in their favor, transferring losses to minority shareholders.
Democratic Party Seeks Legal Ban on Dual Listing Practice
Regarding dual listing, Kim stated the ruling party position differs from the government approach on recent Financial Services Commission guidelines. While the government plans to address the issue through stock exchange listing rule revisions, Kim said the party believes legislative action is necessary. The lawmaker criticized the dual listing practice where companies develop new businesses through technology investment, then spin off and list subsidiaries separately while existing parent company shareholders suffer losses. Kim characterized dual listing as a representative case that has increased distrust in Korean stock markets.
Kim Calls for Clearer Interpretation of 5% Shareholding Rule
Kim emphasized the need for more active institutional investor roles in capital market governance. The lawmaker stated that institutional investors should be able to coordinate their activities, but the Financial Services Commission's interpretation of the 5% rule remains ambiguous. Kim said the Commission must provide clear interpretation and indicated willingness to pursue additional legislation if necessary. The 5% rule requires shareholders holding 5% or more of listed company shares to disclose ownership purposes and stake changes, a provision identified as a constraint on active institutional investor shareholder engagement.
Long-Term Reform and Institutional Investor Action Emphasized
Kim presented long-term institutional reform and market participant implementation as prerequisites for achieving a Korea Premium era. The lawmaker stated South Korea should pursue reforms with a 10-year outlook aimed at growing the stock market three to four times, citing Japan's example. Kim emphasized that legal changes alone are insufficient and require action by market players, specifically highlighting the importance of stewardship code activities by institutional investors including the National Pension Service. In assessing the Commercial Act revision's first-year impact, Kim cited increased trust in Korean stock markets as the most significant achievement, noting growth in domestic investment ratios and improved ability to attract foreign investors. The lawmaker added that companies now recognize changes and find it difficult to make decisions that arbitrarily harm shareholders due to increased investor awareness.
FAQ
What are Rep. Kim Nam-geun's three legislative priorities for South Korea's capital market?
Rep. Kim Nam-geun announced three priorities: implementing a mandatory tender offer system, introducing fair value calculation in mergers and acquisitions, and legally prohibiting dual listing practices. Kim stated all three directly relate to addressing Korea Discount factors.
What is the current status of the fair value M&A amendment?
The Capital Market Act amendment addressing fair value calculation in mergers passed the National Assembly's Political Affairs Committee in May and awaits plenary session processing. The measure aims to prevent shareholder losses from unfair merger ratios by requiring comprehensive consideration of asset values beyond stock prices.
