Financial regulator seeks to allow retail investors to sell shares before M&As

SEOUL– South Korea’s financial regulator said Wednesday it plans to introduce a mandatory takeover bid rule aimed at protecting retail investors in case of a corporate merger and acquisition (M&A).

The rule obligates a takeover bidder to buy shares of its targeted business in the stock market, giving a chance for retail investors to sell their holdings before an M&A. It was first introduced in January 1997 but scrapped about a year later amid criticism that it hampers corporate restructuring by making it hard for a business takeover.

“We will introduce a mandatory takeover bid rule by revising the Capital Market Act in the middle of next year,” the Financial Services Commission (FSC) said.

The FSC said it will offer a grace period of more than one year before enforcing the new rule after the law revision is complete.

The regulator said the rule, if enforced, will be applied to those who acquire more than a 25 percent stake and become the largest shareholder in a listed company. They have to purchase the remainder 25 percent plus one share needed to secure managerial control via the stock market.

The takeover bidder should also pay the same amount of premium it pays to buy the company, it said.

The FSC has pushed to introduce the new rule amid criticism that retail investors are not well protected during corporate takeovers, mostly carried out by share transfer deals in South Korea.

The FSC expects the new rule to help individual investors share the premium paid in the process of an M&A with the largest shareholders and stave off hostile business takeovers.

Source: Yonhap News Agency

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