South Korea Moves to Require Public Disclosure of Unsolicited Takeover Bids
The government and ruling Democratic Party agreed to pursue legislation this year requiring prospective corporate buyers to disclose unsolicited takeover offers publicly, a change intended to make acquisition approaches more transparent and support capital-market activity.
South Korea’s government and ruling Democratic Party agreed Tuesday to introduce a public-disclosure framework for unsolicited corporate takeover bids by the end of this year, as policymakers seek to increase transparency and activity in the country’s capital market.
Rep. Oh Gi-hyoung, who chairs the Democratic Party’s Special Committee on K-Capital Market, said the panel would accelerate work on an amendment to the Capital Market Act. The proposed change would establish what is commonly called a “bear hug” system, under which a prospective acquirer makes its offer public and presses the target company’s board to consider the proposal and state its position.
The agreement emerged from a working-level policy consultation between the government and the ruling party’s capital-market committee at the National Assembly in Seoul. The participants set an objective of introducing the framework within the year, indicating that lawmakers intend to move the proposal through the legislative process on an accelerated timetable.
Under the approach described Tuesday, a company seeking an acquisition without an invitation from the target would have to publicly disclose details of its offer. That requirement would bring an unsolicited approach into public view rather than leaving the proposal solely in private discussions between the bidder and the target’s leadership. It would also require the target board to confront a formal offer and communicate its position.
The measure is aimed at revitalizing South Korea’s capital market. A clearer process for unsolicited bids could give shareholders more visibility into potential changes of control and the terms being presented to a company’s board. Public disclosure could also make it easier for investors to assess how directors respond when an outside buyer expresses interest.
Important details will depend on the wording of the Capital Market Act amendment, including what information bidders must reveal and how the disclosure process will operate. Tuesday’s agreement establishes the policy direction, while the legislative text and its consideration by the National Assembly will determine the final rules.
If enacted, the system would add a new transparency mechanism to South Korea’s takeover market and place unsolicited acquisition proposals under greater public scrutiny. The government and ruling party now face the task of converting their agreement into legislation before their year-end target.