Korea Proposes Capital Market Revisions on Treasury Shares

FSC Seeks Public Input on Amendments to Financial Investment Services and Capital Markets Act

The Korean Financial Services Commission (FSC) has announced a legislative pre-announcement for a partial amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FISCMA). This proposed revision aims to align current financial regulations with recent changes to the Commercial Act, particularly concerning how companies manage and disclose their treasury shares. The public is invited to submit opinions on the draft amendment until May 11, 2026.

The primary driver for these changes is the recently revised Commercial Act, which took effect on March 6. Under the new commercial law, all stock companies are generally required to cancel any acquired treasury shares (shares repurchased by the company itself) within one year of acquisition. Furthermore, the issuance of exchangeable bonds that are based on a company’s own treasury shares is now prohibited. The proposed amendments to the FISCMA Enforcement Decree seek to ensure consistency and coherence across the legal framework governing these financial instruments and corporate actions.

Key proposed changes include:

Treasury Share Trust Contracts: Regulations for trust contracts used to acquire treasury shares will be updated. The revised rules will prohibit the disposal of treasury shares during the trust contract period and mandate their immediate return to the settlor (the company) upon contract termination or cancellation. Consequently, any existing provisions that assumed the disposal of treasury shares within such contracts will be removed.
Exchangeable Bonds: Provisions related to exchangeable bonds, which are bonds that can be exchanged for shares, will be deleted when they are linked to a company’s own treasury shares, reflecting the Commercial Act’s new prohibition.
Expanded Disclosure: The obligation to disclose treasury share holdings and disposal plans will be significantly expanded. Previously, this applied only to listed companies holding 1% or more of their own shares. Under the new amendment, this disclosure requirement will apply to all listed companies, in line with the Commercial Act’s mandate for all stock companies (both listed and unlisted) to prepare such plans.
Stock Appraisal Rights: The regulations will specify the disposal period for treasury shares acquired through the exercise of stock appraisal rights. This ensures that when dissenting shareholders demand that a company buy back their shares, any acquired treasury shares are subject to the Commercial Act’s principle of cancellation within one year or disposal only with shareholder approval and according to a specific plan.

Individuals, organizations, or institutions wishing to submit their opinions on the proposed amendments must do so by May 11, 2026. Opinions can be submitted online via the Integrated Legislative Pre-announcement Center, a government portal for public consultation, at http://opinion.lawmaking.go.kr. Alternatively, written feedback can be sent directly to the Financial Services Commission.

When submitting an opinion, please include whether you support or oppose the amendment (providing clear reasons for opposition), your full name (or organization name and representative’s name for groups), your address, and phone number, along with any other relevant comments. Submissions can be sent by email to minsu0625@korea.kr or by postal mail to the Financial Services Commission, Government Complex Seoul, 209 Sejong-daero, Jongno-gu, Seoul 03171. For more detailed information on the proposed amendment, the FSC website (http://www.fsc.go.kr) offers additional resources under its ‘Knowledge Hub/Legal Information/Legislative Pre-announcement’ section.

Source: 법제처 — Original Article (Korean)