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Newsletter | February 2016, Issue 1
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CORPORATE
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Latest M&A Invigoration Plan Update – The Korean National Assembly Passes the Amendment to the Korean Commercial Code
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On October 6, 2014, as part of the government’s “M&A Invigoration Plan”, a bill to amend the Korean Commercial Code (the “Amendment”) was submitted to the National Assembly. And on November 12, and December 1, 2015, the National Assembly passed the Amendment. It is slated to take effect on March 2, 2016.
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Based on our review and analysis, we find the following to be the key components of the Amendment:
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Items
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Contents
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Introduction of Triangular Share Exchange
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In a triangular share exchange, shareholders of the target company13 would receive shares of the acquiring company’s parent in exchange for the target company’s shares.
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As a result, a reverse triangular merger through triangular share exchange is now permissible.
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Introduction of Triangular Spin-Off Merger
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In a triangular spin-off merger, the shareholders of the target company that is being spun off receives shares of acquiring company’s parent in exchange for the target company’s shares.
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Clarification on Assumption of Liabilities by a Spun-Off Company
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The parties are now allowed to agree to specify the scope of liabilities that will be assumed by the newly spun-off company in the spin-off plan.
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This has the effect of reducing the risk of the newly spun-off company being liable for contingent liabilities.
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Introduction of Simplified Business and Asset Transfer
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If certain conditions are met, the Amendment permits the board of directors to grant corporate approval for business transfers and asset transfers without having to obtain a shareholders’ resolution.
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Relaxation of Requirements Governing Small-Scale Share Exchanges
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The Amendment relaxed the requirements governing small-scale share exchange.
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Now, the threshold for small-scale share exchanges and small-scale mergers is the same - 10% of the total issued shares (previously 5%).
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Clarification on Standard for Small-Scale Mergers
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The Amendment clarifies that numbers of both newly issued shares and treasury stocks being transferred in a merger should be counted in determining whether the number of shares reaches the 10% threshold of the total issued shares to qualify the merger as a small-scale merger.
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Clarification on Non-Voting Stock Shareholders’ Appraisal Rights
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The Amendment specifies that the dissenting holders of non-voting stocks may also exercise appraisal rights.
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Key Implication:
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We expect that the Amendment will likely invigorate corporate restructurings and M&A transactions in Korea.
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The Amendment will enable creative corporate restructurings of and investments in companies by introducing various new methods of mergers and acquisitions. Additionally, the Amendment clarifies areas that has been inviting different interpretations of the law by statutorily promulgating the clarifications into law.
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Upon a comprehensive share exchange, the target company would become a wholly-owned subsidiary of the acquiring company.
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Back to Main Page
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If you have any questions regarding this article, please contact below:
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For more information, please visit our website:
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