Discussions on the Korean version of the Bear Hug Act are expected to intensify at the Policy Affairs Committee subcommittee next month. Against a backdrop of opposition from the business community, work is expected to proceed on finalising the review schedule and scope of application.
Discussions are expected to intensify next month at the Policy Affairs Committee's bill subcommittee over the proposed introduction of what is known as the Korean version of the Bear Hug system, under which a target company's board would disclose the details considered and the basis for its decision when the company receives a takeover proposal. The Democratic Party of Korea said it is coordinating detailed standards with South Korea's Financial Services Commission, with November as the target.
The bill is taking shape as an amendment to the Capital Markets Act sponsored by Democratic Party lawmaker Oh Gi-hyeon (오기현). It would require companies to disclose, in a major-issue report, the details of a takeover proposal that could affect shareholder value and their plans for further consideration, and would also make it mandatory for the board to state its opinion.
The government plans to establish the criteria for disclosures through a government ordinance. The government and the ruling party intend to seek passage of the bill within the year while gathering additional public views through hearings, but many observers believe cooperation from the opposition will be critical.
Market participants point out that the price offered in a takeover proposal could become a new indicator of corporate value. At the same time, concerns have been raised about the impact on small and medium-sized companies and the need to strengthen preparations for hostile M&A, prompting calls for consideration of supplementary legislation.