Korean Business Law

Korean Business Law

Elgar Korean Law series

Edited by Hwa-Jin Kim

The approach of the book is two-fold. On the one hand the book offers valuable insight into the fundamental principles of Korean business law, and landmark cases in the field. On the other hand there is extensive analysis of more recent developments and of current issues raised by recent court cases. The book combines coverage of Korean corporate law and Korean financial law and includes detailed examination of corporate law issues such as director liability, minority shareholder protection, and the dynamic practice area of mergers and acquisitions, and of financial law topics, including private equity, structured finance and foreign financial institutions.

Chapter 12: Issuance of New Shares as a Defensive Mechanism Against Hostile Takeover

Sang Gon Kim

Subjects: asian studies, asian law, law - academic, asian law


12. Issuance of new shares as a takeover defense and countermeasures Sang Gon Kim I. INTRODUCTION In a hostile takeover situation, the most important issue for both the bidder and target is securing friendly shares. This is because, in order for a hostile takeover to succeed, the bidder’s designees must be elected as the directors of the target and such election is decided by votes at the meeting of shareholders. Generally speaking, there are three ways of securing friendly shares in a hostile takeover situation: (1) proxy contest, (2) sale of treasury shares to friendly shareholders and (3) issuance of new shares to friendly shareholders. Proxy contests in listed companies are regulated by the Financial Investment Services and Capital Markets Act (“FSCMA”).1 There are numerous legal problems regarding the methods for soliciting proxies and for validating power of attorneys at meetings of shareholders. Furthermore, there still remain concerns of proxy contests being handled in favor of existing shareholders who have the power to call meetings of shareholders.2 Regarding the sale of treasury shares and issuance of new shares, since they are subject to approval of the target’s board, in practice they are used The Securities and Exchange Act (“SEA”), which was the relevant law, was abolished with the promulgation of the FSCMA on February 4, 2009. The special provisions under the SEA relating to listed companies have been incorporated in the Commercial Code and the rest have been incorporated in the FSCMA. As such, certain provisions under the abolished...

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