The Democratic Party of Korea said it is reviewing a flexible purchase ratio for the mandatory tender offer system in connection with amendments to the Financial Investment Services and Capital Markets Act centered on introducing the mandatory tender offer regime. It appears the party will draw up a plan to raise the ratio above the government's previously pushed "50% + one share."

The ruling party and government say they are reviewing a plan to flexibly adjust the purchase ratio in connection with introducing a mandatory tender offer system. Oh Ki-hyeong, Special Committee Chairperson, delivers his opening remarks during a meeting between the Democratic Party of Korea KOSPI5000 Special Committee·Economic Criminal Penalty and Civil Liability Rationalization TF and eight economic organizations at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on the afternoon of the 9th. /Courtesy of News1

Oh Ki-hyeong, chairperson of the Democratic Party's "KOSPI 5000 Special Committee," met with reporters at the National Assembly on the 4th after a closed-door ruling party–government consultation with the Ministry of Economy and Finance, the Ministry of Justice, and the Financial Services Commission (FSC), and said, "Both the government and the party agree on introducing a mandatory tender offer system," adding, "I cannot share specific measures, but the idea is to be a bit more flexible than the existing government plan. The National Policy Committee, the competent standing committee, will make final additional adjustments."

The mandatory tender offer system requires that when someone becomes the largest shareholder by acquiring 25% or more of a listed company's equity, they must also purchase the remaining shares of minority shareholders at the same price as the existing controlling shareholder. The aim is to allow minority shareholders to enjoy the "control premium," a benefit that had gone mainly to major shareholders in mergers and acquisitions (M&A).

In 2022, the Financial Services Commission (FSC) pushed a system requiring a mandatory tender offer for "50% + one share" or more to become the largest shareholder by securing 25% or more of a listed company's equity. In contrast, the Democratic Party has introduced multiple bills for a "100% mandatory tender offer" that would require an acquirer seeking to buy 25% or more equity to purchase all remaining shares from minority shareholders. Given concerns that sharply raising the mandatory purchase ratio could shrink the M&A market, it appears the party intends to craft a compromise by reflecting both the FSC plan and proposals from ruling party lawmakers.

The ruling party and the government also discussed directions for tax code revisions following the Democratic Party's recently released third amendment to the Commercial Act, which defines the nature of treasury shares as "capital," not an "asset."

Chairperson Oh said, "Right now, the tax system proceeds on the premise that treasury shares are an 'asset,' but there will be a conceptual change in the tax code in the future," adding, "We will discuss it again as soon as the Ministry of Economy and Finance (MOEF)'s practical outsourced review results come out."

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