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Newsletter | December 2013
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CORPORATE |
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Amendment to the Enforcement Decree of the Capital Markets Act and the Financial Investment Services |
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On August 29, 2013, a number of notable amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (the “Amendments”) have been promulgated as follows.
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Investment by Private Equity Funds (“PEF”): Under the Amendments, PEFs may invest in mezzanine bonds, including convertible bonds (“CB”) and bonds with warrants (“BW”) that would (i) account for 10% or more of the total number of outstanding voting stocks through the exercise of CB and/or BW; or (ii) enable the PEF to have de facto control over major management matters based on an investment agreement or through the right to appoint and dismiss officers. |
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PEF’s Reporting Obligations: PEF will now be subject to reporting obligations when taking out loans, issuing guarantees or investing in derivatives. |
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PEF’s Requirement to Register General Partners (“GP(s)”): To qualify for GP registration, a GP must be an entity with (i) an equity capital of KRW 100 million or more; (ii) officers meeting certain qualification standards; (iii) at least one investment professional; and (iv) adequate internal control system to monitor, evaluate and prevent conflicts of interest. |
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No Involvement of Limited Partners (“LP(s)”): LPs cannot exert any influence over GP’s decisions with respect to: (i) selection of a target company or establishment/selection of SPC; (ii) determination of purchase price, timing and purchase method of equity securities in a target or an SPC; or (iii) exercise of voting right to equity securities comprised as assets of the PEF or SPC. |
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Increased Autonomy in Calculating Merger Value: Listed corporations’ merger value can be set within the scope of 10% above or below the arithmetic mean of the closing share price of the most recent month, week and immediately preceding day. In case of non-listed companies, the merger value does not need to reflect a comparative value. |
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