As outlined in our previous newsletters (linked below), regulations regarding dividend distribution procedures continue to get amended to promote capital market efficiency, information transparency, and corporate governance of listed companies. A key focus of the updates has been to push the record date for dividend payment to after the determination of the dividend amount, for greater transparency and reduced investor uncertainty around the ex-dividend process.

In January 2023, the Financial Services Commission (“FSC”) and the Ministry of Justice announced their “Initiative to Improve Dividend Distribution Procedures in Line with Global Standards” (Link). In October 2023, the FSC and the Korea Exchange (“KRX”) amended their Guidelines on Corporate Governance Disclosure to reflect the new standard (Link). In December 2023, the Financial Supervisory Service (“FSS”) issued guidance on preparing for the implementation of the aforementioned initiative including revising model articles of incorporation for listed companies (Link). Subsequently, in December 2024, the FSS announced amendments to business report forms to require companies to disclose in detail their progress in improving dividend distribution procedures (Link).

Now, through the amendment to the Financial Investment Services and Capital Markets Act (“FSCMA”), the enhancements made to the procedures for regular dividend distribution at general shareholders’ meetings have been applied to the procedures for quarterly dividend distribution as well.

Previously under Article 165-12 of the FSCMA, listed companies with an annual settlement period could distribute quarterly dividends by board resolution if provided for in their articles of incorporation. Quarterly dividends would be distributed to shareholders as of the end of March, June, and September upon the board resolving for such quarterly dividends within 45 days of such quarter’s end. However, this meant that dividend amounts would only be determined after the record date for the quarterly dividend payment had passed, raising concerns over dividend information transparency.

To address the issue, on December 27, 2024, amendments to the FSCMA were adopted at the plenary session of the National Assembly, removing the requirement to set the record date for dividend payment as of the quarter end. Instead, companies are permitted to set such date by board resolution or in the articles of incorporation to a date following the determination of the dividend amount. Accordingly, dividends would be determined at a board meeting held within 45 days of the end of a quarter, after which, investors would have until the record date for dividend payment following such meeting to make their investment decision. Additionally, the deadline to make dividend payments has also been extended from within 20 days of board resolution to within one month of board resolution, or as otherwise may be stipulated in the articles of incorporation or by board resolution.

Previously under the FSCMA, corporations submitting a business report for the first time were required to also submit a business report for the immediately preceding year, but were not required to file semi-annual or quarterly reports for previous periods. To address concerns that any gaps in financial information disclosure could impede investor decision-making, the amended FSCMA now mandates that corporations newly required to submit business reports file a semi-annual or quarterly report for the immediately preceding period with the FSC and the KRX within five days of becoming subject to the reporting requirement. The amendment addresses and alleviates an operational deficiency in the current corporate disclosure system.

Furthermore, for corporations subject to reporting requirements, the issuances of convertible bonds must now be disclosed in a material update report with the FSC by the earlier of (i) the day after the decision to issue the convertible bond or, (ii) one week before the payment due date for the issuance.

The amended FSCMA will generally take effect six months from promulgation, provided that the provisions related to quarterly dividends will take effect immediately.

Listed companies and their investors should closely monitor these developments on quarterly dividend distribution procedures and the tightening of other disclosure requirements. This issue is especially relevant in implementing 2025 corporate value-up programs, establishing dividend policies, conducting general shareholders’ meetings and board of directors’ meetings for dividends, and issuing convertible bonds.

[Korean Version]