As outlined in our previous newsletter (Link), under the recent third amendment to the Korean Commercial Code (the “KCC”), companies must, in principle, cancel their treasury shares within one year of acquisition (or, for treasury shares acquired prior to the effective date of the amendment, within 18 months). If the exceptional use of treasury shares is necessary—such as for employee compensation purposes or disposal to a third party for a bona fide business purpose—companies must prepare a treasury share holding and disposal plan and obtain shareholder approval at a general meeting. Disposal to a third party for a business purpose also requires express authorization in the articles of incorporation (“Articles”). Accordingly, at their 2026 annual general meetings of shareholders, a significant number of listed companies submitted to shareholders and passed resolutions on (i) proposed amendments to their Articles regarding the holding and disposal of treasury shares and (ii) agenda items to approve the relevant holding and disposal plans.
In this regard, the Financial Services Commission (the “FSC”) prepared and announced for public comment proposed amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (the “FSCMA”) and the Regulations on Issuance and Disclosure of Securities (the “Regulations”), with a view to ensuring that the purposes of the amended KCC are properly implemented (link). Under the proposed amendments, the FSC plans to (i) expand the scope of companies subject to disclosure obligations with respect to treasury share holdings and disposal plans to all listed companies, and (ii) refine the rules regarding trust agreements involving treasury shares, the issuance of exchangeable bonds backed by treasury shares, and on-market sales, among other matters. The details are as below. The notice period runs from March 31, 2026 to May 11, 2026, and the amendments are expected to take effect following review by the Ministry of Government Legislation and resolution by the Vice-Ministerial Council and the State Council.
First, the disclosure requirement on treasury share holdings along with disclosure requirements on related disposal plans—previously limited to listed companies holding 1% or more of their own issued shares—will be expanded to apply to all listed companies.
As previously explained (Link), under recent amendments to the FSCMA and related rules, a listed company holding 1% or more of its own issued shares must disclose its (A) treasury share holdings and (B) related disposal plans twice a year (prior to the amendments, the disclosure obligation applied once a year to listed companies holding 5% or more of their own issued shares). Under the current proposed amendments, the disclosure obligation will be expanded to cover all listed companies. This is intended to ensure that investors and minority shareholders receive more detailed disclosures, such as the company’s actual progress in implementing its treasury share holding and disposal plan approved at a general meeting of shareholders under the amended KCC.
Second, to improve consistency with the amended KCC, the proposed amendments strengthen the regulatory framework applicable to trustees and refine the rules on exchangeable bonds backed by treasury shares and on-market sales.
In line with the amended KCC’s policy of restricting disposal of treasury shares, the FSC plans to amend the Enforcement Decree of the FSCMA and the Regulations to prohibit trustees from disposing of treasury shares during the term of a trust agreement, and to repeal in full the provisions governing the issuance of exchangeable bonds backed by treasury shares – this is to reflect the fact that such exchangeable bonds are no longer allowed to be issued. In addition, the FSC plans to restrict market sales (i.e., sale methods involving the disposition of treasury shares to an unspecified number of buyers), while maintaining the existing regulatory framework for off-hours block trades where the counterparty is identified.
In addition, Article 165-4 of the FSCMA and Article 176-7 of the Enforcement Decree currently require a listed company to dispose of treasury shares acquired as a result of the exercise of appraisal rights within five years from the date of acquisition, an issue that has been debated following the amendment of the KCC. The FSC plans to enhance consistency across the regulatory framework by requiring the disposal of such treasury shares within the holding period set out in a listed company’s treasury share holding and disposal plan under the KCC.
In addition to the FSC’s proposed amendments to the Enforcement Decree of the FSCMA and related rules following amendment of the KCC, careful attention should be paid to the Korea Exchange’s Guidelines for Corporate Value-Up Plans and accompanying commentary, which operate as soft-law standards from listed company corporate governance and investor relations perspectives. In particular, to promote broader market adoption of advanced dividend procedures, the “improvement of dividend procedures” item has been added as an example of a non-financial metric that may be used in the process of assessing current status, setting targets, and formulating a “Value-Up Plan” for disclosure. In addition, the Korea Exchange’s guidelines incorporate key points from the Ministry of Justice’s guidelines on directors’ standards of conduct in corporate reorganizations, announced on February 25, 2026 (which we previously described (link)), so that such points may be used in public disclosure of Value-Up Plans.
The strengthening of disclosure regulations under the FSCMA relating to treasury shares and revisions to the Korea Exchange’s Guidelines for Corporate Value-Up Plans described above are closely interrelated and are likely to become key issues in listed companies’ shareholder return practices and their shareholder communications through investor relations and disclosures. In particular, further institutional changes may follow given regulations on treasury shares continue to tighten—such as the expansion to all listed companies of the application of the disclosure requirement with respect to treasury share holdings and the disclosure requirement of related disposal plans—and as there are ongoing discussions in the market and academia regarding the need to refine specific regulations on the procedures for disposals of treasury shares to better reflect the intent of the amended KCC. These developments may therefore need to be taken into account in a listed company’s disposal of treasury shares and shareholder return process.
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