The government has announced its intention to swiftly implement policy measures within 2026 aimed at preventing actions that undermine corporate value and ensuring respect for shareholder value. As part of these efforts, the National Assembly’s National Policy Committee passed a proposed amendment to the Financial Investment Services and Capital Markets Act (the “FSCMA”), which introduces a “fair value” requirement for mergers involving listed companies (the “Proposed Amendment”), on May 14, 2026, and it will soon be submitted to the National Assembly’s plenary session.

The “Plans to Improve the Capital Market’s Structure for Stabilization,” announced by the Financial Services Commission (the “FSC”) on March 19, 2026, included policies aimed at “preventing the impairment of corporate value, such as the neglect of low stock prices.” Specifically, it introduced improvement measures including: (i) mandating the calculation of fair value and external evaluations during M&A transactions, (ii) inducing companies with low price-to-book ratios to make efforts to enhance their corporate value, and (iii) introducing the disclosure of asset values based on revaluation standards. The Proposed Amendment reflects these initiatives.

Key details of the Proposed Amendment are as follows:
 

• Under the current FSCMA and its Enforcement Decree, when a listed company enters into (i) a merger, (ii) an acquisition or transfer of a significant business or asset, (iii) a comprehensive share exchange or transfer, or (iv) a spin-off or split and merger (each, a “Subject M&A Transaction”) with an affiliate, it must calculate the transaction value based on a market price formula, while an appraisal-based standard applies when a transaction is with an unaffiliated company.
   

• However, the Proposed Amendment repeals the market price formula applied to a Subject M&A Transaction between affiliates, requiring instead that the transaction value be determined as a “fair value calculated by comprehensively taking into account the share price, asset value, earnings value, etc.”
   

• The current FSCMA and its Enforcement Decree mandate that companies “must undergo” an evaluation by an external appraiser regarding matters such as the value of a Subject M&A Transaction. Furthermore, the Regulation on Securities Issuance and Disclosure (the “Securities Disclosure Regulation”) requires an external appraiser’s appraisal opinion to be attached to the registration statement for disclosure.
   

• The Proposed Amendment also explicitly codifies into statutory law this disclosure obligation for an appraisal opinion, providing that violations will be subject to enforcement actions by the FSC.
   

• Under the current Enforcement Decree of the FSCMA, when a listed company pursues a Subject M&A Transaction with an affiliate (an “Affiliate M&A Transaction”), it must obtain the consent of the statutory auditor or the resolution of the audit committee, as applicable, for the selection of an external appraiser.
   

• The Proposed Amendment mandates that in case of an Affiliate M&A Transaction, the statutory auditor or audit committee, as applicable, must itself select the external appraiser, thereby strengthening the authority of the statutory auditor/audit committee.
   

Furthermore, the Proposed Amendment: (i) codifies into law the obligation to prepare and disclose the board of directors’ written opinion prior to any board resolution regarding mergers and similar transactions, (ii) introduces a new obligation to disclose any conflicts of interest involving specially-related parties and the counterparty to a merger between affiliated companies, and (iii) modifies the calculation method for the purchase price where dissenting shareholders have exercised appraisal rights and an agreement cannot be reached, moving away from the previous “market price” standard to a price determined by “comprehensively taking into account the share price, asset value, earnings value, etc.”

The Proposed Amendment goes beyond merely altering the method for calculating merger value. Combined with the amended Article 382-3 of the Korean Commercial Code—which took effect on July 22, 2025 and expanded the scope of a director’s duty of loyalty to include “the company and its shareholders,” while introducing duties to protect the interests of all shareholders and treat them fairly—the Proposed Amendment is expected to substantially broaden the scope of conduct standards imposed on directors during corporate restructuring transactions such as mergers.

Previously, as long as the merger value of a listed company was calculated according to the formula set out in the Enforcement Decree, the room for disputes over its legality was relatively limited. However, following the implementation of the Proposed Amendment, legal disputes are expected to arise regarding whether the board of directors calculated “fair value” that comprehensively considered share price, asset value and earnings value in restructuring transactions, and whether they exerted their best efforts to prevent shareholder losses. In particular, whether a price is “fair” could become a direct subject of review not only in lawsuits on the merits challenging the validity of shareholder resolutions approving the merger, but also at the preliminary injunction stage.

Accordingly, proving that sufficient procedural steps were taken to ensure the fairness of the transaction value during future corporate restructurings will become crucial. In this regard, companies can refer to the “Guidelines on the Standards of Directors’ Conduct in the Context of Corporate Restructuring” published by the Ministry of Justice on February 25, 2026 (Link). As these Guidelines propose (i) the establishment and operation of a special committee, (ii) reviews conducted by independent external experts, and (iii) the provision of comprehensive information to shareholders as measures to enhance fairness, listed companies reviewing or considering restructuring transactions should stay mindful of these legal principles.^[1]

Meanwhile, aside from the matters included in the Proposed Amendment, discussions continue regarding the necessity of amending the FSCMA to introduce a mandatory tender offer rule that includes the sharing of management premiums in M&A transactions, as we explained in a previous newsletter (Link). Furthermore, other significant developments concerning corporate governance reform remain underway, such as the approval of amendments to Korea Exchange regulations for delisting reform measures and preparatory work regarding the ban on double listings following the FSC’s policy announcement. Given these active shifts, keeping track of the overall changes in the capital market environment will be of critical importance.

^[1]   For reference, some of the proposed amendments to the FSCMA included the introduction of approval of disinterested shareholders or the affirmative vote of a majority of minority shareholders, but this was not included in the Proposed Amendment as it was removed during the National Policy Committee’s review process.

[Korean Version]