Skip Navigation

Legislative Trends in Corporate Governance, Including Strengthened Disclosure Requirements under the FSCMA and FTL


The Financial Services Commission (the “FSC”) seeks to strengthen the disclosure requirements for the listed companies in addition to restricting increase of the major shareholders’ shareholding through convertible bonds.  Moreover, the Korea Fair Trade Commission (the “KFTC”) has strengthened the disclosure requirements for overseas affiliates in line with the enforcement of the amended Monopoly Regulation and Fair Trade Law (the “FTL”).

As the trend to strengthen disclosure requirements continues, we advise the listed companies and the companies belonging to business groups subject to public disclosure to closely monitor changes in the regulations.  Furthermore, in their issuance of convertible bonds, the listed companies need to be aware of the new regulations to comply with them.  Please see below for the detailed discussion.

1.   Proposed Amendment to the Financial Investment Services and Capital Markets Act (the “FSCMA”) to Strengthen Disclosure Requirements

The key terms of the proposed amendment to the FSCMA and relevant regulations are summarized as follows:

(1) Reinforcement of surcharge imposed for violation of the duty to report large shareholding (“5% Report Obligation”)

The maximum surcharge for violation of the 5% Report Obligation by the listed companies will be raised from 1/100,000 to 1/10,000 of the market capitalization of such companies.  Further, in line with raising the level of sanction, a listed company whose market capitalization is less than KRW 100 billion will be deemed to have a market capital of KRW 100 billion in calculating such surcharges. 

(2) Strengthened disclosure requirements for privately placed convertible bonds and bonds with warrants

In relation to the issuance and subscription of privately placed convertible bonds or bonds with warrants, the disclosure requirements will be strengthened to require the issuing company to disclose the Report on Material Facts at least one week prior to the closing date of such subscription.

(3) New requirement to submit the semi-annual or quarterly report of the immediately preceding six months for newly listed companies 

Under the current FSCMA, a newly listed company is not required to submit a semi-annual or quarterly report for the quarter immediately preceding the listing date, so the investors may not be provided with the financial information of the company for up to six months.  To address such issues, a newly listed company will be required to submit a semi-annual or quarterly report of the immediately preceding six (6) months of the listing date. 

(4) New disclosure requirements regarding perpetual bonds

While the issuance of perpetual bonds was not subject to the scope of the Report on Material Facts, the new requirement will be added to submit the Report on Material Facts by one day after the resolution date for the issuance of perpetual bonds. 

(5) Improvement of the standards for imposing surcharges on listed companies for violation of disclosure requirements 

Under the current laws and regulations, there can be circumstances where the amount of surcharges imposed on smaller-sized listed companies is less than that imposed on the private companies.  In order to enhance the effectiveness of surcharges for violation of the disclosure requirement, the relevant surcharge amount will be adjusted from KRW 1 billion to KRW 2 billion for the listed companies, and the upper limit of surcharge for private companies will be lowered to KRW 1 billion. 

2.   Amendments to the Regulations on Issuance of Securities and Disclosure

The key terms of the Regulation on Issuance of Securities and Disclosure which became effective from December 1, 2021, are summarized as follows:

(1) New limit on the grant of call options upon issuance of convertible bonds by a listed company and disclosure requirement for such grant 

In case a listed company issues convertible bonds, call option that can be granted to the company’s largest shareholders or related parties can only be exercised within the shareholding ratio held by such largest shareholder or related party at the time of the issuance of the relevant convertible bonds.  In addition, such call option grantees and the number of shares for conversion should be disclosed. 

(2) Obligation to increase conversion price in case of increase in stock price

For privately placed convertible bonds issued by listed companies, if the stock price rises after the fall of the stock price which results in downward adjustment (refixing) of the conversion price of such bonds, the conversion price should be re-adjusted upward, and the conversion price reflecting such upward adjustment should not exceed the initial conversion price.

3.   Proposed Amendments to the FTL and its Subordinate Regulations

According to the FTL and regulations on disclosure of important matters of the companies belonging to the business groups subject to public disclosure (the “Disclosure Regulations”), which will be effective from December 30, 2021, a member of a business group subject to public disclosure must disclose the below items with respect to (i) a foreign affiliate in which a specially-related party (refers to the Same Person under the FTL (i.e. the group head) and its family members only) holds 20% or more shareholding, either alone or jointly with other specially-related parties; and (ii) a foreign affiliate that directly or indirectly holds the shares of a domestic company which belongs to the business group subject to public disclosure, and such disclosure shall be made once a year by May 31 of each year: 

For both (i), (ii)
  • General information of the foreign affiliate, including its name, representative director, country of incorporation, date of incorporation, and details on the business
  • Status of Shareholding 
Additionally for (ii)
  • Status of investment in affiliates
  • Status of cross-shareholding in which at least one foreign affiliate is included 


In relation to the business of the listed companies and business groups subject to public disclosure, we would recommend taking precautionary measures, such as learning and understanding the amendments to the Regulation on Issuance of Securities and Disclosure and FTL, whose effective date is imminent, and organizing a management and inspection system to ensure compliance with the amended regulations.

In addition, the proposed amendments to the FSCMA and its subordinate statutes, which would reinforce the disclosure requirements, will be finalized through a series of procedures, including review by the Ministry of Government Legislation, deliberation by the State Council, approval by the President, and deliberation and resolution by the National Assembly.  Therefore, we would recommend monitoring the progress and final outcome of the legislation.