Major Shareholders' 'Evasive Stake Expansion' Blocked... Exchange Strengthens Disclosure of CB Transactions

If CBs Are Acquired Before Maturity and Resold, Disclosure Is Mandatory

Starting next month, listed companies will be required to disclose information when they acquire convertible bonds (CB) before maturity and resell them.

On the 13th, the Korea Exchange announced that it has amended the disclosure regulations for the KOSPI, KOSDAQ, and KONEX markets in this direction. The revised regulations will take effect next month.

Korea Exchange, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

This amendment aims to prevent companies from increasing their shares through loopholes by acquiring CBs before maturity and reselling them to major shareholders without disclosure. Not only CBs but also bonds with warrants (BW) and exchangeable bonds (EB) are included in the mandatory disclosure items.

Failure to comply with this disclosure obligation, reversal of disclosures, or changes of 50% or more in the initially disclosed acquisition or sale amounts will be sanctioned as false disclosure.

Additionally, the Exchange requires that related information must be reported when adjusting the conversion price of convertible preferred stocks (CPS), redeemable convertible preferred stocks (RCPS), and other convertible stocks that can be converted into common stock.

This reporting obligation already applies to the KOSPI market, and with this regulatory amendment, it will be extended to KOSDAQ-listed companies.

Furthermore, to extend the preparation period for English disclosures by KOSDAQ-listed companies, the deadline for English disclosures will be changed from one week to five trading days. This measure is intended to prevent the shortening of the English disclosure deadline and the resulting increased burden on companies when public holidays fall within the period. The KOSPI disclosure regulations were already amended in this direction in March last year.

Also, the deadline for English disclosures of lengthy reports such as sustainability management reports will be extended to within three months for both KOSPI and KOSDAQ.

The Exchange stated, "By expanding the distribution information of CBs and others, we aim to strengthen the market’s monitoring function against major shareholders’ manipulative shareholding increases and provide stronger protection for investors," adding, "We expect that the activation of English disclosures and sustainability management report disclosures by KOSDAQ companies will improve foreign investors’ access to disclosure information."