Amendment to the Capital Markets Act Passed in the National Assembly Plenary Session
Mandatory Submission of Quarterly and Semiannual Reports for Newly Listed Companies
Going forward, investors will be able to check the dividend amount before investing in quarterly dividends. To prevent a repeat of the 'Pado incident,' newly listed companies will be required to disclose not only their business reports but also their most recent quarterly or semi-annual reports.
The Financial Services Commission announced that the amendment to the Capital Markets Act, aimed at improving dividend procedures and corporate disclosure systems, passed the National Assembly plenary session on the 27th.
Recently, improvements in dividend procedures, where the dividend amount is determined first and then the shareholder register is finalized, have been gradually expanded for year-end dividends. However, for quarterly dividends, the Capital Markets Act specifies the dividend record dates as the end of March, June, and September, so a legal amendment was necessary to move away from 'blind dividends.'
This amendment removes the provision that sets the dividend record dates at the end of March, June, and September, allowing companies to designate the dividend record date after the dividend amount is decided, either by board resolution or in the articles of incorporation. The improvements related to quarterly dividend procedures will take effect immediately upon promulgation. The government plans to encourage related organizations and companies to revise their articles of incorporation and improve practices regarding quarterly dividends.
The Financial Services Commission expressed expectations that "the advancement of quarterly dividend procedures could positively influence the activation of medium- to long-term investments aimed at dividends."
Additionally, regarding corporate disclosure, the amendment requires newly listed companies to disclose their most recent quarterly or semi-annual reports in addition to the existing business report to protect investors.
This bill was also prepared as a government proposal in 2021 but failed to pass the National Assembly and was discarded due to the expiration of the session. The necessity to reinforce the bill was raised following the Pado incident this year. Pado entered the KOSDAQ in August 2023 through a technology special listing, surpassing a market capitalization of 1 trillion won, but its stock price plummeted in November of the same year after a delayed disclosure of its quarterly report.
Furthermore, the revised amendment requires that information on the issuance of privately placed convertible bonds and bonds with warrants be disclosed at least one business day before the minimum payment date to protect common shareholders by providing sufficient time.
The penalty cap for violations of large shareholding reporting has been increased tenfold, from one ten-thousandth to one one-thousandth of the market capitalization. The improvements related to corporate disclosure will take effect six months after the law is promulgated.
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