Even 1% Treasury Shareholding Now Requires Biannual Disclosure... Effective from the 30th

Cabinet Approves Amendment to Capital Markets Act Enforcement Decree
Expanded Disclosure Requirements and Frequency; Heavier Penalties for Violations
Serious Industrial Accident Occurrences and Responses Added to Disclosure Items

Starting from December 30, listed companies holding 1% or more of their own shares will be required to disclose the status of their holdings and plans for disposition every half-year. In addition, they must also publicly compare the previously disclosed disposition plans with the actual implementation status. Financial authorities have also added the occurrence of serious accidents and corresponding response measures as new disclosure items in business reports and semiannual reports, in order to strengthen the management of financial risks related to major industrial accidents.

On December 23, the Financial Services Commission announced that the Cabinet had approved the amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act, which includes these changes. The main purpose of this amendment is to improve the disclosure system so that listed companies can voluntarily utilize treasury shares to enhance shareholder value and for other purposes. In relation to this, on December 3 and 17, the Financial Services Commission also approved amendments to the Regulations on Issuance and Disclosure of Securities and the Regulations on Capital Market Investigation, respectively.

The amended enforcement decree and regulations will take effect from December 30, together with the revised guidelines for the preparation of corporate disclosure forms that specify the relevant templates. Listed companies must also reflect these changes in their 2025 business reports.

Previously, listed companies were required to make disclosures only once a year if they held 5% or more of their total issued shares as treasury stock. However, going forward, if a company holds 1% or more, it will be required to disclose the status, purpose, and disposition plans of its treasury shares twice a year, including in the semiannual report. The disclosure form has also been revised to allow for more detailed disposition plans, requiring companies to describe their specific plans for the next six months in a tabular format.

Additionally, the amendment requires companies to compare the previously disclosed treasury share disposition plan with the actual implementation status over the past six months and disclose this in both the business report and the semiannual report. If there is a difference of 30% or more between the plan and the actual implementation, the reasons for the discrepancy must be explained in detail.

A basis has also been established for imposing aggravated penalties if a listed company repeatedly violates disclosure requirements related to the acquisition, holding, or disposal of treasury shares. There have been repeated cases of disclosure violations, such as omitting counterparties or failing to include important information when disposing of treasury shares, but these often ended with voluntary corrections, leading to criticism that the effectiveness of sanctions was insufficient.

Accordingly, the amendment actively utilizes a variety of sanction measures for treasury share disclosure violations, such as recommending the dismissal of executives, restricting securities issuance, imposing fines, and criminal penalties. If violations are repeated, aggravated penalties will be imposed to ensure that the purpose of imposing disclosure obligations is effectively achieved.

Regular disclosure requirements related to major industrial accidents have also been strengthened. Previously, business and semiannual reports only included information on criminal and administrative actions related to such accidents, without disclosing the actual occurrence. Going forward, companies will be required to disclose the overview of the incident, the extent of the damage, response measures, and future outlook.

In addition, the amendment requires that, during mergers, significant transfers or acquisitions of business or assets, or comprehensive exchanges or transfers of shares, not only the explanations provided by management to the board of directors but also the specific details discussed by the board must be included in the board opinion statement and disclosed at each point a board resolution is made.

An official from the Financial Services Commission stated, "This amendment to the enforcement decree is related to National Policy Task 47-1, 'Improving Corporate Governance to Enhance Shareholder Value,' and with this institutional improvement, a corporate management culture centered on shareholder value will be further strengthened."

The official added, "We expect that information asymmetry between controlling and minority shareholders will be reduced, and companies will increasingly consider the impact on minority shareholders and other investors in their decision-making processes. We also anticipate that more listed companies will use treasury shares as a means of shareholder return for the benefit of all shareholders, rather than individual ones." As of November, the total amount of treasury shares retired reached approximately 20.7 trillion won, already surpassing the total amount retired in 2024, which was 13.9 trillion won.