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Korea’s New Tender Offer Rules: What you need to know about the pending mandatory tender offer rules

2026.11.02

Introduction
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Korea has been reforming its capital markets and corporate governance rules to strengthen minority shareholder protection and make corporate acquisitions more transparent.  As part of this effort, a new mandatory tender offer regime recently advanced through a National Assembly committee.  While its final passage (approval by the National Assembly’s plenary session and subsequent promulgation by the government) has been delayed, there is a ground swell of interest as to what the proposed new rules provide, and how it would affect the capital market and market players. </div>
 
 
1. What is the Proposed New Rule?

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A tender offer is a public offer to buy shares from shareholders, usually at a specified price and during a defined period.  In Korea, a key policy question is when a person acquiring a significant stake in a listed company should be required to offer the same opportunity to other shareholders. 
 
The proposed new rule would amend Korea’s Financial Investment Services and Capital Markets Act (“Capital Markets Act”) to introduce a mandatory tender offer requirement when control of a listed company changes.  The key terms agreed by lawmakers at the committee level are as follows. 
 
<ul>
	<li>25% ownership threshold 
	The rule would generally apply when a buyer, together with specially related parties, holds at least 25% of a listed company’s voting shares and becomes its largest shareholder.  Certain additional purchases by an existing largest shareholder would also be covered. </li>
	<li>Minimum acquisition target: 50% + 1 share 
	The buyer would generally need to make a public offer sufficient to bring its total holding to at least 50% plus one share, after accounting for shares already held.  This is not necessarily an obligation to buy every remaining share. </li>
	<li>Regulated offer price 
	The price floor is to be determined under implementing regulations, taking into account factors including market prices and prices paid in previous acquisitions.  The precise formula depends on the final rules. </li>
	<li>15-day announcement deadline 
	The bill provides for the tender offer announcement to be made within 15 days after the triggering event, subject to the final enacted text and applicable rules. </li>
</ul>
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2. Why is this rule being introduced?

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The reform seeks to address a longstanding criticism of Korean M&A transactions that the controlling shareholder may receive a control premium while minority shareholders receive no equivalent exit opportunity. 
 
More specifically the reform aims to address the following: 
 
<ul>
	<li>Protect minority shareholders by giving them an exit opportunity when there is a control change. </li>
	<li>Improve fairness in M&A by reducing the disparity between controlling and ordinary shareholders. </li>
	<li>Strengthen investor confidence by supporting Korea’s broader capital-market and corporate-governance reforms. </li>
</ul>
 </div>
 
 
3. Who is affected by this new rule?

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The proposed new rule is projected to affect a wide array of persons and entities but most notably the following: 
 
<ul>
	<li>Private equity funds and strategic acquirers as it would have a material effect on financing needs, deal pricing and acquisition structures. </li>
	<li>Controlling shareholders selling a stake as the potential buyers will be subsequently obligated to purchase additional stakes. </li>
	<li>Minority shareholders as it will present potential opportunities to exit during a transaction that triggers change of control. </li>
	<li>Listed companies and their advisers as factors such as transaction timetables, disclosure, due diligence and regulatory compliance will be affected by the reform. </li>
</ul>
 </div>
 
 
4. What are the implications?

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The most important consequence of the reform is that buying control of a Korean listed company could become materially more expensive and legally complex, even if the buyer has already negotiated a purchase price with the controlling shareholder(s). 
 
The proposed amendment provides for criminal penalties of imprisonment of up to five years or a fine of up to KRW 200 million for certain violations, including failing to carry out the required offer or making prohibited off-offer purchases.  The Financial Services Commission may also impose administrative monetary penalties of up to 3% of the total planned tender offer amount (capped at KRW 2 billion) for specified violations, including failure to conduct the required tender offer.  It also provides for voting-rights restrictions in which shares acquired in violation of the rules may lose voting rights and disposal orders in which the Financial Services Commission may order the sale of specified shares on the grounds of violation. 
 
From a financial standpoint a potential buyer may need substantially more committed capital than what a negotiated block purchase would have required.  Potential buyers may need to revisit equity commitments, acquisition debt, cash reserves and funding certainty.  This will result in parties factoring in the mandatory tender requirements in negotiating the purchase price for the transaction. 
 
From a legal standpoint the parties to an acquisition transaction will need to consider, among other things, whether the transaction would trigger the 25% largest shareholder threshold, whether through the current transaction or earlier or subsequent purchases or through related party holdings.  They would also need to consider whether the price to be paid for premium control would require the potential buyer to offer the same price to minority shareholders in the tender and whether any deferred consideration, earn-outs, side payments and other benefits provided to the selling shareholder should be reviewed to assess whether they affect the applicable price calculation.  The transaction documents to be drafted once the amendment proposal is implemented should include the necessary representations and warranties, and covenants and conditions precedent to closing to address these issues. </div>
 
 
5. In Closing

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The proposed mandatory tender offer regime could change the economics and execution of acquisitions of Korean listed companies.  Under the current bill, the amendment would take effect one year after promulgation and apply to share acquisitions made on or after its effective date.  The main legal workstreams are determining whether the trigger applies, financing the additional share purchases, complying with offer-price and timing rules, structuring the transaction documents appropriately, and managing sanctions and transitional risk. </div>

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