Moving forward, fair value rather than market price will be applied when calculating merger prices, blocking incentives for controlling shareholders and others to engage in stock price suppression.

The Financial Services Commission announced today (the 20th) that the amendment to the Capital Markets Act featuring these provisions has passed the plenary session of the National Assembly.

This amendment stipulates that when determining prices for mergers, divisions, and comprehensive stock exchanges, a fair value that comprehensively considers market value, asset value, and earning power must be applied.

Previously, because the merger prices of listed companies relied solely on market prices, there had been criticism that controlling shareholders and others intentionally chose periods when market prices were undervalued to push forward with mergers or engaged in stock price suppression in order to create favorable transaction conditions.

The intent is to calculate the actual intrinsic value of a company by reflecting various factors in addition to market price.

In addition, the method for calculating the appraisal rights price for shares of shareholders who oppose mergers and other restructuring has been revised so that an amount reflecting market value, asset value, and earning power is presented to shareholders.

The amendment also strengthens procedural safeguards.

For mergers between affiliated companies, it requires additional disclosure of specific conflicts of interest between related parties and the counterpart corporation, such as debt guarantees, provision of collateral, and concurrent holding of executive positions.

Following government forwarding, State Council deliberation, and other procedures, the amendment will take effect three months after its promulgation.

(Photo: Yonhap News)