As the government and the ruling party push for legislation within the year to introduce a "Korean-style bear hug rule," it has been confirmed that a commissioned report by the Financial Supervisory Service includes proposals not only to mandate board opinion statements on tender offers but also to require public responses from acquirers. Both the currently proposed bills and the report share the same direction in that they aim for boards of directors to review acquisition proposals and disclose their positions to shareholders. The report further proposes public questions from target companies, answers from tender offerors, and requests to modify or extend the tender offer period under certain circumstances, drawing attention to whether these will be reflected in upcoming legislative discussions.
Through the office of Democratic Party of Korea lawmaker Park Hong-bae, a member of the National Assembly's Political Affairs Committee, MoneyToday obtained on the 14th a commissioned report by the Financial Supervisory Service titled "Improvement Measures for Recent Control Disputes," which includes such tender offer improvement proposals. The report was submitted to the Financial Supervisory Service by the Capital Market Institute in November last year and consists of 142 pages. While reviewing systems related to control disputes, it addressed information disclosure during the tender offer process and the role of boards of directors.
The report's proposals directly align with the "Partial Amendment Bill to the Capital Markets Act and Financial Investment Business Act" jointly introduced on the 3rd of last month by Oh Ki-hyung, Democratic Party of Korea, chairman of the K-Capital Market Special Committee. This amendment bill, known as legislation to introduce a Korean-style bear hug rule, includes provisions to amend Article 138, which stipulates opinion statements regarding tender offers. While current law leaves opinion statements to the discretion of the target company, the amendment requires boards of directors to necessarily disclose their opinions through independent and professional judgment procedures in cases of tender offers that have significant impact on shareholders, as prescribed by presidential decree.
A bear hug is an acquisition strategy that pressures the management of a target company by offering a high acquisition price. When an acquirer initiates a tender offer by presenting terms such as price and duration to purchase shares, shareholders must decide whether to sell. The legislation for a Korean-style bear hug aims to help shareholders' choices by ensuring boards of directors do not remain silent but explain their judgments. The Financial Supervisory Service's commissioned report also starts from the premise that the board's duty to explain regarding tender offers should be strengthened.
The report diagnosed that under the current system, opinion statements on tender offers are not a legal obligation, so the role and responsibility of boards of directors have not been sufficiently established. Accordingly, it proposed amending the Capital Market Act or subordinate regulations to mandate disclosure of the company's opinions (support, opposition, neutrality) and their basis in tender offer situations, and to require board resolutions before issuing opinion statements.
In particular, the report included a proposal for boards of directors to request information necessary to disclose their positions from acquirers, allowing shareholders to also verify those responses. This involves target companies publicly asking certain questions to tender offerors and requiring tender offerors to answer publicly. It also presented a plan to allow target companies to request changes or extensions to the tender offer period under certain circumstances. Public Q&A and requests for period modification or extension are not included in the current Oh Gi-hyeong (Rep.) bill.
The securities industry cites the board's opinion statement during the SM Entertainment control dispute as a representative case. The SM Entertainment board expressed opposition to HYBE's 2023 tender offer, while it did not issue an opinion on Kakao's tender offer, leading SM shareholders to read the message that "the company (SM) sided with Kakao."
Disclosures of opinion statements regarding tender offers have also increased this year. According to the Financial Supervisory Service's electronic disclosure system, opinion statements on tender offers increased from 3 cases in 2024 and 2 cases in 2025 to 10 cases so far this year. The board of Golfzon Holdings disclosed its support for the tender offer proposal by SJ Investment Holdings Co., Ltd. last August, while The Bizon expressed support for Dronikum Co., Ltd.'s second tender offer last April and recommended shareholders to "participate in the tender offer."
The office of Oh (Chairman), who jointly introduced the bear hug rule legislation, also plans to review the Financial Supervisory Service's commissioned report during the legislative process. The financial authorities are also expected to refer to the commissioned report when providing feedback on the bill.
The ruling party, which has emphasized boards' duty of loyalty to shareholders, is supporting the mandate for opinion statements. Park (Rep.) stated, "The rights and interests of general shareholders must be sufficiently protected in the process of corporate mergers and acquisitions," adding, "It is necessary to improve the system in a direction that strengthens information disclosure so that shareholders can make rational judgments, enhances corporate valuation, and increases trust in the capital market."
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