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Laws of the Republic of Korea |
M&A Notification Guidelines
Enacted by Economic Planning Board Notification No. 44 May 13, 1981
Amended by Economic Planning Board Notification No. 61 January 6, 1983
Amended by Economic Planning Board Notification No. 87-9 May 22, 1987
Amended by Fair Trade Commission Notification No. 90-5 May 26, 1990
Amended by Fair Trade Commission Notification No. 1993-9 April 10, 1993
Amended by Fair Trade Commission Notification No. 1997-20 April 7, 1997
Amended by Fair Trade Commission Notification No. 1998-6 June 15, 1998
Amended by Fair Trade Commission Notification No. 1999-3 April 15, 1999
Amended by Fair Trade Commission Notification No. 2001-11 July 24, 2001
Amended by Fair Trade Commission Notification No. 2003-1 May 2, 2003
Amended by Fair Trade Commission Notification No. 2005-5 March 23, 2005
We hereby designate this amended M&A Notification Guidelines in accordance with Article 12 of the Monopoly Regulation and Fair Trade Act (hereinafter, the "Act") and Article 18 of its Enforcement Decree (hereinafter, the "Decree").
April 1, 2005
Korea Fair Trade Commission
M&A Notification Guidelines
I. Purpose
These guidelines seek to specify the principles of notification of business combination including the notification procedures, notification forms, documents to be submitted together with the notification forms, etc., pursuant to Article 12 - 2 -
(M&A Notification) of the Act and Article 18 (M&A Notification, Etc.) of the Decree.
II. Categorization of Business Combinations Subject to Notification
1. Business combinations subject to Notification shall be categorized into business combinations subject to ordinary notification (hereinafter, "Subject of Ordinary Notification") and business combinations subject to simplified notification (hereinafter, "Subject of Simplified Notification").
2. Business combinations falling into one of the following categories shall be subjects of Simplified Notification:
A. When the company subject to notifying a business combination and its counterpart in the business combination are Specially Related Persons of each other (excluding parties to the business combination who participate with the common goal of gaining managerial control);
B.
C. Engaging in interlocking directorate with less than 1/3 of the total number of
officers in the counterpart company of the business
combination; provided that
interlocking directorate with the representative director shall be excluded.
D. Engaging in the establishment
of a private equity fund operator pursuant to
Article 144-2 of the Indirect Investment Asset Management Business Act (hereinafter
referred to as "Management Business Act").
E. Combining special-purpose companies pursuant to Subparagraph 5 Article 2 of
the Asset-backed Securitization Act
F. Participating in the establishment of a ship investment company pursuant to the
Ship Investment Company Act
3. In the case of Simplified Notification, the Notification form by type of business
combination as set forth in III of this Guidelines
shall be submitted together with Attached
form 6; provided that notification may be filed online at the website of the Fair Trade
Commission.
III. Business Combination Notification Guideline
1. Notification of the acquisition or ownership of shares
A. A company or its Specially Related Person other than the company (pertaining
to
an individual, a non-profit corporation, or an organization; the same shall apply
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hereinafter) "owning more than 20% [more than 15% for companies listed on the stock
exchange or registered in KOSDAQ (Korea Securities
Dealer Automated Quotation)] of
the total number of stocks issued by another company" under Subparagraph 1 Paragraph
1 Article
12 of the Act and "becoming the largest shareholder by additionally acquiring
shares of the company after serving a notice of the
combination of enterprises as per the
provision of Subparagraph 1" under Subparagraph 2 shall submit to the Fair Trade
Commission
a notification form as set forth in Exhibit 1 together with the relevant
documents; if the Fair Trade Commission decides that a
business combination as
notified pursuant to Subparagraph 1 creates a controlling relationship, however, no such
notice shall be
served pursuant to Subparagraph 2.
B. "Becoming to own not less than 20%15% for the corporations listed on the
stock market exchange
or registered in the KOSDAQof the total number of stocks"
under Subparagraph 1 Paragraph 1 Article 12 of the Act means an increase
in the
shareholding ratio due to forfeited shares generated by paid-in capital increase, due to a
donation of shares without compensation,
or for any other reasons.
C. In the case of notification under Subparagraph 1 Paragraph 1 Article 12 of the
Act, the Initial Date
for Notification Obligation shall be the date on which the total
shareholding ratio exceeds 20% [15% for the corporations listed
on the stock market
exchange or registered in the KOSDAQ]
D. In the case of notification under Subparagraph 2 Paragraph 1 Article 12 of the
Act, the Initial Date for Notification Obligation
shall be the date on which a company
becomes the largest shareholder by acquiring shares.
E. "Delivery" as set forth in Subparagraph
1(a) Paragraph 8 Article 18
(M&A Notification, Etc.) of the Decree shall include easy delivery
under Article 188 (Effect of Assignment
of Real Rights to Movables,
Easy Delivery) and change in possession under Article 189 (Change in
Possession) of the Civil Act and
transfer of the right to a claim to
return the premises under Article 190 (Transfer of the Right to a Claim
to Return the Premises)
of the Civil Act as well as delivery.
F. When the contents of the interlocking directorate after the
acquisition or ownership of
shares are the same as the content of the
notice served pursuant to Subparagraph 1 and 2 Paragraph 1 Article 12
(M&A Notification)
of the Act, a notice of interlocking directorate
under Subparagraph 3 Paragraph 1 Article 12 of the Act shall not be
served.
G. A private equity fund operator (also referred to as "PEF," which
includes those established or located overseas) owning shares
of
another company pursuant to Subparagraph 1 or 2 Paragraph 2 Article
144 of the Management Business Act should submit documents
related
to the current investment status (investee and business type and
investment rate, etc.), investment rates of partners with
unlimited and
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limited liability and their business types, etc. In this case, the summary
of assets and turnover pursuant to Paragraph 2 Article
12 of the Act
shall include the investing and controlling company and a partner with
unlimited liability and its affiliates. If
a PEF engages in interlocking
directorate in another company (including the case wherein a partner
of a PEF engages in interlocking
directorate) and participates in
establishing a new company and serves a notice of M&A in accordance
with Subparagraph 3 or 5 Paragraph
1 Article 12 of the Act, the
aforesaid principle shall apply.
H. "Stock ownership" in Paragraph 7 Article 12 (M&A Notification) of
the Act shall be deemed effective when the share certificate
is
delivered or share purchase payment is made, including cases wherein
the voting rights and rights to other stocks are actually
transferred by
agreement or contract prior to receiving the share certificate or
making share purchase payment.
2. Notification of interlocking directorate of a large-scale company.
A. When "an officer of a company concurrently holds the position
of officer of
another company" as set forth in Subparagraph 3 Paragraph 1 Article 12 of the Act, the
company which caused the relevant
officer or employee to hold the position in another
company shall submit a notification, as set forth in the Attached form 2 to
the Fair Trade
Commission, together with relevant documents.
B. When only a natural person is to be changed without the change in the number of
or in the position of directorate, the fact of
such change is not subject to notification.
3. Notification of the merger of companies
A. A company " merged into another company" as specified in
Subparagraph 3 Paragraph
1 Article 7 (Limitations in Business
Combination) of the Act should submit the notification form shown in
Exhibit 3 along with
related documents. If notification is made pursuant to
Paragraph 6 Article 12 of the Act, the surviving company (in the case of
a
merge) or the new company (in the case of establishment of a new
company) shall execute the notification. If notification is
made pursuant to
the Addendum of Paragraph 6 Article 12 of the Act, however, the surviving
company (in the case of a merge) or
both the surviving company and the
combining company (in the case of establishment of a new company) shall
execute the notification.
B. The spin-off or merging of businesses pursuant to Article 530-2
- 5 -
(Split/Spin-off and Merge of Companies) of the Commercial Act shall be
governed by A. above.
4. Notification of the transfer of business of a company
A. When a company intends to "take over or lease the whole or a substantial
part of
the business or undertake the management of another company, or take over the whole
or a substantial part of the fixed
operating assets of another company" as set forth in
Subparagraph 4 Paragraph 1 Article 7 of the Act, the company shall submit a
notification as set forth in the Attached form 4 to the Fair Trade Commission, together
with relevant documents.
B. "Business" in Subparagraph 4 Paragraph 1 Article 7 of the Act means combined
property rights of the company which are organized
for the business purpose and which
function as an organic entity. This includes intangible property rights such as sales rights
(including sales-related organizations, manpower, contractual relations involving
agencies), patent rights and trademarks, as well
as others which are associated with
licenses and authorizations and have property values.
C. "Substantial part" in Subparagraph
4 Paragraph 1 Article 7
(Limitations in Business Combination) of the Act means that the
transferred or leased parts may be operated
as an independent business
unit, or transfer or lease may result in a significant reduction in the
turnover of the transferred
company, and that the amount of transfer is
more than 10% of the total amount of assets in the balance sheet of the
transferred
company as of the last day of the immediately preceding
business year or more than KRW 5 billion. When acquiring liabilities with
regard to the operations acquisition amount apart from the acquiring
payment for the operations, however, the liability amount
shall be
included in the acquisition. The same principle with regard to the
operations acquisition amount shall apply when renting
all or a major part
of the operations or undertaking management.
D. "Undertaking of the management of another company" in Subparagraph 4
Paragraph 1 Article 7 of the Act means the acting of undertaker
as the person executing
managerial rights through the signing of contracts which entrust management between the
acquired company
and transferred company, etc.
E. "Performing the business transfer agreement" as referred to in
Paragraph 7 Article 12 (M&A Notification) of the Act means delivery
or
transfer in the case of movable property, registration in the case of real
estate, and registration when such is required for
trademark, etc.
5. Notification of the acquisition of the shares of newly established company
A. A company or its specially related person other
than the company
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"acquiring 20% or more of the shares of a new company to be established"
as per Subparagraph 5 Paragraph 1 Article 12 (M&A Notification)
of the
Act shall submit to the Fair Trade Commission a notice as set forth in
Attached Form 5 together with related documents.
B. When the contents of the shareholding ratio or interlocking
directorate after the incorporation of a company are the same as
those of the
notice of participation in the establishment of a company as served pursuant
to Subparagraph 5 Paragraph 1 Article
12 (M&A Notification) of the Act, a
notice of the acquisition of shares or interlocking directorate after the
incorporation under
Subparagraph 1 and 3 Paragraph 1 Article 12 of the Act
shall not be served.
C. If the notifying company as the largest contributor and a certain
partner participating in establishing the company fall under
Paragraph 1~3
Article 18 of the Decree, all participating companies should be included in
the notice as partners regardless of
whether the other participants meet the
aforesaid requirement.
D. If there are 2 or more largest contributors deemed liable to execute
notification, each of them shall execute the notification
individually and at
the same time. Note, however, that one of the liable contributors designated
as the notification agent may
execute the notification by submitting proof of
its designation.
E. When participating in a PEF pursuant to Article 144-2 of the
Management Business Act, the largest contributor among partners
with
unlimited liability as defined in Paragraph 1 Article 144-3 of the same Act
(the contribution made by a partner with limited
liability as defined in
Paragraph 1 Article 144-3 of the same Act shall be excluded; other
provisions remain the same) shall execute
the notification. Note, however,
that the largest contributor may have the notification executed through the
executing partner
as defined in Article 144-10 of the same Act as the M&A
notification agent. If there are 2 or more largest contributors, the provision
of D. above shall apply.
- 7 -
F. The standards that apply to a foreign company's local turnover as
defined in Paragraph 3 Article 18 of the Decree shall continue
to apply only
to the case wherein the newly established company is a foreign company
(entity whose principal office is located
overseas or entity established
pursuant to a foreign law). The same provision shall not apply when both
companies to be combined
are foreign companies and a foreign company is
combined into a newly established company that is a local entity.
G. "Acquiring
shares" as cited in Paragraph 7 Article 12 (M&A
Notification) of the Act refers to the payment of the price of the allotted
shares.
IV. Business Combination including Foreign Company
1. The size of each domestic turnover of the acquiring and the acquired companies
respectively under Paragraph 3 Article 18 of the
Decree includes that of
companies remaining as affiliates before and after the completion of the
business combination. For the
takeover business under Subparagraph 4
Paragraph 1 Article 7 (Limitations in Business Combination) of the Act,
however, the domestic
turnover of affiliates is not included in the domestic
turnover of the acquired company.
2. In applying Subparagraph 1 Paragraph 1 Article 12 (M&A Notification) of the
Act, the acquired company as a foreign company owning
less than 20% of the
total number of stocks excluding non-voting shares under the provision of the
related law of its own country
is exempted from the notification obligation.
3. "Affiliate" in Paragraph 2 Article 12 of the Act shall be determined considering
Subparagraph 2~3 Article 2 (Definitions) of the
Act and Article 3 and 3-2 of the
Decree. In the absence of documents, any company required to draw the
consolidated financial statements
is an affiliate.
4. When converting the unit in the financial statements of a foreign company into
Korean Won, the exchange rate as of the closing
date of the immediately
preceding business year when the relevant business combination took place is
- 8 -
applied to the total assets, and the average exchange rate of the immediately
preceding business year, to turnover (the same applies
to the local turnover).
V. Filing Request for Voluntary Pre-Merger Review
Request for a pre-merger review pursuant to Paragraph
(8) Article 12 of the Act shall be
filed submitting the related notification form by the types of business combination set forth
III of this guidelines, together with relevant documents.
VI. Filing Request for Designation and Change of the Representative for
Notifying
Business Combinations
A person who has been designated as the Representative for Notifying Combination of
Enterprises pursuant to Paragraph (10) Article
12 of the Act or Paragraph 1 Article 19 of the
Decree, or who wishes to change the designated Representative for Notifying Business
Combinations shall submit the application set forth in the Attached form 7 to Fair Trade
Commission; provided that in the case
of changing the already designated Representative for
Notifying Business Combinations, the application shall be submitted together
with a
document stating the reason therefore.
. Review Period
Any rescission and amendment with regard to these Guidelines shall be made
based on the changes in statutes and circumstances after
these Guidelines are
announced as per the Regulations on the Issuance and Management of
Directives and Established Rules (Presidential
Directive No. 248) until August
20, 2012.
ADDENDUM
announcement.
Addendum
Addendum
These Guidelines shall take effect as of August 21, 2009.
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