Companies required to publicly disclose details of key decisions over merger deals

SEOUL, The financial regulator said Tuesday it will require companies to publicly disclose details of key decisions when they push for merger deals, in an effort to better protect investors. The move was announced one day after a Seoul court cleared Samsung Electronics Co. Chairman Lee Jae-yong of any wrongdoing in a controversial 2015 merger of two Samsung affiliates that was widely seen as an attempt to solidify Lee's control of the largest conglomerate in South Korea. Currently, "details of board meetings related to a merger are not disclosed, making it hard for shareholders to raise issues even when the board makes a decision that only benefits the major shareholder," the Financial Services Commission (FSC) said in a press release. The financial regulator said it will seek to require firms to disclose the purpose of an envisioned merger and acquisition, the amount of cost involved and whether such a cost is appropriate, along with detailed views of the board. Businesses seeking to merge or acquire fi rms are also currently required to have an external agency determine the appropriate price of the proposed merger and acquisition and have the proposed price evaluated, but they often have the same agency propose and evaluate the price of the merger and acquisition, according to the FSC. Under new rules, businesses will be prohibited from having the same external agency propose and evaluate the price of a merger. The financial regulator will also stipulate that the "appropriateness (of price) refers to the actual value of a firm," so that the evaluation of price will not simply check to see if the price does not violate regulations, it added. Also, in the case of a merger involving affiliated firms, the businesses will be required to appoint external agencies that are "independent" from the firms' major shareholders to study and evaluate the cost of their merger. Currently, they are allowed to "freely appoint any evaluation agency, raising concerns that their evaluations may be biased toward the interest of the major shareholder," the FSC said. The financial regulator plans to issue a legislative notice of the proposed changes before the end of this month and start enforcing the new regulations next month. Source: Yonhap News Agency