South Korean legislators push for merger and acquisition reforms, aiming to strengthen minority shareholder protection and address the "Korea Discount"

According to Zhihui Finance APP, a member of South Korea’s ruling party has recently proposed expanding information disclosure requirements for corporate mergers and acquisitions—this move is the latest effort to strengthen the protection of minority shareholders and address the long-standing issue of the “Korea discount” in Korean stock market valuations.

According to a statement released Thursday by the office of Democratic Party lawmaker Oh Gi Hyoung, 11 National Assembly members, including Oh Gi Hyoung, have submitted an amendment to the Capital Markets Act, which mainly regulates M&A transactions involving listed companies. Oh Gi Hyoung also serves as chairman of the National Assembly’s Special Committee on the “Korea Discount.”

Under the amendment, the board of directors of a target company would be required to publicly issue an independent opinion regarding a takeover offer, clearly stating whether the offer aligns with the interests of all shareholders. Additionally, the amendment will expand mandatory information disclosure from decisions involving only company assets or management to all company decisions that have a material impact on shareholder rights. This means all M&A proposals affecting shareholder interests will be subject to mandatory disclosure.

The “Korea discount” refers to the long-standing phenomenon where Korean listed companies are valued lower than their global peers—a situation commonly attributed to weak corporate governance and the dominance of family-controlled conglomerates. Although the Korea Composite Stock Price Index (Kospi) has risen by more than 50% this year, its valuation remains below comparable markets such as Taiwan and Japan, highlighting the gap policymakers are attempting to close.

This reform is a key component of President Lee Jae Myung’s administration’s comprehensive overhaul of corporate governance rules. The Lee Jae Myung government and the ruling party have made improving governance and enhancing shareholder returns central to boosting stock market valuation. Last year, the National Assembly passed a landmark reform extending directors’ fiduciary duties to all shareholders, requiring directors to protect the interests of all shareholders equally.

Oh Gi Hyoung stated that South Korea’s M&A market has so far failed to effectively unlock the potential of undervalued companies, which is the core issue the amendment seeks to address. He noted in the statement: “This legislative reform is expected to contribute to investor protection and to resolving the ‘Korea discount’ issue by strengthening the responsibilities of boards of directors in M&A processes and increasing information transparency.”