South Korean lawmakers promote merger and acquisition reform, aiming to strengthen minority shareholder protection and address the "Korean discount."

Recently, members of South Korea's ruling party proposed to expand the requirements for the disclosure of merger and acquisition information. This is the latest measure aimed at strengthening the protection of minority shareholder rights and addressing the long-standing issue of valuation discounts in the South Korean stock market. According to a statement released on Thursday by the office of Democratic Party lawmaker Oh Gi Hyoung, a total of 11 members of the National Assembly, including Oh, have submitted an amendment to the Capital Markets Act, which primarily regulates merger and acquisition transactions involving publicly listed companies. Oh also serves as the chair of the National Assembly's Special Committee on the "Korea Discount" issue. Under the amendment, the board of directors of the target acquisition company must publicly issue an independent opinion on the acquisition bid, clarifying whether the bid aligns with the interests of all shareholders. Additionally, the amendment will expand the scope of mandatory information disclosure from solely involving company assets or management decisions to include all corporate decisions that have a substantial impact on shareholder rights. This means that any merger proposal that affects shareholder interests will fall under the mandatory disclosure category. The term "Korea Discount" refers to the long-standing undervaluation of South Korean listed companies compared to their global peers, which the market generally attributes to weak corporate governance and the dominant position of family-controlled conglomerates. Although the Korean Composite Stock Price Index (Kospi) has risen by more than 50% this year, its valuation level remains lower than that of similar markets such as Taiwan and Japan, highlighting the valuation gap that policymakers aim to bridge. This reform is an important part of President Lee Jae Myung's governments comprehensive overhaul of corporate governance rules. The Lee administration and the ruling party have identified improving governance and enhancing shareholder returns as key strategies to drive the reassessment of stock market value. Last year, the South Korean National Assembly passed a landmark reform that extended the fiduciary duties of company directors to all shareholders, requiring directors to protect the interests of all shareholders equally. Oh Gi Hyoung stated that the South Korean merger and acquisition market has yet to effectively release the potential of undervalued companies, which is the core issue the amendment aims to address. In his statement, he noted, "This legislative amendment is expected to contribute to investor protection and the resolution of the 'Korea Discount' issue by strengthening the responsibilities of the board of directors in the M&A process and improving information transparency."