FSC passes amendment to Capital Markets Act enforcement decree; all listed firms holding treasury shares now required to disclose disposal and cancellation plans

[Financial Services Commission]
[Financial Services Commission]

All listed companies holding treasury shares will be required to disclose not only their current holdings but also their plans to dispose of or cancel those shares and the progress of those plans.

The Financial Services Commission and the Financial Supervisory Service said the cabinet approved an amendment to the enforcement decree of the Act on Capital Markets and Financial Investment Business on Tuesday. The revision is a follow-up measure under the amended Commercial Act, enacted March 31, to prevent companies from using treasury shares at their own discretion.

Under the previous rules, only listed companies holding treasury shares equivalent to 1 percent or more of their total issued shares were required to disclose their holdings and disposal plans. The amended decree extends that obligation to all listed companies holding treasury shares and requires more detailed disclosure of treasury share disposal plans approved at shareholders' meetings.

The amended Commercial Act bans the issuance of exchangeable bonds backed by treasury shares entirely, and related provisions have been removed from the enforcement decree and subordinate regulations accordingly.

Treasury share-backed exchangeable bonds had long drawn criticism for conflicts of interest. They were frequently issued to third parties friendly to controlling shareholders even when there was no pressing need to raise capital, effectively serving as a tool to defend management control or maintain dominance.

Financial authorities said removing the exchangeable bond provisions would block the use of such instruments to circumvent the obligation to cancel treasury shares, and would improve consistency between the Commercial Act and the Capital Markets Act.

Trustees will be prohibited from disposing of treasury shares during the term of a trust contract entered into for the purpose of acquiring treasury shares, and must return the shares to the company immediately upon the contract's termination or cancellation. The measure blocks attempts to circumvent the cancellation obligation by extending trust contracts.

Treasury shares acquired through the exercise of appraisal rights must be disposed of within the holding period set out in the disposal plan approved at the shareholders' meeting, and in any case within five years.

Under the amended Commercial Act, treasury share disposals are permitted only through equal distribution to existing shareholders or disposal to a specific third party. Provisions allowing open-market sales to unspecified buyers on the regular exchange market have been removed from subordinate regulations accordingly, with the aim of increasing transparency by requiring that disposal counterparties be identified.

The format for annual report disclosures will also be revised. The treasury share cancellation deadline and the details of the disposal plan approved at the shareholders' meeting will be added as required entries in the "treasury share holdings" section of annual reports, allowing shareholders to verify the approved plan directly.

In addition, companies will be required to disclose the original purpose for which treasury shares were acquired, enabling shareholders to compare the stated acquisition purpose with the actual disposal purpose.

The impact of the reforms is already visible in the data. The value of treasury shares canceled by listed companies, based on exchange disclosures, rose sharply from 2.5 trillion won ($1.63 billion) in 2021 to 3.1 trillion won in 2022, 4.8 trillion won in 2023, 13.9 trillion won in 2024 and 21.4 trillion won in 2025. In just the first five months of this year, cancellations reached 43.1 trillion won — already more than double the full-year 2025 total.

Treasury share buybacks have also surged, rising from 4.8 trillion won in 2021 to 20 trillion won in the January–May period this year. The amended enforcement decree takes effect on its promulgation date of June 30, with related regulations on securities issuance, disclosure and corporate filing formats taking effect at the same time.

The buyback momentum has continued in recent weeks. Mirae Asset Securities said its board met June 17 and resolved to buy back treasury shares worth 300 billion won — the largest such repurchase in the company's history. The buyback covers 200 billion won in common shares, 10 billion won in first-class preferred shares and 90 billion won in second-class preferred shares. The company plans to cancel all repurchased shares.


th5@heraldcorp.com