Appraisal Rights for Physical Divisions Deemed Excessive Regulation... Reform Should Focus on Duplicate Listings

Experts at National Assembly Forum Speak with One Voice
Regulations Hinder Corporate Restructuring; Easing Needed
Companies Must Also Strengthen Communication with Shareholders

It was pointed out that the shareholder appraisal rights granted to shareholders during corporate spin-offs are excessive regulation. One proposal was to reform the system by focusing on dual listings rather than spin-offs themselves.

The National Assembly held a debate on shareholder appraisal rights on November 4. It was hosted by Ahn Dogeol, a lawmaker from the Democratic Party of Korea, and co-organized by the Korea Listed Companies Association and the Korea Federation of Mid-Sized Enterprises.

Shin Hyun-han, a professor at Yonsei University and former president of the Korean Securities Association, who gave the presentation, said the current system was introduced after LG Chem's spin-off and has effectively come to block all spin-offs. He explained that regulations intended to address dual-listing issues are also hindering corporate restructuring. “We’re burning down the house to catch a flea,” Shin said, emphasizing that the system of granting shareholder appraisal rights uniformly at the time of a spin-off should be reconsidered.

Participants pose for a commemorative photo at the forum titled “How Should Appraisal Rights Be Improved?” held on the 4th in Seminar Room 2 of the National Assembly Members’ Office Building in Yeouido, Seoul. Office of Democratic Party lawmaker Ahn Dogeol

He proposed granting shareholder appraisal rights when a company pursues a dual listing, rather than when it completes a spin-off. In other words, he called for a shift from an “entry-blocking” approach that prevents corporate restructuring at the spin-off stage to an “exit-restricting” approach that protects shareholders at the dual-listing stage.

Ahn Taejun, a professor at Hanyang University, also said, “The current shareholder appraisal rights system, which only restrains spin-offs, needs to be abolished or reconsidered.” He explained that spin-offs do not necessarily lead to dual listings, and that simple spin-offs have only a limited impact on existing shareholders.

Some also called for easing regulations to enable companies to restructure their businesses swiftly. Park Yang-gyun, head of the policy division at the Korea Federation of Mid-Sized Enterprises, emphasized that business restructuring has become important for corporate survival amid U.S.-China hegemonic competition and China’s technological advances. “Blocking spin-offs themselves is excessive ex ante regulation,” Park said, adding that conditions should be created to allow companies to restructure their businesses swiftly.

Some also said that companies should strengthen communication with shareholders alongside improvements to the system. Shin stressed the need to address the reality that shareholder meetings have become mere formalities and for companies to engage in meaningful communication with shareholders.

This content was produced with the assistance of AI translation services.