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S. Korea Parliament Boosts Shareholder Rights
25 Feb
Summary
- New law mandates cancellation of newly acquired treasury shares.
- Revisions aim to curb corporate governance issues and the 'Korea Discount'.
- The Kospi index surpassed 6,000 points for the first time.
South Korean lawmakers approved a significant revision to the Commercial Act on Wednesday, mandating that listed companies cancel any newly acquired treasury shares within a year. This legislation targets loopholes previously exploited by firms to consolidate management control. Existing treasury shares will have a six-month grace period for compliance.
The amendments are part of a broader initiative to overcome the 'Korea Discount,' a phenomenon where South Korean companies are valued lower than their global counterparts. Poor corporate governance, family-run conglomerate structures, and geopolitical risks are key factors contributing to this valuation gap.
This legislative action comes as the benchmark Kospi index has seen remarkable growth, recently surpassing the 6,000-point mark for the first time. The index’s performance, more than doubling in the past year, highlights increasing investor interest in South Korean equities following policy drives aimed at enhancing market returns.
