Guidelines on Directors' Codes of Conduct in Corporate Restructuring Announced...Regulatory Change Extending to the Correction of Disclosures

The guidelines require that, where a conflict of interest exists between a director, controlling shareholder, or member of management and the company, or between a controlling shareholder and ordinary shareholders, measures to secure fairness be carried out without fail and that these be fully explained to shareholders.

The key point is not simply to proceed with the transaction but to be able to prove that the process and the outcome are objectively fair.

To this end, the following measures are emphasized.

First, the formation of an independent special committee. It is required that a committee centered on outside directors who are independent of the controlling shareholder be formed and that it be granted substantive authority to review the matter from the early stages of the transaction.

If the board of directors reaches a different conclusion, it must clearly record the reasons.

Second, an independent review by outside experts. A multilayered review structure is needed, such as reviewing the legality and fairness of the transaction through legal counsel and analyzing the valuation and market conditions through financial advice.

Third, the provision of sufficient information to shareholders. Beyond formal disclosure, the background of the transaction, the process of reviewing alternatives, whether a conflict of interest exists, the measures taken to secure fairness, and similar matters must be explained at a level that shareholders can understand.

Because a merger between affiliated companies involves a structure in which the same controlling shareholder influences both companies, there is a possibility that the merger price will be set in a manner favorable to a particular shareholder.

Accordingly, an independent special committee must be formed for each company to separately review the necessity, timing, conditions, and structure of the merger, and the merger price must secure objectivity through valuation by outside experts and multiple advisory opinions.

In addition, the disclosure must specifically set out the necessity of the merger, its effect on shareholder value, the basis for calculating the merger price, the structure of the relevant interests, the changes in governance structure following the merger, and similar matters.

Going-private transactions carried out through a tender offer and a share exchange are subject to stricter standards in that there is a high possibility of information asymmetry and pressure on ordinary shareholders.

In this case, the opinion on the tender offer must be reviewed through a special committee, and the fairness of the price must be verified through outside experts.

In particular, where a tender offer and a share exchange are carried out consecutively, securing equity between the prices is important, and a structure that provides ordinary shareholders with an opportunity to make an autonomous choice is required.

Recent cases in which financial supervisory authorities have required corrections confirm that compliance with the guidelines is functioning as a core element in the review of disclosures.

In particular, supplementation of the following matters was intensively required.

With respect to the special committee, the time of its establishment, its composition, its authority, the content of its deliberations, the results of outside advice, and the final opinion, as well as whether it was reflected by the board of directors, must be specifically described.

With respect to outside experts, even the substantive content of the analysis, such as the reasons for their selection, their independence, the work they performed, the results of their review, the valuation methodology, and the basis for applying the discount rate, had to be explained in detail.

In addition, with respect to the provision of information to shareholders, the explanation was required to include the process of reviewing alternatives, the conflict-of-interest structure, measures to protect ordinary shareholders, communication plans, and similar matters.

This is a case showing that disclosure is functioning as a means of proving the fairness and reasonableness of decision-making.

Daeryun, ranked ninth among law firms in the Republic of Korea (based on 2025 value-added tax filings with the National Tax Service), comprehensively analyzes the conflicts of interest, the securing of fairness, and the disclosure risks that may arise in the course of corporate restructuring, and supports the formulation of strategy from the early stages.

In particular, it provides practice-oriented legal advice across the entire process, including the formation of a special committee, the design of an outside-expert advisory structure, the preparation of disclosure documents, and responses to the financial supervisory authorities.

It also closely reviews the issues specific to each transaction type, such as mergers, divisions, and delistings, designs procedures that can prove the performance of directors' duty of loyalty, and presents proactive response strategies that take into account the possibility of future disputes.

If you wish to reduce the legal risks associated with corporate restructuring and achieve stable decision-making, it is advisable to obtain the assistance of an attorney with relevant experience.