The 50%+1 Share Partial Mandatory Tender Offer: Not a “Half-Measure” but a “Bad Institution”
- At a minimum, require that the controlling shareholder also sell only through the tender offer (pro rata acceptance). If even that is not possible, do not legislate at all
-The Forum makes the following recommendations.
- Enact, as a matter of principle, an obligation to make a tender offer for all remaining shares;
- If 50%+1 share is to be retained, expressly provide in the statute for a pro rata acceptance clause and a clause requiring the approval of a majority of minority; and
- If neither a full offer nor the above supplemental measures are to be introduced, do not legislate at all. Rather than creating such a system — displaying to the world the backwardness of Korea’s capital market policy capability, and foreclosing even the possibility of protecting shareholders through the establishment of directors’ duty of loyalty to shareholders and through soft law — not legislating is the better choice, in our view.
President Lee’s campaign pledge was to “share the control premium” and to “guarantee minority shareholders an exit opportunity.” The “50%+1 Share Amendment” to the Capital Markets Act that passed the National Policy Committee of the National Assembly on September 17th honours neither. General shareholders of listed companies in which the controlling shareholder already holds a majority are afforded no protection whatsoever. The amendment will cause the controlling shareholders’ stakes across the market as a whole to converge on “50%+1 share,” leaving the investor protection worse than it was, in our opinion.
The world has converged on either a “purchase of all remaining shares” (the UK, the EU, HK and Singapore; in Japan, the two-thirds rule) or “directors’ fiduciary duty to shareholders” (the US). A partial mandatory tender offer is not a middle course between the two; it is a separate and inferior institution.
Within the present bill (that is subject to majority approval at the National Assembly main session), there are two ways to change substance by the smallest amendment. Require the controlling shareholder also to dispose of its shares only by tendering into the public offer (pro rata acceptance); and condition the effectiveness of a partial offer on the approval of a majority of minority rule, and permit shareholders who voted against it to sell on the same terms once it takes effect (separation of the vote from the sale).
If these two measures cannot be added, it would be better not to legislate at all. Now that directors’ fiduciary duty to shareholders has only just begun to operate, handing acquirers and boards a shield of immunity on the ground that “we did everything the law required” would be the worst possible choice.
According to local press, an amendment to the Capital Markets and Financial Investment Services Act (the “50%+1 Share Amendment”) — which would fix the mandatory tender offer threshold at “50%+1 share or more of the total issued shares” and delete the delegation to Presidential Decree concerning the adjustment of the number of shares to be purchased — passed the First Subcommittee on Legislative Review of the National Assembly’s National Policy Committee on the September 15th with the agreement of the ruling and opposition parties. The reported content is as follows: ① A mandatory tender offer obligation arises where a person becomes the largest shareholder holding 25% or more of the shares through acquisition of shares (including where a largest shareholder holding 25% or more makes an additional acquisition); and ② The volume of the tender offer is to be fixed in the statute itself, the provision delegating the matter to Presidential Decree having been deleted in deference to the position of the opposition People Power Party.
The KCGF takes the view that the 50%+1 Share Amendment is not a half-measure relative to a full buyout offer, but a bad institution that undermines the very purpose of a full offer. The National Assembly should supplement it at the plenary and Legislation and Judiciary Committee stages with at least the two measures set out below; and if that is not possible, it would be better not to legislate.
1. Fulfil the President Lee’s Pledge
President Lee pledged in his campaign platform to “introduce a mandatory tender offer system to share the control premium in acquisitions and to guarantee minority shareholders an exit opportunity.” The 50%+1 Share Amendment passed by the National Policy Committee’s legislative subcommittee, however, cannot by any means share the control premium or guarantee minority shareholders an exit opportunity. It is, rather, expected to have a negative effect on Korea’s corporate governance environment.
First, general shareholders of companies in which the controlling shareholder already holds a majority of the shares will not be able to share in the control premium or be guaranteed an exit opportunity notwithstanding the 50%+1 Share Amendment. Are the minority shareholders of companies in which the controlling shareholder already holds a majority or more, not the minority shareholders whom the President’s pledge promised to protect?
Second, companies in which the controlling shareholder’s stake falls short of a majority are also seriously problematic. The controlling shareholder may enjoy the control premium in full, while general shareholders are able to sell only a portion of their holdings; and the shares that remain are left in an even more vulnerable position.
The 50%+1 Share Amendment will also have a negative effect on the shareholding structure of Korea’s capital market as a whole. Because the value and liquidity of a controlling stake would change the moment a majority is reached, controlling shareholders who fall short of a majority will mobilise on-market purchases, partial tender offers and the purchase and cancellation of treasury shares in an effort to reach 50%+1 share. Thus, the controlling shareholders of many of Korea’s listed companies will converge on a stake of 50%+1 share or more. Given ordinary attendance rates at shareholders’ meetings, this may deepen the concentration of control and significantly weaken minority shareholders’ capacity to hold management in check.
2. The Problems with a Partial Mandatory Tender Offer
The essence of the mandatory tender offer is to give every shareholder an equal right of exit on equal terms when control passes. By applying this principle only halfway, a partial offer in fact splits shareholders into three classes: ① the existing controlling shareholder, which sells its entire stake off-market at a premium; ② shareholders who tendered but sold only part of their holdings by pro rata allocation; and ③ the remaining shareholders. The moment the acquirer secures 50%+1 share, the remaining shareholders are left under a new controlling shareholder, holding shares of diminished liquidity, and exposed to the risk of a second-step transaction.
Because the position of the remaining shareholders (③) is so weak, they cannot afford not to tender even at a low price. Even where a shareholder judges the intrinsic value of the company to be 100, if the shares remaining after a partial offer are expected to trade at a market price of 40 owing to the change of control and the loss of liquidity, that shareholder will come under pressure to tender even though the offer price of 70 falls short of intrinsic value, in our opinion.
3. Why Advanced Jurisdictions Do Not Maintain Partial Offers
The global trend in tender offers has converged on two regimes. One compels a tender offer by which control is acquired to be made for all remaining shares (the UK, the EU, HK and Singapore). The other relies on directors’ fiduciary duty to shareholders and judicial review to control coercive takeovers and unfair transaction terms, and combines the tender offer with a subsequent merger so as to acquire all shares, including those of ordinary shareholders, for the same consideration (the US). It is not without reason that the world has converged on these two approaches. They are the only two that can protect shareholders in a situation of selling pressure.
Japan imposes a duty of full purchase and full solicitation on a tender offer reaching two-thirds or more of the shares, and it layers protective devices one upon another even in situations below two-thirds, where a partial offer is permitted. It prohibits separate purchases during the tender offer period, and where subscriptions exceed the offer, the largest shareholder too is allocated pro rata without exception. In addition, the Ministry of Economy, Trade and Industry’s Guidelines for Corporate Takeovers (2023) require a board that receives a partial offer proposal to treat “the fact that shareholders are not able to sell all of their shares at that price” as an important axis of judgment, and to negotiate with the acquirer to convert the offer into a full purchase where it concludes that the problems of a partial offer are significant; and they point out that a partial offer with a cap “leaves existing shareholders as minority shareholders and thus makes it easier for a takeover that diminishes corporate value to be effected.” Japan has, in other words, given concrete form to the board’s duties of negotiation and protection as soft law, in place of permitting partial offers by statute.
4. We Urge Two Supplemental Measures, However Modest
If the 50%+1 Share Amendment is to be proceeded with, we urge that the following two measures be added.
① Require the Controlling Shareholder Also to Sell Only Through the Tender Offer (Pro Rata Acceptance)
In a transaction that triggers a mandatory tender offer, it would be sufficient to require the controlling shareholder also to dispose of its shares only by tendering into the offer. If the “pre-acquisition” of the controlling shareholder’s stake off-market were required to take the form of the tender offer itself, then where the acquirer seeks to buy only 50%+1 share, the controlling shareholder could sell only in the same proportion as general shareholders; and an acquirer wishing to obtain the controlling shareholder’s entire stake would have to increase the volume, ultimately arriving at a full purchase. Japan requires an acquisition exceeding 30% to be effected by way of tender offer, and allocates pro rata among the largest shareholders as well.
② Separate the Vote from the Sale (MoM Approval)
If a partial offer is to be retained at all, its effectiveness should be conditioned on the approval of a majority of minority (MoM) shareholders, excluding the acquirer, the selling controlling shareholder and specially related persons; and shareholders who voted against it should be permitted to tender on the same terms once the offer has taken effect. The structure is one in which a shareholder who wishes to oppose may oppose, but if a majority approves, that shareholder too may sell — so that general shareholders can escape the selling pressure. The UK, Hong Kong and Singapore operate this method through a separate approval box on the tender form for partial offers exceptionally permitted with the consent of the regulator; Israel operates it through its companies act.
5. If Not This, Then Do Not Legislate at All
A fiduciary duty of directors to shareholders has been introduced into the Korean Commercial Code, and the Ministry of Justice’s Guidelines have pointed out that a structure combining a partial offer with a subsequent share exchange in merger and going-private transactions may increase selling pressure, and have set out procedures for securing fairness, such as a special committee. Although they are insufficient, special committees have begun to operate in the market, and boards have begun to state their views on tender offers.
As with the Guidelines of Japan’s METI referred to above, it would also be possible to give concrete form to shareholder protection in partial offer situations through soft law. Once directors’ fiduciary duty to shareholders takes root, boards will be under a duty, as in the US, to reject coercive takeovers and to pursue a sale at the highest price, and matters may reach the point where partial offers effectively disappear.
Yet the 50%+1 Share Amendment would become a basis for immunity on the ground that “we did everything the law required,” foreclosing entirely any room for directors’ fiduciary duty, for soft law, and for market monitoring and judicial review to operate. We are concerned that this would be a repetition of what happened when merger price formulae were fixed to market-price formulae for decades, denying minority shareholders any room to contest a fair price.
September 17th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Auditor, Hyeseop Sim
The 50%+1 Share Partial Mandatory Tender Offer: Not a “Half-Measure” but a “Bad Institution”
- At a minimum, require that the controlling shareholder also sell only through the tender offer (pro rata acceptance). If even that is not possible, do not legislate at all
-The Forum makes the following recommendations.
President Lee’s campaign pledge was to “share the control premium” and to “guarantee minority shareholders an exit opportunity.” The “50%+1 Share Amendment” to the Capital Markets Act that passed the National Policy Committee of the National Assembly on September 17th honours neither. General shareholders of listed companies in which the controlling shareholder already holds a majority are afforded no protection whatsoever. The amendment will cause the controlling shareholders’ stakes across the market as a whole to converge on “50%+1 share,” leaving the investor protection worse than it was, in our opinion.
The world has converged on either a “purchase of all remaining shares” (the UK, the EU, HK and Singapore; in Japan, the two-thirds rule) or “directors’ fiduciary duty to shareholders” (the US). A partial mandatory tender offer is not a middle course between the two; it is a separate and inferior institution.
Within the present bill (that is subject to majority approval at the National Assembly main session), there are two ways to change substance by the smallest amendment. Require the controlling shareholder also to dispose of its shares only by tendering into the public offer (pro rata acceptance); and condition the effectiveness of a partial offer on the approval of a majority of minority rule, and permit shareholders who voted against it to sell on the same terms once it takes effect (separation of the vote from the sale).
If these two measures cannot be added, it would be better not to legislate at all. Now that directors’ fiduciary duty to shareholders has only just begun to operate, handing acquirers and boards a shield of immunity on the ground that “we did everything the law required” would be the worst possible choice.
According to local press, an amendment to the Capital Markets and Financial Investment Services Act (the “50%+1 Share Amendment”) — which would fix the mandatory tender offer threshold at “50%+1 share or more of the total issued shares” and delete the delegation to Presidential Decree concerning the adjustment of the number of shares to be purchased — passed the First Subcommittee on Legislative Review of the National Assembly’s National Policy Committee on the September 15th with the agreement of the ruling and opposition parties. The reported content is as follows: ① A mandatory tender offer obligation arises where a person becomes the largest shareholder holding 25% or more of the shares through acquisition of shares (including where a largest shareholder holding 25% or more makes an additional acquisition); and ② The volume of the tender offer is to be fixed in the statute itself, the provision delegating the matter to Presidential Decree having been deleted in deference to the position of the opposition People Power Party.
The KCGF takes the view that the 50%+1 Share Amendment is not a half-measure relative to a full buyout offer, but a bad institution that undermines the very purpose of a full offer. The National Assembly should supplement it at the plenary and Legislation and Judiciary Committee stages with at least the two measures set out below; and if that is not possible, it would be better not to legislate.
1. Fulfil the President Lee’s Pledge
President Lee pledged in his campaign platform to “introduce a mandatory tender offer system to share the control premium in acquisitions and to guarantee minority shareholders an exit opportunity.” The 50%+1 Share Amendment passed by the National Policy Committee’s legislative subcommittee, however, cannot by any means share the control premium or guarantee minority shareholders an exit opportunity. It is, rather, expected to have a negative effect on Korea’s corporate governance environment.
First, general shareholders of companies in which the controlling shareholder already holds a majority of the shares will not be able to share in the control premium or be guaranteed an exit opportunity notwithstanding the 50%+1 Share Amendment. Are the minority shareholders of companies in which the controlling shareholder already holds a majority or more, not the minority shareholders whom the President’s pledge promised to protect?
Second, companies in which the controlling shareholder’s stake falls short of a majority are also seriously problematic. The controlling shareholder may enjoy the control premium in full, while general shareholders are able to sell only a portion of their holdings; and the shares that remain are left in an even more vulnerable position.
The 50%+1 Share Amendment will also have a negative effect on the shareholding structure of Korea’s capital market as a whole. Because the value and liquidity of a controlling stake would change the moment a majority is reached, controlling shareholders who fall short of a majority will mobilise on-market purchases, partial tender offers and the purchase and cancellation of treasury shares in an effort to reach 50%+1 share. Thus, the controlling shareholders of many of Korea’s listed companies will converge on a stake of 50%+1 share or more. Given ordinary attendance rates at shareholders’ meetings, this may deepen the concentration of control and significantly weaken minority shareholders’ capacity to hold management in check.
2. The Problems with a Partial Mandatory Tender Offer
The essence of the mandatory tender offer is to give every shareholder an equal right of exit on equal terms when control passes. By applying this principle only halfway, a partial offer in fact splits shareholders into three classes: ① the existing controlling shareholder, which sells its entire stake off-market at a premium; ② shareholders who tendered but sold only part of their holdings by pro rata allocation; and ③ the remaining shareholders. The moment the acquirer secures 50%+1 share, the remaining shareholders are left under a new controlling shareholder, holding shares of diminished liquidity, and exposed to the risk of a second-step transaction.
Because the position of the remaining shareholders (③) is so weak, they cannot afford not to tender even at a low price. Even where a shareholder judges the intrinsic value of the company to be 100, if the shares remaining after a partial offer are expected to trade at a market price of 40 owing to the change of control and the loss of liquidity, that shareholder will come under pressure to tender even though the offer price of 70 falls short of intrinsic value, in our opinion.
3. Why Advanced Jurisdictions Do Not Maintain Partial Offers
The global trend in tender offers has converged on two regimes. One compels a tender offer by which control is acquired to be made for all remaining shares (the UK, the EU, HK and Singapore). The other relies on directors’ fiduciary duty to shareholders and judicial review to control coercive takeovers and unfair transaction terms, and combines the tender offer with a subsequent merger so as to acquire all shares, including those of ordinary shareholders, for the same consideration (the US). It is not without reason that the world has converged on these two approaches. They are the only two that can protect shareholders in a situation of selling pressure.
Japan imposes a duty of full purchase and full solicitation on a tender offer reaching two-thirds or more of the shares, and it layers protective devices one upon another even in situations below two-thirds, where a partial offer is permitted. It prohibits separate purchases during the tender offer period, and where subscriptions exceed the offer, the largest shareholder too is allocated pro rata without exception. In addition, the Ministry of Economy, Trade and Industry’s Guidelines for Corporate Takeovers (2023) require a board that receives a partial offer proposal to treat “the fact that shareholders are not able to sell all of their shares at that price” as an important axis of judgment, and to negotiate with the acquirer to convert the offer into a full purchase where it concludes that the problems of a partial offer are significant; and they point out that a partial offer with a cap “leaves existing shareholders as minority shareholders and thus makes it easier for a takeover that diminishes corporate value to be effected.” Japan has, in other words, given concrete form to the board’s duties of negotiation and protection as soft law, in place of permitting partial offers by statute.
4. We Urge Two Supplemental Measures, However Modest
If the 50%+1 Share Amendment is to be proceeded with, we urge that the following two measures be added.
① Require the Controlling Shareholder Also to Sell Only Through the Tender Offer (Pro Rata Acceptance)
In a transaction that triggers a mandatory tender offer, it would be sufficient to require the controlling shareholder also to dispose of its shares only by tendering into the offer. If the “pre-acquisition” of the controlling shareholder’s stake off-market were required to take the form of the tender offer itself, then where the acquirer seeks to buy only 50%+1 share, the controlling shareholder could sell only in the same proportion as general shareholders; and an acquirer wishing to obtain the controlling shareholder’s entire stake would have to increase the volume, ultimately arriving at a full purchase. Japan requires an acquisition exceeding 30% to be effected by way of tender offer, and allocates pro rata among the largest shareholders as well.
② Separate the Vote from the Sale (MoM Approval)
If a partial offer is to be retained at all, its effectiveness should be conditioned on the approval of a majority of minority (MoM) shareholders, excluding the acquirer, the selling controlling shareholder and specially related persons; and shareholders who voted against it should be permitted to tender on the same terms once the offer has taken effect. The structure is one in which a shareholder who wishes to oppose may oppose, but if a majority approves, that shareholder too may sell — so that general shareholders can escape the selling pressure. The UK, Hong Kong and Singapore operate this method through a separate approval box on the tender form for partial offers exceptionally permitted with the consent of the regulator; Israel operates it through its companies act.
5. If Not This, Then Do Not Legislate at All
A fiduciary duty of directors to shareholders has been introduced into the Korean Commercial Code, and the Ministry of Justice’s Guidelines have pointed out that a structure combining a partial offer with a subsequent share exchange in merger and going-private transactions may increase selling pressure, and have set out procedures for securing fairness, such as a special committee. Although they are insufficient, special committees have begun to operate in the market, and boards have begun to state their views on tender offers.
As with the Guidelines of Japan’s METI referred to above, it would also be possible to give concrete form to shareholder protection in partial offer situations through soft law. Once directors’ fiduciary duty to shareholders takes root, boards will be under a duty, as in the US, to reject coercive takeovers and to pursue a sale at the highest price, and matters may reach the point where partial offers effectively disappear.
Yet the 50%+1 Share Amendment would become a basis for immunity on the ground that “we did everything the law required,” foreclosing entirely any room for directors’ fiduciary duty, for soft law, and for market monitoring and judicial review to operate. We are concerned that this would be a repetition of what happened when merger price formulae were fixed to market-price formulae for decades, denying minority shareholders any room to contest a fair price.
September 17th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Auditor, Hyeseop Sim