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Disclosure of Significant Event

Disclosure for Corporate Insiders

A person who becomes a corporate insiderㅡa director or an officer or a major shareholder of a listed companyㅡfor the first time must file a disclosure on its legal and beneficial equity ownership in the company (the issuer) within five days with the SFC/FSS and the Korea Exchange. Any change in the insider’s equity ownership thereafter must also be reported to the SFC/FSS and the Korea Exchange within five days. Equity securities issued by the company and held by its corporate insiders are referred to as specific securities.

Corporate insiders are subject to strict equity ownership disclosure requirements because they are assumed to be privy to material nonpublic information about their company that may be abused for personal gains. The disclosure requirements are intended to ensure timely and fair disclosure of insiders' equity interests and any trade involving them to the market.

Specific Securities

The term "specific securities" refers to any of the following classes of securities:

  • (a) Equity and equity-convertible securities such as voting stock, preferred nonvoting stock, convertible bonds, bonds with warrants, participating bonds, and investment contracts;
  • (b) Depositary receipts and exchangeable bonds linked to the equity securities listed in subparagraph (a); and
  • (c) Derivatives and other investment products whose underlying assets consist of any of the securities listed in subparagraphs (a) and (b).

Persons Subject to Disclosure

A company's directors and officers and major shareholders are primarily subject to insider disclosure rules.

Directors and Officers

Directors and officers who are subject to insider disclosure requirements refer to:

  • (a) Directors (including outside directors) and the auditor elected by the company's shareholders at the general shareholders' meeting; or
  • (b) Officers as provided under article 401-2(1) of the Commercial Act; they may include: (i) persons who effectively control the company and routinely order company directors to carry out specific activities; (ii) persons who can act on behalf of the company; and (iii) persons who are not directors but perform executive duties and functions assuming such titles as honorary president, president, chief executive officer, executive director, director, or other titles indicative of decision-making position or authority.

The directors and officers of an affiliate of the listed company are not subject to insider disclosure irrespective of whether or not they are registered or unregistered directors.

The determination of whether a person is a company officer is to be made by the person in consideration of the following:

  • (a) A person carries out company duties assuming such job titles as honorary president, president, chief executive officer, executive director, and director; or
  • (b) Where a person assumes an advisor title or a director-equivalent title, the determination is to be made with due consideration given to the following:
    • Use of the title within the company;
    • Areas of responsibility and decision-making authority; or
    • Amount of remuneration.
Major Shareholders

The term "major shareholder" denotes either of the following shareholders:

  • (a) A shareholder that holds at least 10 percent of the company's total voting equity securities issued, including depositary receipts that have been issued for such securities (irrespective of whether the voting equity securities are held in the name of the shareholder or not); or
  • (b) A shareholder that holds less than 10 percent of the total voting equity securities issued, but nevertheless effectively controls the company.

The ownership of specific securities such as convertible bonds and bonds with warrants that are not voting equity securities is not relevant to the determination of a major shareholder when the shareholder's voting equity securities in the company are less than 10 percent. Therefore, a shareholder that holds 7 percent of the voting equity securities and 3 percent of the convertible bonds issued by the company is not a major shareholder unless the shareholder effectively controls the company.

In calculating a shareholder's ownership of specific securities, equity securities held or traded under another person's name are included. Similarly, equity securities acquired and held under the employee stock ownership plan count toward equity ownership of a major shareholder.

A shareholder that effectively controls a company is a shareholder who:

  • (a) Has appointed, alone or together with other shareholders, the company's chief executive officer or the majority of the members of the company's board of directors; or
  • (b) Holds the decision-making authority in respect of the company's business management, organization change, and other key decisions. The determination of whether a shareholder meets this criterion (and liability for the determination) is left to the shareholder.

Disclosure Period

A person who becomes a director, an officer, or a major shareholder of a listed company for the first time must file a report on the ownership of specific securities issued by the company. An initial ownership report (IOR) must be filed within five days after the person becomes a director, an officer, or a major shareholder. No IOR is required if the person does not hold any legal or beneficial ownership of specific securities.

A change in ownership report (COR) must be filed within five days when a change in the ownership of an insider's specific securities occurs.

Effective Date for Initial Ownership Report
  • (a) Where a person is elected a director at the company's general shareholders' meeting for the first time, the effective date is the day of the election.
  • (b) Where a person becomes an officer, the effective date is the day the person assumes the appointed position.
  • (c) Where a person becomes a major shareholder after acquiring company shares, the effective date is the day of the share acquisition.
  • (d) Where an unlisted company becomes listed for the first time, the effective date is the day the company becomes listed.
  • (e) Where an unlisted company merges with a listed company, and an insider of the unlisted company becomes an insider of the listed company, the effective date is the day the shares of the merged company commences trading.
Effective Date for Change in Ownership Report
  • (a) Where an insider either buys or sells specific securities on-exchange during regular trading hours, the effective date is the day of the transaction settlement (T+2).
  • (b) Where an insider either buys or sells specific securities off-exchange, the effective day is the earlier of either the date the payment was made or the date the securities are delivered.
  • (c) Where an insider acquires specific securities in a secondary stock offering, the effective date is the date immediately following the day the payment is delivered.
  • (d) Where an insider lends or borrows specific securities, the effective date is the day the securities are lent or borrowed.
  • (e) Where an insider receives specific securities as a gift, the effective date is the day the delivery of the securities is completed.
  • (f) Where an insider inherits specific securities, the effective date is the day the inheritance is finalized. Where two or more persons inherit specific securities, the effective date is the day the division of the securities and any other share-related assets is completed.
  • (g) Where an insider acquires specific securities through other means, the effective date is to be determined as provided under the applicable law:
    • Acquisition of scrip shares (capitalization shares): the date the scrip shares were allotted;
    • Acquisition of stock dividends: the date the stock dividend distribution was approved at the company's general shareholders' meeting;
    • Acquisition of shares from the exercise of equity conversion rights/options attached to convertible bonds: the date the conversion rights/options were exercised;
    • Acquisition of shares from the exercise of equity conversion rights/options attached to bonds with warrants and stock options: the date payment for the shares was made;
    • Acquisition of shares of a newly merged company: the date of the merger registration; and
    • Reverse stock split, stock split, and share redemption: applicable provisions of the Commercial Act.
Exemptions from Change in Ownership Report

Where the aggregate number of specific securities of an insider was less than 1,000 shares, or either the acquisition or the disposition amount was less than KRW10 million after the most recent filing, COR is not necessary. The determination of disclosure exemption must be made on a cumulative basis.

Extension of Disclosure Deadline

For a change in share ownership due to stock dividend, stock split, reverse stock split, capital reduction, or other unavoidable causes, the disclosure deadline is extended to the tenth day of the following month. For certain qualified investors that pose little or no risk of abuse of inside information, the disclosure deadline is extended to the tenth day of the following quarter. The disclosure deadline for IOR remains unchanged at five business days.

The qualified investors exempted from the five-day disclosure period include the following:

  • National and municipal governments;
  • Bank of Korea;
  • Korea Deposit Insurance Corporation and Korea Resolution & Collection(KR&C);
  • Korea Asset Management Corporation;
  • Korea Housing Finance Corporation;
  • Korea Investment Corporation;
  • Korea Securities Depository;
  • Korea Exchange;
  • Financial Supervisory Service;
  • Collective Investment Scheme;
  • Korea Credit Guarantee Fund.;
  • Korea Technology Finance Corporation;
  • Funds and fund managing entities established under the law; and
  • Joint enterprises established for member benefits under the law.