A proposed bill in South Korea aims to regulate ‘Korean-style bear hugs’ by bolstering shareholder disclosure requirements and tackling stock suppression, signalling a significant shift in the country’s corporate control landscape.
South Korea’s debate over a “Korean-style bear hug” has moved from political signalling to draft legislation, with a bill filed on 3 September that would force listed companies to tell shareholders about important takeover approaches and require boards to state, publicly, whether a bid serves all investors. The proposal, led by Democratic Party lawmaker Oh Ki-hyung with 10 other legislators, is aimed squarely at companies whose shares trade well below book value and whose managers have long been shielded from serious contests for control.
The timing matters because the proposal is now being tied to a broader campaign against what officials call “stock suppression”. Newsis reported that finance minister nominee Lee Hyoung-il raised the idea on 2 September, arguing that tax reform alone may not be enough to stop controlling shareholders from benefiting from depressed valuations ahead of inheritance or gift-tax events. He said authorities were considering how to institutionalise bear-hug tactics so that companies with excessively low share prices would not be insulated from merger threats. That discussion comes alongside the government’s 2026 tax overhaul, which would let officials look back as far as six years and six months, rather than rely on the current four-month average price, when valuing shares in suspected suppression cases.
Under the draft Capital Markets Act amendment, boards would no longer be able to treat major tender offers as something they may comment on only if they wish. Beta News reported that, where a bid materially affects shareholders, a target company’s board would have to reach its view through an “independent and professional” process and explain the impact on shareholder value from the standpoint of all shareholders. Tiger Brokers, citing Oh’s office, said the board would also have to publish whether the offer serves the interests of all shareholders. The same package would broaden the scope of mandatory reporting from matters affecting a company’s management and assets to matters affecting shareholders as well, reflecting the growing expectation, after changes to directors’ duties, that boards must answer directly to investors in takeover situations.
Supporters say the case for tougher disclosure is strengthened by how many Korean companies still trade below book value. Beta News and Newsis both cited figures from Oh’s office showing that about 69% of KOSPI-listed companies were below 1 times price-to-book value at the end of 2025, compared with about 20% in the United States and 36% in Japan. Before the bill was filed, Seoul Economic Daily reported that one option under review was to apply the rule when a company trading below 0.5 times book value received an offer carrying a control premium, though the final threshold had not been fixed. The same report said pressure could rise further if South Korea also revives a mandatory tender-offer regime, which would let minority shareholders sell on the same terms as controlling investors in large stake sales.
That prospect is exactly why governance advocates see the measure as more than a technical disclosure change. Seoul Economic Daily quoted Lee Nam-woo of the Korea Corporate Governance Forum saying such a system “could raise price-to-book ratios by allowing undervalued companies to be repriced according to market principles”. Financial News reported that Lee went further, arguing that exposure to hostile bids is a legitimate form of market discipline and that the most reliable way to defend control is not to complain about bidders but to repair a discounted share price.
Business groups and deal advisers, however, say the state may be sharpening the spear without issuing a shield. Seoul Economic Daily reported concerns that compulsory disclosure of acquisition approaches could affect competitiveness, while Financial News said some bankers fear the change could leave domestic companies easier prey for overseas capital. In a separate market-watch report, the newspaper said critics worry that public pressure on boards is being strengthened even though South Korea still lacks robust defensive devices commonly seen elsewhere. Another Financial News article quoted deal professionals saying groups such as Hyundai Mobis, LG, Lotte Holdings, KCC and Hankook & Company could face far more intense repricing pressure if the rules take effect.
Even among legal specialists who back the disclosure duty, support is qualified rather than absolute. Financial News reported that An Tae-jun of Hanyang University’s law school called compulsory board opinions on tender offers “sufficiently legislatively valid” given the strengthened duty of loyalty to shareholders, and said the obligation itself should not be seen as a device that directly increases tender offers. But he also argued that South Korea’s takeover defences remain narrow by international standards and that lawmakers should debate counterweights such as poison pills or multiple-voting-share structures as part of the broader “game rules”.
For now, that balance is becoming the central question. Oh has presented the bill as a way to improve information transparency, protect investors and chip away at the Korea discount, while the government has framed bear hugs as a possible answer to entrenched low valuations and opaque succession incentives. Yet the same reporting that made the reform sound urgent has also underlined its limits: it will work only if South Korea has an active enough M&A market to make threats credible, and only if lawmakers decide how much room boards should have to defend themselves once silence is no longer an option.
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