개정상법상 자기주식의 취득과 처분

Abstract

This article reviews legal issues related to stock repurchase and cancellation of shares under the 2011 revision of the Korean Commercial Code (KCC). A reacquired stock is one that is bought back by the issuing company. Companies repurchase their own stock for various reasons. Sometimes companies do this when they decide that their stock is undervalued in the open market. Another important purpose of repurchase is to provide a “bonus” according to an incentive compensation plan for employees. Others use stock repurchase to protect their company against a takeover threat. The Korean Commercial Code, before the revision in 2011, has strictly restricted the companies' repurchasing their own stock. However, the 2011 revision of KCC permitted companies to repurchase their own stock with their distributable profits. Thereafter, the Companies can either cancel the purchased shares or hold the shares for later resale. If not canceled, such shares are referred to as treasury shares. The revision intended not only to enhance the flexibility of equity financing, but also to harmonize treasury stock policy with that of other jurisdiction. For example, in the United States, buybacks are allowed and covered by multiple laws under the auspices of the Securities and Exchange Commission. Also, in the UK, the Companies Act of 1955 companies from holding their own shares. However, the Companies Act of 1993 later repealed this. Further, stocks can be reacquired even when companies have no dividable profits, if they are repurchased when exercising the appraisal rights of dissenters in a case of M&A, takeover, split of corporation etc. This is termed reacquisition of stocks for specific purposes. On the other hand, companies are able to dispose the treasury stock at any time by the action of the board of directors. There are no restrictions on disposing the treasury stocks on the time or on the sale to a third party under the revised KCC. On the contrary, §165-5 paragraph 4 of the Financial Investment Services and Capital Market Act provides that the companies that reacquired stocks in the course of exercising the appraisal rights of dissenters shall dispose said stocks within three years from reacquiring. This writer suggests to repeal §165-5 paragraph 4 of the Financial Investment Services and Capital Market Act, so as to allow the companies to hold treasury stocks without a limit on time or other obligations.