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Korea to ease rules on M&As
Writer : Sender
Sep 29, 2009
Korea plans to allow special purpose acquisition companies in order to facilitate takeover activity and corporate restructuring, the nation's top financial regulator said yesterday.
The Financial Services Commission said it is revising regulations to allow private investors to form a paper company, SPAC, which can raise funds through an initial public offering and acquire another firm with that money.
Currently, a shell company is not allowed to list its shares on the Seoul bourse.
"The move would help accelerate the restructuring move and raise corporate value through the mechanism of the capital market," Hong Young-man, director-general at the capital markets bureau of the FSC, said at a press conference.
The government expects the SPAC system to come into effect within the year.
The move comes as the Korea's financial authorities strive to the momentum for corporate restructuring alive, as its urgency fades with the economy's stronger-than-expected performance.
Kim Jong-chang, chairman of the Financial Supervisory Service, the executive arm of the FSC, recently urged banks to keep a vigilant eye on borrowers.
"Banks should not hesitate to take actions on companies that are failing in competition, because of worries about the impact on their business results in the short run," he said.
Korean banks have led a corporate reform campaign as Asia's fourth-largest economy contracted sharply in the last quarter of 2008 and slightly in the first quarter of 2009 in the face of a global slowdown. Some major industrial groups, including Kumho Asiana, have been placed under bank-led balance-sheet enhancement programs.
Aside from allowing the SPAC, the FSC also plans to ease regulations on private equity funds so they can invest more in corporate restructuring and infrastructure projects.
Under the plan, PEFs will be allowed to invest in infrastructure projects directly, with the investment amount not exceeding half of total asset. Currently, the funds can invest only indirectly by purchasing security papers issued by companies leading infrastructure development.
The FSC plans to allow PEFs injecting funds into local companies under corporate restructuring programs to lend more.
The regulator is also moving to lower the upper limit of fees that fund managers charge on retail investors.
Currently, fund managers are allowed to charge a 5 percent sales fee upon buying or selling of fund products and a 5 percent of maintenance fee. The regulator plans to drastically slash them to 2 percent and 1 percent, respectively.
(Source: The Korea Herald)
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