Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
In principle, within 30 days after the consummation of the underlying transactions (such as a merger or the acquisition of shares), the acquiring party must report such transactions to the KFTC. If a large company (with total assets or annual turnover of 2 trillion won or more on a consolidated basis) is involved in the business combination (except the interlocking directorate), the pre-merger notification must be filed any time after the date of signing the agreement and before the closing date. Furthermore, in a pre-merger notification case, the acquiring company may not acquire the new shares or complete the transfer of the business, nor may it register the business combination pending the KFTC’s review. The reporting company may, however, voluntarily request the KFTC to conduct a prior review of the transaction in question even before entering into the agreement.
The MRFTA provides that if a reportable merger is not notified, the KFTC may impose an administrative fine of up to 100 million won upon those companies that failed to file. The KFTC imposed administrative fines of 327 million won in total on 25 cases that failed to file business combination reports in 2018.
Which parties are responsible for filing and are filing fees required?
The acquiring company is responsible for reporting the business combination to the KFTC. In the case of the establishment of a joint venture company, the party who becomes the largest shareholder is responsible for filing. No filing fees are required in Korea.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
Taking effect from 22 June 2012, all notifications (both pre-merger and post-merger notifications) are subject to a 30-day waiting period after the filing date. In addition, the waiting period may be extended by up to 90 days where the KFTC deems it necessary. Prior to receiving a clearance from the KFTC, consummation of the business combination such as the transfer of stocks, registration of ownership and full payment of the purchase price is prohibited.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
The KFTC may file actions against companies that close their transactions before clearance. In the case of a merger or establishment of a new joint venture prior to clearance, the KFTC may file a lawsuit to nullify the consummation of such business combination. In practice, the KFTC imposes an administrative fine of up to 100 million won on the company responsible for filing. This sanction is enforced without fail as long as the violation is detected.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
The sanctions are also applied in cases involving closing before clearance in foreign-to-foreign mergers. The KFTC announced that they imposed sanctions on five foreign companies in 2012 for violation of the merger control rules (failure to report, delay in report as well as consummation before closing). The latest official data has not been opened to the public.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
Because a foreign-to-foreign merger is also subject to a filing requirement, the KFTC will investigate whether the merger will have any anticompetitive impact on the relevant markets in Korea. In this regard, such solutions as a local ‘hold-separate’ arrangement in exchange with closing before clearance in a foreign-to-foreign merger have never been recognised in Korea.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
In the case of public takeover bids, the notification must be filed within 30 days of the date on which the acquisition of shares takes place even if a large company is involved in the transaction.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The reporting party must provide the KFTC with sufficient information to allow the KFTC to review the underlying transactions. Full details of transactions are required, and various forms must be completed and submitted together with supporting documents. The KFTC provides a list of necessary documentation relating to the proposed transaction to enable it to determine whether there will be any anticompetitive impact on the market if it is completed. Under this general rule, data or information on the financial statements of the parties, names of the shareholders of the parties, financial statements of affiliated companies (including organisation charts, etc), as well as market information in the relevant sector are required. If the KFTC deems it necessary, it may request further data or information. If the KFTC officer discovers the provided information is not correct or necessary information is missing, he or she may issue a request for supplementary information. In this case, the clock stops on the date the request is issued and restarts once the requested information is received.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
Once it has received the report, accompanied by relevant documents containing information relating to the proposed transaction, the KFTC has 30 days (subject to a 90-day extension) to deliver its determination. During this time, the report is circulated internally and officers handling the case are required to investigate the possibility of an anticompetitive effect on the market. If there is any material anticompetitive impact on the market arising from the business combination, the transactions may not receive clearance.
What is the statutory timetable for clearance? Can it be speeded up?
After submission of the filing to the KFTC, the KFTC must, within 30 days, issue its decision on whether to grant clearance under the MRFTA. The 30-day period may, at the discretion of the KFTC, be shortened or extended by up to 90 days. Where such extensions are required, common reasons include the complexity of the potential transaction and the KFTC requesting additional information (whether owing to the incomplete nature of the information filed with the KFTC in the initial report or because the KFTC deems that the complexity of its investigation requires further data to enable it to reach a determination based on sufficient research on the question of clearance). In this case, the period required for submitting supplementary documents to the KFTC shall not be included in the review period. There is no formal mechanism for accelerating the review process, even though the KFTC may do so at its discretion.