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Business Under Legal Management Prohibited from Selling over 50 Percent of New Stocks in One Year

Business Under Legal Management Prohibited from Selling over 50 Percent of New Stocks in One Year

Posted October. 11, 2001 08:53,   


A new measure was introduced to promote M&A of the business under legal management and to prohibit speculative purchase of the CRCs for short-term marginal profits.

The Bankruptcy department of the Seoul district court announced its implementation of `the revised standard concerning the M&A process of the businesses under legal management` which regulates the prohibition the new buyer from selling over 50 percent of new stock in a year.

The revision is introduced to control the influx of the short-term speculative fund of CRCs to the M&A market, which had brought about a problem of the stock price fabrication by the purchase of insolvent business.

According to the new regulation, the buyer of the new stocks that issued in the process of M&A cannot sell out over 50 percent of the new stocks in a year. In addition, the individual or business who want to purchase a business have to present their purchase plan to the court to prove their intention to manage the business.

A related official said, ``the prohibition of the stock sales in a certain period might bring about a controversy about a market principle. However, the measure is to protect the creditors and stockholders from the speculative M&A. If the CRCs guarantee its purpose to revive the insolvent business rather than a speculative investment, they will be encouraged to participate in M&A.``

In addition, the new regulation includes such measures as clarification of the criteria for the buyer and the manager of M&A, setting up a standard fee for the manager, increasing the maximum fee of the manager of M&A up to 300 million won.

10 corporations including Sammi Corporation, Shinhan Steel, and Shinho Steel have got rid of legal management by the M&A and 30 businesses are currently in the process of M&A.

Lee Jung-Eun lightee@donga.com