South Korea’s government and ruling Democratic Party have agreed to push for a new “bear hug” system that would require prospective corporate acquirers to publicly disclose key details of unsolicited takeover offers.
The agreement, announced September 29, is part of the government and ruling party’s broader effort to reform South Korea’s capital market and strengthen transparency around corporate transactions.
Rep. Oh Gi-hyoung, chairman of the ruling party’s Special Committee on K-Capital Market, said the committee plans to accelerate an amendment to the Capital Market Act with the goal of introducing the system by the end of 2026.
What Is the “Bear Hug” System?
A bear hug refers to a takeover proposal made publicly by a potential buyer in an effort to pressure the target company’s board to consider the offer and respond.
Under the proposed system, information about such takeover attempts would be disclosed to the market, allowing shareholders and other market participants to assess the proposal and its potential implications.
Oh said the disclosure requirement is intended to give market participants access to information needed to make informed decisions and potentially facilitate corporate transactions.
The proposal would require changes to South Korea’s Capital Market Act, meaning the announced target of implementation by year-end still depends on the legislative process.
Why South Korea Is Pursuing the Change
The proposed reform comes as Seoul seeks to strengthen its capital markets and encourage companies to improve corporate value.
The government and ruling party are also continuing work on measures targeting companies with persistently low price-to-book ratios, or PBRs.
The Korea Exchange’s planned “naming and shaming” initiative is scheduled to identify companies with low PBRs publicly for the first time on November 2, according to Oh.
Oh said approximately 60% to 70% of South Korean companies have PBRs below 1, highlighting the scale of the issue the committee is seeking to address.
What Could Change for Companies and Shareholders?
If the proposed bear-hug disclosure system becomes law, unsolicited takeover attempts could become more visible to investors earlier in the process.
That could give shareholders additional information when evaluating a potential change in corporate ownership or control.
For companies facing an unsolicited bid, however, greater disclosure could also mean that takeover proposals become a matter of public attention much earlier, potentially increasing pressure on boards to explain their position.
The precise disclosure requirements, procedures and legal consequences will depend on the legislation ultimately passed by the National Assembly.
The Next Deadline Is Now in Sight
The ruling party’s K-Capital Market committee plans to work on the Capital Market Act amendment with the stated goal of completing the legislative process within 2026.
That puts the proposed takeover-disclosure system alongside other capital-market reforms being pursued by Seoul as policymakers seek to increase transparency and address concerns surrounding corporate valuations.
For investors and companies, the key question now shifts from whether South Korea will introduce the “bear hug” concept to exactly how the new disclosure rules will work once lawmakers turn the proposal into legislation.
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