1. Reason for revision
The purpose of the proposed revision is to rectify certain operational deficiencies in the enforcement of the current system while taking follow-up actions on the “Measures to Enhance the Soundness of the Convertible Bond Market” published on January 23, 2024.
2. Main contents
a. The obligation of disclosure is imposed when exercisers of the call option are designated (Article 4-4 (2) 3 of the Draft)
- It prescribes that the specific information on the exercisers of the call option must be disclosed upon their designation.
b. Enhance the disclosure of the issuer’s acquisition of convertible bonds prior to maturity (Article 4-4 (2) 4 of the Draft)
- The issuers are required to disclose the details upon acquiring convertible bonds before maturity.
c. Clarification of base date for calculating conversion value, such as for private equity convertible bonds (Article 5-22 (1) of the Draft)
- In the case of private equity convertible bonds, etc., it requires the conversion value to reflect the standard market price on the actual payment date when the conversion value is calculated.
d. Rationalize the exceptional application of the minimum limit for adjustment of the conversion value (Subparagraph 2 of Article 5-23 of the Draft)
- It prescribes that the minimum limit for adjustment of the conversion value may only be applied (less than 70% of the initial conversion value) in exceptional cases pursuant to a special resolution by the general shareholders' meeting (case-by-case).
e. Prevention of excessive downward adjustment of conversion value in the case of capital increase, stock dividend, etc. (Subparagraph 4 of Article 5-23 of the Draft)
- It prescribes that the conversion value may be adjusted downward only at prices higher than those reflecting the dilution effect if the value of the conversion right is diluted due to capital increase, stock dividend, etc.
