Successful Advisory on Legal Risk Review and Response Regarding Major Shareholder Disposal of Shares Amid Delisting Crisis

This matter involved a request for legal advice from the largest shareholder of a listed company regarding whether the shareholder could sell their equity stake in a situation where the company's declining market capitalization had raised the possibility of delisting. The client was concerned about whether selling the major shareholder's stake amid a potential delisting procedure could give rise to illegality under the Financial Investment Services and Capital Markets Act, and in particular whether it could amount to the use of undisclosed material information. The client also needed advice on whether a transaction structured as a transfer of the stake to a specially related party was feasible, and whether such a process could give rise to criminal, civil, or tax-related problems.

The core issues in this matter were organized as follows.

First, whether the act of the major shareholder selling their held shares is itself legally restricted in a situation where grounds for delisting have arisen or are in progress. Second, whether a violation of the Financial Investment Services and Capital Markets Act is established where the major shareholder, as an insider, sells shares using undisclosed material information in their possession. Third, whether choosing a structure of transferring the stake to a specially related party could give rise to risks such as breach of trust under criminal law, breach of a shareholders' agreement, or the denial of unfair calculation of transactions under tax law.

Insight Law Firm provided advice after comprehensively reviewing the relevant statutes, precedents, and regulatory trends of the financial authorities. First, we explained that since the transfer of shares is in principle free under the Commercial Act, the mere fact that a delisting procedure is in progress does not generally prohibit a major shareholder's disposal of shares. However, we emphasized that where a major shareholder trades using undisclosed material information acquired from within the company, a violation of Article 174 of the Financial Investment Services and Capital Markets Act may be established, so a close review of the timing of the transaction and whether the information was held is necessary. In particular, we analyzed that where internal information capable of having a material effect on investment decisions, such as the status of a listing eligibility review, deterioration of internal finances, or large-scale losses, exists prior to disclosure, the transaction itself may give rise to legal risk. We also presented that while a structure transferring the stake to a specially related party is in principle possible, breach of trust issues or taxation issues under tax law may arise depending on the transaction structure, so it is important to secure the rationality of the transaction's purpose and the price determination.

Through this advice, the client was able to confirm that disposing of a stake in a situation where delisting is a possibility is not necessarily illegal, while at the same time recognizing in advance the criminal, administrative, and civil risks that could arise during the actual transaction process and establishing a response strategy. In particular, by clearly organizing the point that whether undisclosed material information is used serves as the core criterion for judgment, and that additional legal liability may arise depending on the transaction structure, the client established a standard for designing the method and timing of the stake disposal more carefully going forward.

This case demonstrates that a major shareholder's stake transaction conducted amid a delisting crisis is not a simple matter of selling shares, but a high-risk area combining various legal issues such as capital markets law, company law, criminal law, and tax law. When a company faces such a situation, designing the transaction structure and timing through prior legal review plays an important role in preventing unnecessary criminal risk and regulatory response costs.

Governance and capital market issues arising in the course of corporate management are matters that go beyond simple legal problems and are directly connected to a company's trust and value. Insight Law Firm's "Your Legal Team" supports companies in making stable decisions by systematically analyzing such complex legal risks and presenting practical resolution strategies.