Document:

EX-4.7 KOREAN SECURITIES AND EXCHANGE ACT

 

Exhibit 4.7

Securities and Exchange Act

	 	 	 	 	 
	Wholly amended By

	 	1976•12•22
	 	Act No. 2920
	Amended By

	 	1982• 3•29
	 	Act No. 3541
	Amended By

	 	1987•11•28
	 	Act No. 3945
	Amended By

	 	1991•12•31
	 	Act No. 4469
	Amended By

	 	1994• 1• 5
	 	Act No. 4701
	Amended By

	 	1995•12•29
	 	Act No. 5041
	Amended By

	 	1997• 1•13
	 	Act No. 5254
	Amended By

	 	1997•12•13
	 	Act No. 5423
	Amended By

	 	1998• 1• 8
	 	Act No. 5498
	Amended By

	 	1998• 2•24
	 	Act No. 5521
	Amended By

	 	1998• 5•25
	 	Act No. 5539
	Amended By

	 	1998• 9•16
	 	Act No. 5559
	Amended By

	 	1998•12•28
	 	Act No. 5591
	Amended By

	 	1999• 2• 1
	 	Act No. 5736
	Amended By

	 	1999• 5•24
	 	Act No. 5982
	Amended By

	 	2000• 1•21
	 	Act No. 6176
	Amended By

	 	2001• 3•28
	 	Act No. 6423
	Amended By

	 	2002• 1•26
	 	Act No. 6623
	Amended By

	 	2002• 4•27
	 	Act No. 6695
	Amended By

	 	2003•10• 4
	 	Act No. 6987
	Amended By

	 	2003•12•31
	 	Act No. 7025
	Amended By

	 	2005•12•29
	 	Act No. 7762

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to contribute to the development of national economy by attaining wide
and orderly circulation of securities, and by protecting investors through fair issuance, purchase,
sale or other transactions of securities.

Article 2 (Definitions)

 

 

(1) The term “securities” in this Act shall mean any of the following subparagraphs: <Amended by
Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>

1. Government bonds;

2. Municipal bonds;

3. Bonds issued by a corporation which is established under a special Act;

4. Corporate bonds;

5. Certificates of contribution issued by a corporation which is established under a special Act;

6. Stock certificates, or instruments which represent preemptive right;

7. Certificates or instruments issued by a foreign corporation, etc., which have the same nature as
those referred to in subparagraphs 1 through 6 of this paragraph;

8. Securities depository receipts which a person designated by the Presidential Decree issues based
on underlying certificates or instruments issued by a foreign corporation, etc.; and

9. Other certificates or instruments designated by the Presidential Decree, which are similar or
related to those referred to in subparagraphs 1 through 8 of this paragraph.

(2) Such right as shall be represented by the securities referred to in each subparagraph of
paragraph (1) shall be regarded as such securities, even before certificates of such securities
have been issued with respect to such rights.

(3) The term “public offering of new securities” in this Act shall mean a solicitation of an offer
to acquire securities which are issued newly under the Presidential Decree. <Amended by Act No.
4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>

(4) The term “public offering of outstanding securities” in this Act shall mean an offer to sell
outstanding securities or a solicitation of an offer to buy those under the Presidential Decree.

 

 

<Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>

(5) The term “issuer” in this Act shall mean a person who has issued or intends to issue any
securities: Provided, That in issuing securities prescribed in paragraph (1) 8, the term “issuer”
shall mean a person who has issued or intends to issue certificates or instruments which are the
basis of such issuance. <Amended by Act No. 5254, Jan. 13, 1997>

(6) The term “underwriting” in this Act shall mean an act which falls under any of the following
subparagraphs:

1. To acquire from an issuer all or a part of securities with a view to distributing, in connection
with issuance of the securities;

2. To make a contract to acquire the unsold portion of securities with an issuer in connection with
issuance of the securities, in a case where there is no one else to acquire it; and

3. To make arrangements on behalf of an issuer for a public offering of new or outstanding
securities, or to participate directly or indirectly in a public offering of new or outstanding
securities in part, for the purpose of a commission or reward.

(7) The term “underwriter” in this Act shall mean any person who conducts one of the activities
referred to in subparagraphs of paragraph (6). <Amended by Act No. 5423, Dec. 13, 1997>

(8) The term “securities business” in this Act shall mean any business which falls under any of the
following subparagraphs: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 6423, Mar. 28, 2001;
January 29, 2004>

1. To buy and sell securities;

2. To buy and sell securities on consignment;

3. To act as an intermediary or an agent with respect to purchase and sale of securities (excluding
what falls under subparagraph 8);

4. To act as an intermediary or agent with respect to an entrustment of sale and purchase
transactions to be executed on a securities market, KOSDAQ, or market in foreign country

 

 

similar to those;

5. To underwrite securities;

6. To make a public offering of outstanding securities;

7. To arrange for a public offering of new or outstanding securities; and

8. To act as an intermediary or an agent with respect to the sale and purchase of securities and
make other sale and purchase of securities necessary for the relevant intermediary business
according to quotations falling under each of the following items for listed stocks or KOSDAQ
registered stocks, making use of information communications networks and electronic data-processing
equipment, on behalf of many persons at the same time:

(a) Final quotations of the relevant stocks published by the securities market or KOSDAQ; and

(b) The single price determined in such manner as prescribed by the Ordinance of the Ministry of
Finance and Economy.

(9) The term “securities company” in this Act means a company which conducts securities business in
accordance with this Act.

(10) and (11) Deleted. <by Act No. 6987, Oct. 4, 2003>

(12) The term “securities market” in this Act shall mean a market which is established by the Korea
Exchange (hereinafter referred to as the “Korea Exchange”) organized under the Korea Exchange Act
that falls under a securities market within the meaning of Article 2(1) of the same Act.
<Amended Jan. 29, 2004>

(13) The terms “listed corporation”, “unlisted corporation”, “stock-listed corporation” and
“stock-unlisted corporation” in this Act shall mean: <Amended by Act No. 5736, Feb. 1, 1999>

1. Listed corporation: issuer of securities listed on the securities market;

2. Unlisted corporation: issuer of securities not listed on the securities market;

 

 

3. Stock-listed corporation: corporation which has issued stocks listed on the securities market;
and

4. Stock-unlisted corporation: corporation which has issued stocks not listed on the securities
market.

(14) The term “KOSDAQ” in this Act shall mea KOSDAQ within the meaning of Article 2(2) of the Korea
Exchange Act. <Amended Jan. 29, 2004>

(15) The term “KOSDAQ-registered corporation” in this Act shall mean a corporation which issued
securities listed on KOSDAQ d <Amended Jan. 29, 2004>

(16) The term “foreign corporation” in this Act shall mean a foreign government, foreign local
government, foreign public institution, foreign enterprise established under foreign Acts and
subordinate statutes, international finance organization established under a treaty, or person who
is designated by the Ordinance of the Ministry of Finance and Economy. <Newly Inserted by Act
No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998>

(17) The term “securities-related institution” in this Act shall mean: <Amended by Act No. 5736,
Feb. 1, 1999; Act No. 6987, Oct. 4, 2003>

1. An institution which has been established, licensed to do operations or business, or registered
under this Act;

2. An asset operation company, trustee company or asset deposit company under the Act on Business of
Operating Indirect Investment and Assets; and

3. Deleted. <by Act No. 6987, Oct. 4, 2003>

(18) The term “employee stock ownership association” in this Act shall mean an organization created
after satisfying requirements prescribed by the Presidential Decree for the purpose of promoting
the welfare of employees and enhancing their economic status through the management of stocks
acquired by such employees of any stock-listed corporation, any KOSDAQ registered corporation, or
any corporation, registered under Article 3, which intends to list newly its stock certificates.
<Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar.
28, 2001; Jan. 29, 2004>

 

 

(19) The term “outside director” in this Act shall mean a director who does not engage in the
regular business of the relevant company and is selected and appointed under Article 54-5 or
191-16. <Newly Inserted by Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001>

Article 2-2 [Deleted Dec. 29, 1995]

CHAPTER II REGISTRATION OF ISSUER OF SECURITIES

Article 3 (Registration of Issuer of Securities)

Any issuer who falls under any of the following subparagraphs shall be registered with the
Financial Supervisory Commission so as to provide for a fair issuance of securities and public
disclosure of information as to a business corporation: Provided, That the same shall not apply to
issuers of securities as prescribed in Article 2 (1) 1 through 3, 4 (limited to corporate bonds as
prescribed by the Presidential Decree), and 5, and of such other securities as determined by the
Presidential Decree: <Amended by Act No. 3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act
No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5498,
Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001;
Act No. 6623, Jan. 26, 2002; Jan. 29, 2004>

1. Deleted; <by Act No. 6623, Jan. 26, 2002>

2. A corporation that is neither KOSDAQ registered corporation nor listed corporation, which intends
to make a public offering of new or outstanding securities;

3. A corporation that is neither KOSDAQ registered corporation nor listed corporation, which intends
to merge with a stock-listed corporation or a KOSDAQ registered corporation;

4. Deleted; <by Act No. 6623, Jan. 26, 2002>

5. A corporation under incorporation which intends to make a public offering of new securities; and

 

 

6. A corporation which intends to grant the stock option pursuant to Article 189-4.

Article 4 (Documents for Registration)

An issuer of securities who applies for the registration pursuant to the provisions of Article 3
shall file documents as determined by the Financial Supervisory Commission such as general
situations and property conditions of the company, with the Financial Supervisory Commission. In
case where any significant matters stated in the filed documents are modified, such information
shall also be filed with the Financial Supervisory Commission. <Amended by Act No. 4469, Dec.
31, 1991; Act No. 5498, Jan. 8, 1998>

Article 5 (Disclosure of Documents Filed for Registration)

The Financial Supervisory Commission may offer the documents filed pursuant to Article 4 for public
inspection. <Amended by Act No. 5498, Jan. 8, 1998>

Article 6 (Administration of Registered Corporation)

With respect to a corporation which has been registered with the Financial Supervisory Commission
pursuant to the provisions of Article 3 (hereinafter referred to as a “registered corporation”),
the Financial Supervisory Commission may prescribe the criteria for sound management of the
registered corporation such as financing the corporate and improving financial structure, and make
necessary recommendations. <Amended by Act No. 5498, Jan. 8, 1998>

[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]

CHAPTER III REGISTRATION STATEMENT

Article 7 (Scope of Application)

No provisions of this Chapter shall apply to the securities referred to in Article 2 (1) 1 through
3 (including bonds that are deemed bonds of subparagraph 3 in other Acts and subordinate

 

 

statutes, but excluding bonds prescribed by the Presidential Decree) and 5 and to such other
securities as determined by the Presidential Decree. <Amended by Act No. 4469, Dec. 31, 1991;
Act No. 6423, Mar. 28, 2001>

Article 8 (Registration of Public Offering)

(1) Where the total value of a public offering of new or outstanding securities, which is
calculated as prescribed by the Ordinance of the Ministry of Finance and Economy, is not less than
the amount prescribed by the Ordinance of the Ministry of Finance and Economy, the public offering
of such securities may not be made unless the issuer files a registration statement on such
securities with the Financial Supervisory Commission and the registration statement is accepted by
the Financial Supervisory Commission: Provided, That if the issuer determines a period in which he
is to issue securities pursuant to the Ordinance of the Ministry of Finance and Economy, and files
en bloc a registration statement of securities to be offered publicly during the period
(hereinafter referred to as “shelf registration statement”) with the Financial Supervisory
Commission, and the shelf registration statement is accepted by the Financial Supervisory
Commission, he shall not be required to file separately the registration statement on securities to
be offered publicly in such period. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan.
13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6423, Mar. 28, 2001>

(2) Matters on the predictions or prospects for the issuer’s future financial status or results of
operation which fall under any of the following subparagraphs (hereinafter referred to as
“predicted information”) may be entered or indicated in a registration statement under paragraph
(1). In this case, the entry or indication of predicted information shall be made through the
methods as prescribed in Article 14 (2) 1, 2 and 4: <Newly Inserted by Act No. 5736, Feb. 1,
1999>

1. Matters on the issuer’s results of operation such as size in sales and revenues, or other
predictions or prospects for results of operation;

2. Matters on the predictions or prospects for the issuer’s financial status such as the size in
capital stock and funds flows;

 

 

3. Matters on the issuer’s results of operation or changes in financial status, and targeted levels
at a certain point due to the occurrence of a particular event or the establishment of a particular
plan; and

4. Other matters on the predictions or prospects for the issuer’s future as determined by the
Presidential Decree.

(3) In filing a registration under paragraph (1), where the matters to be entered in such
registration or accompanying documents are the same as those which have already been filed, the
Commission may allow the issuer to substitute the documents referring to the same information which
has already been filed for the above documents. <Amended by Act No. 5423, Dec. 13, 1997; Act No.
5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

(4) In filing a registration under paragraph (1), the representative director of the relevant
issuer and any director in charge of filing the registration (in the case of the absence of the
director in charge of filing the registration, referring to any person who executes the duties of
the relevant director; hereafter the same in this Article shall apply) shall put each signature to
the registration statement after confirming and examining matters prescribed by the Presidential
Decree, including the fact that the entries of matters that may affect investment judgment or the
value of securities and the entries of other important matters prescribed by the Presidential
Decree and indications in the registration statement are not omitted or falsified from among the
entries of the relevant registration statement. <Newly Inserted by Act No. 7025, Dec. 31,
2003>

(5) Matters necessary for the matters to be entered in the registration statement or accompanying
documents referred to in paragraphs (1) through (3) shall be determined by the Presidential Decree.
<Newly Inserted by Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb.
1, 1999; Act No. 6176, Jan. 21, 2000>

Article 9 (Effective Date of Registration Statement, etc.)

(1) A statement pursuant to the provisions of Article 8 (1) (hereinafter referred to as a
“registration statement”) shall come into force on such date as the time period prescribed by the
Ordinance of the Ministry of Finance and Economy elapses after the receipt thereof by the Financial
Supervisory Commission. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498,

 

 

Jan. 8, 1998; Act No. 5539, May 25, 1998>

(2) The effect taken pursuant to the provisions of paragraph (1) shall not be construed as assuring
that the truth or the accuracy of such matters stated in the registration statement has been
recognized on its face value or that the Government has guaranteed or approved the value of the
securities specified in the registration statement. <Amended by Act No. 5498, Jan. 8, 1998>

(3) In case where an issuer of securities intends to withdraw a registration statement of
securities, he shall file a registration statement on withdrawal with the Financial Supervisory
Commission before such registration statement takes effect. <Newly Inserted by Act No. 4469,
Dec. 31, 1991; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998;
Act No. 6176, Jan. 21, 2000>

[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]

Article 10 (Restrictions on Transactions)

(1) In case where there is an offer to acquire or purchase securities, unless a registration
statement has taken effect pursuant to the provisions of Article 9, no issuer or seller of
securities specified therein nor his agent shall accept such offer. <Amended by Act No. 3541,
Mar. 29, 1982>

(2) No issuer who filed a shelf registration statement pursuant to the proviso of Article 8 (1),
shall accept any offer for acquisition or purchase of securities, unless he files additional
documents of shelf registration statement determined by the Presidential Decree at each time he
makes a public offering of new or outstanding securities. <Newly Inserted by Act No. 4469, Dec.
31, 1991; Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

Article 11 (Amendment Statement)

(1) If it appears to the Financial Supervisory Commission that a registration statement is

 

 

incomplete in its form or inadequate in any material information required to be stated therein, the
Financial Supervisory Commission may, with presenting the reasons thereof, issue an order to file
an amendment statement. <Amended by Act No. 5498, Jan. 8, 1998>

(2) In case where an order is issued pursuant to the provisions of paragraph (1), the registration
statement concerned shall be construed not to be received by the Commission after the date on which
the order is issued.

(3) A person who has filed a registration statement may file an amendment statement, if there
occurs any modification in matters entered in the registration statement before the day of
subscription as determined by the statement commences. In this case, if important matters as
determined by the Ordinance of the Ministry of Finance and Economy are modified, the amendment
statement thereof shall be filed without fail. <Amended by Act No. 3945, Nov. 28, 1987; Act No.
4469, Dec. 31, 1991; Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998>

(4) A person who filed a shelf registration statement as prescribed in the proviso of Article 8
(1), notwithstanding the provisions of paragraph (3), may file an amendment statement before the
predetermined issue period is terminated. In this case, the predetermined issue amount and period
may not be revised. <Newly Inserted by Act No. 4469, Dec. 31, 1991>

(5) If an amendment statement is filed pursuant to the provisions of paragraph (1), (3) or (4), a
registration statement on securities shall be regarded as filed and received on the day of receipt
of the amendment statement. <Amended by Act No. 4469, Dec. 31, 1991>

Article 12 (Preparation and Disclosure of Prospectus)

(1) When an issuer of securities makes a public offering of new or outstanding securities pursuant
to Article 8, such issuer shall prepare a prospectus under the conditions as determined by the
Presidential Decree, and make it available for public inspection at a place determined by the
Ordinance of the Ministry of Finance and Economy. <Amended by Act No. 3541, Mar. 29, 1982; Act
No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5423,
Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

(2) In the prospectus as prescribed in paragraph (1), particulars different from the contents

 

 

mentioned in the registration statement (including additional documents of shelf registration
statement as prescribed in Article 10 (2); hereafter the same shall apply in this Chapter) shall
not be mentioned, or matters to be entered in the registration statement shall not be omitted:
Provided, That the same shall not apply to the matters as prescribed by the Presidential Decree
from among matters which are not appropriate for being offered for public inspection, considering
balance between interests of keeping secret in management of business and protection of investors.
<Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>

Article 13 (Justifiable Use of Prospectus)

(1) No one shall be permitted to allow any other person to acquire securities the registration of
which has taken effect or shall sell such securities to such other person before a prospectus
prepared in accordance with the provisions of Article 12 is, upon a request by the other person,
given to him. In this case, when the prospectus is given in the form of digitally recorded document
in accordance with the provisions of Article 194-2, such prospectus shall be deemed to be given
when requirements falling under each of the following subparagraphs are satisfied:

1. It is required that a person to receive or be transmitted with a digitally recorded document
(hereinafter referred to as the “recipient of digitally recorded document”) agree to the receipt or
the transmission of a prospectus in the form of the digitally recorded document;

2. It is required that the recipient of digitally recorded document designate the kind of an
electronically transferable media through and a place at which he receives or is transmitted with
the digitally recorded document;

3. It is required to confirm that the recipient of digitally recorded document has received or has
been transmitted with a digitally recorded document; and

4. The digitally recorded document is required to be identical in content with the prospectus paper.

(2) Where any person intends to induce subscriptions for new or outstanding securities subject to
the registration under the provisions of Article 8 for the purpose of executing a public offering

 

 

or other transactions thereof, he shall induce such subscriptions in a manner falling under any of
the following subparagraphs:

1. A manner in which the prospectus under the provisions of Article 12 is used after the
registration of securities comes into force under the provisions of Article 9 (1);

2. A manner in which an issuer uses a preliminary prospectus (referring to the prospectus
additionally indicating the fact that the registration has yet to come into force) prepared on the
conditions as prescribed by the Presidential Decree before the registration of securities comes
into force after such registration has been accepted under the provisions of Article 9 (1); and

3. A manner in which an issuer uses a simple prospectus (referring to a document, a digitally
recorded document and other devices or indications similar to them that omit part of matters or
include extracted matters from among the matters to be entered in the prospectus statement)
prepared on the conditions as prescribed by the Presidential Decree through ads. making use of
newspapers, broadcasts and magazines, etc., handbooks, publicity leaflets, or electronically
transferable media after his registration of securities is accepted under the provisions of Article
9 (1).

[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]

Article 14 (Liabilities for Compensation Due to False Statements)

(1) If a purchaser of securities sustains damage because a registration statement or a prospectus
(including a preliminary prospectus and a simple prospectus; hereafter in this Article the same
shall apply) of securities as prescribed in Article 12 includes false statements or indications or
fails to state or indicate important matters, the following persons shall be liable to compensate
for the damage: Provided, That the same shall not apply where a person who may be liable for
compensation proves that he could not know such false facts or omissions of that prospectus in
spite of his exercise of due diligence, or where the purchaser of such securities has known the
fact at the time of his offering to acquire them: <Amended by Act No. 6176, Jan. 21, 2000; Act
No. 7025, Dec. 31, 2003>

1. A registrant under the registration statement concerned and directors of the corporation
concerned at the time of registration (if the registration statement is filed before the
corporation

 

 

is incorporated, its promoter);

1-2. A person who falls under each subparagraph of Article 401-2 (1) of the Commercial Act and is in
charge of instructing the preparation of the registration statement on the securities or filing
such registration;

2. A certified public accountant, an appraiser and a credit-rating specialist, etc. who are each
prescribed by the Presidential Decree (including any organization to which each of them belongs)
and authenticate and sign the truth and correctness of the entries or accompanied documents of the
relevant registration statement on securities;

2-2. A person who agrees to enter his opinion on the assessment, analysis and confirmation of the
entries of the registration statement on securities or the accompanied documents in the relevant
registration statement and confirms details of the entries;

3. A person who has made a contract to underwrite the securities with the issuer;

4. A person who has prepared or delivered the prospectus; and

5. A holder of outstanding securities offered for sale at the time of registration for public
offering of outstanding securities.

(2) Where predicted information is entered or indicated through the following methods, any person
falling under any subparagraph of paragraph (1), notwithstanding the provisions of paragraph (1),
shall not be liable to compensate for the damage concerned: Provided, That this shall not apply
where the purchaser of securities does not know the fact that there are false entries or
indications in predicted information or that material matters are not entered or indicated at the
time of his offering to acquire them, and where he proves that any person falling under any
subparagraph of paragraph (1) was by intention or by gross negligence responsible for the entry or
indication:

1. The entry or indication concerned shall specify that it is predicted information;

2. The basis for the assumption or judgement for predictions or prospects shall be specified;

3. The entry or indication concerned shall be faithfully made on the basis of rational foundations

 

 

or assumptions; and

4. A warning phrase that predicted values may differ from actual results shall be specified in the
entry or indication concerned.

(3) The provisions of paragraph (2) shall not apply where a corporation other than stock-listed
corporations and KOSDAQ registered corporations submits a registration statement of securities for
the first time for the public offering of new or outstanding securities. <Amended Jan. 29,
2004>

[This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]

Article 15 (Amount of Liability to be Compensated)

(1) The amount to be compensated for damage pursuant to the provisions of Article 14 shall be the
difference between the amount actually paid by the claimant for the acquisition of securities and
the amount which falls under any of the following subparagraphs:

1. The market price of securities at the time of the closing of oral proceedings, if a lawsuit is
entered against the securities concerned (in case where no market price is available, an estimated
price at which the securities would be disposed of); and

2. The price at which the securities were disposed of, in case where such disposition of securities
has been made prior to the time of the closing of oral proceedings referred to in subparagraph 1 of
this paragraph.

(2) Notwithstanding the provisions of paragraph (1), where a person liable for compensation for
damage pursuant to the provisions of Article 14 proves that a claimant has sustained all or part of
the damage without regard to any false statement or indication or any omission of the entry or
indication of material matters, he is not bound to compensate for damage of such part. <Newly
Inserted by Act No. 5254, Jan. 13, 1997>

Article 16 (Extinction of Claims)

 

 

The compensation liabilities for damage pursuant to the provisions of Article 14 shall be
extinguished, unless the claimant exercises such right within one year from the date on which he
discovers the fact or within three years from the time when a registration statement has taken
effect.

Article 17 (After-Report)

An issuer of securities specified in a registration statement then in effect shall file with the
Financial Supervisory Commission a report on results of public offering of new or outstanding
securities under the conditions as determined by the Financial Supervisory Commission. <Amended
by Act No. 3541, Mar. 29, 1982; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No.
5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

Article 18 (Disclosure of Registration Statement and After-Report)

A registration statement of securities and an after-report pursuant to Article 17 (hereinafter
referred to as an “after-report”) shall be kept in the Financial Supervisory Commission and made
available for public inspection under the conditions as prescribed by the Presidential Decree:
Provided, That the same shall not apply to the matters as prescribed by the Presidential Decree
from among matters which are not appropriate for being offered for public inspection, considering
balance between interests of keeping secret in management of business and protection of investors.
<Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

Article 18-2 (Public Offering without Filing Registration Statement)

Any issuer who makes a public offering of new or outstanding securities without filing a
registration statement in accordance with the provisions of Article 9 (1) shall disclose matters
concerning his financial standing and take measures prescribed by the Presidential Decree to
protect investors.

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 19 (Report and Investigation)

 

 

(1) The Financial Supervisory Commission, if necessary in the public interest or for protection of
investors, may order a registrant under the registration statement, an issuer of securities, an
underwriter thereof, and any other related persons to file a report or materials for reference, or
may have the Governor of the Financial Supervisory Service established under the Act on the
Establishment, etc. of Financial Supervisory Organizations (hereinafter referred to as the
“Financial Supervisory Service”) investigate account books, documents and any other related
materials of such registrant, issuer, underwriter and other related persons. <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

(2) A person who investigates pursuant to the provisions of paragraph (1) shall carry along a
certificate which proves his authority to investigate and shall present such certificate to persons
concerned. <Amended by Act No. 5254, Jan. 13, 1997>

Article 20 (Disposition Right of Financial Supervisory Commission)

In the case falling under any of the following subparagraphs, the Financial Supervisory Commission,
after showing reason therefor and making a public notice of such fact, order the issuer of
securities concerned to make an amendment, and if necessary, the Financial Supervisory Commission
may suspend or prohibit the issuance of such securities, public offering of new or outstanding
securities or other transactions with respect thereto or may take measures as prescribed by the
Presidential Decree. In this case, the Financial Supervisory Commission may determine procedures
and criteria necessary for taking measures against the issuer of securities: <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar.
28, 2001>

1. In case that a registration statement or an after-report is not submitted or such statement or
such report contains false statements or omits important matters;

2. In case that a prospectus does not comply with the provisions of Article 12 or 13;

3. In case that a violation of the provisions of Article 13 (2) is committed with respect to the
public offering of new or outstanding securities and other transactions of securities through a
preliminary prospectus or a simple prospectus; and

 

 

4. In case that a violation of the provisions of Article 18-2 is committed.

CHAPTER IV TENDER OFFER FOR SECURITIES

Article 21 (Applicable Object of Tender Offer)

(1) A person who intends to acquire voting stocks or any other securities as prescribed by the
Presidential Decree (hereinafter referred to as “stocks, etc.”) through purchase, exchange, bid or
any other acquisition by transfer (hereafter referred to as “purchase, etc.” in this Chapter) from
persons of not less than the number as prescribed by the Presidential Decree outside the securities
market or KOSDAQ during the period as prescribed by the Presidential Decree shall acquire the
stocks, etc. through tender offer, in case where the total number of the stocks, etc. held
(including the cases prescribed by the Presidential Decree as owning or its equivalent; hereafter
the same shall apply in this Chapter and Article 200-2) by the person himself and specially related
persons (this means the specially related person as prescribed by the Presidential Decree;
hereinafter the same shall apply) after the purchase, etc. is 5/100 or more of the total number of
the stocks, etc. (including the case where the person himself and specially related persons who
have acquired 5/100 or more of the total number of the stocks, etc. make purchase, etc. of the
stocks, etc.): Provided, That the same shall not apply with respect to purchase, etc. as prescribed
by the Presidential Decree, considering the type thereof and ther circumstances. <Amended Jan.
29, 2004>

(2) Deleted. <by Act No. 5521, Feb. 24, 1998>

(3) In this Chapter, the term “tender offer” means making an offer to buy stocks, etc. (including
exchange with other securities; hereafter the same shall apply in this Chapter) or a solicitation
of an offer to sell stocks, etc. (including exchange with other securities; hereafter the same
shall apply in this Chapter) against many and unspecified persons, and buying them outside the
securities market and KOSDAQ. <Amended Jan. 29, 2004>

(4) Number of stocks, etc. and total number of stocks, etc. pursuant to the provisions of paragraph
(1) shall be the number calculated by the method as prescribed by the Ordinance of the Ministry of
Finance and Economy. <Amended by Act No. 5521, Feb. 24, 1998; Act No. 5539,

 

 

May 25, 1998>

(5) The term “person handling tender offer affairs” means a person in charge of keeping in custody
stocks, etc. to be purchased, paying funds necessary for making tender offer or offering securities
subject to a swap and handling administrative affairs related to tender offer on behalf of any
person who intends to make tender offer. In this case, any person qualified to act as such agent
shall be limited to a securities company. <Newly Inserted by Act No. 6423, Mar. 28, 2001>

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

Article 21-2 (Publication of Tender Offer and Submission of Tender Offer Statement)

(1) Any person who intends to make tender offer shall publish matters falling under each of the
following subparagraphs (hereinafter referred to as “publication of tender offer”) under the
conditions as prescribed by the Presidential Decree:

1. A person who intends to make tender offer;

2. A person who issues stocks, etc. subject to tender offer;

3. The objective of tender offer;

4. Kinds and numbers of stocks, etc. subject to tender offer;

5. The period of tender offer and tender offer conditions such as prices, settlement date, etc.; and

6. Details of purchase funds and other matters prescribed by the Presidential Decree.

(2) Any person who has published his tender offer (hereinafter referred to as “tender offerer”
shall file a statement containing matters falling under each of the following subparagraphs with
the Financial Supervisory Commission (hereinafter referred to as a “tender offer statement”) on the
date on which his tender offer is published (hereinafter referred to as the “publication date of
tender offer”) under the conditions as prescribed by the Presidential Decree: Provided, That in the
event that the publication date of tender offer falls under any holiday or any other day

 

 

prescribed by the Financial Supervisory Commission, the tender offer statement may be submitted on
the day next thereto:

1. Matters concerning tender offerer and specially related persons;

2. Issuers of stocks, etc. subject to tender offer;

3. Objective of tender offer;

4. Kinds and numbers of stocks, etc. subject to tender offer;

5. Period of tender offer and tender offer conditions such as prices and settlement date, etc.;

6. In the event a contract exists that aims for the purchase of stocks, etc. without depending on
tender offer after the publication date of tender offer, details of such contract; and

7. Details of purchase funds and other matters prescribed by the Presidential decree.

(3) The period of tender offer referred to in paragraphs (1) and (2) shall be set within the scope
of the period prescribed by the Presidential Decree.

(4) The provisions of Article 8 (2) shall apply mutatis mutandis to the tender offer statement.

[This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]

Article 21-3 (Restrictions on Voting Rights, etc.)

In case where a person has made purchase, etc. of stocks, etc. in violation of the provisions of
Article 21 (1) or 21-2 (1) and (2), he may not exercise the voting rights on the stocks concerned
(including stocks which are acquired through exercise of rights related to the stocks, etc.
concerned) during the period as prescribed by the Presidential Decree, and the Financial
Supervisory Commission may order to dispose of the stocks, etc. concerned (including stocks which
are acquired through exercise of rights related to the stocks, etc. concerned). <Amended by Act
No. 5498, Jan. 8, 1988; Act No. 5521, Feb. 24, 1998; Act No. 6423, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

 

 

Article 22 (Submission of Copy of Tender Offer Statement)

Any tender offerer shall, when he files a tender offer statement, promptly send a copy thereof to
each of issuers of stocks, etc. subject to his tender offer (referring to persons prescribed by the
Presidential Decree in case of stocks, etc. prescribed by the Presidential Decree; hereafter in
this Chapter the same shall apply) and also submit such copy to the Korea Exchange. <Amended
Jan. 29, 2004>

[This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]

Article 23 (Restrictions on Purchases by Tender Offerer)

(1) [Deleted] <Jan. 17, 2005>

(2) Except for the case as prescribed by the Presidential Decree, no tender offerer (including a
specially related person and any person handling tender offer affairs) shall, during the period
from the date on which tender offer is submitted to the Financial Supervisory Commission pursuant
to Article 21-2(2) to the date on which period of tender offer expires, make any purchase of
securities by other means than a tender offer. <Amended Jan. 17, 2005>

(3) [Deleted] <Jan. 17, 2005

(4) [Deleted] <Jan. 17, 2005.

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

Article 23-2 (Amendment Statement and Publication, etc.)

(1) Any tender offerer, in case where he intends to modify the terms for purchase, shall file an
amendment statement by the date on which period of tender offer expires: Provided, That reduction
of purchase price, decrease of number of stocks, etc. which are intended to be purchased, extension
of payment period of purchase amount and other purchase conditions as prescribed by the
Presidential Decree shall not be modified. <Amended by Act No. 5423, Dec.

 

 

13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

(2) Any tender offerer shall, when he files an amendment statement under paragraph (1), promptly
publish the fact and details of what is amended (limited to matters contained in the publication of
tender offer). In this case, the method of making such publication shall be governed by the
provisions of Article 21-2 (1). <Newly Inserted by Act No. 6423, Mar. 28, 2001>

(3) If an amendment statement is filed by a tender offerer in accordance with Article 23(1) or if a
an amendment statement is filed as ordered by the Financial Supervisory Commission, the period of
tender offer shall expire:

1. If the date on which the amendment statement is filed falls within 10 days prior to the end of
the period of tender offer reported in accordance with Article 21-2(1)-5, on the 10th
day following the filing of the amendment statement; or

2. If the date on which the amendment statement is filed does not fall within 10 days prior to the
end of the period of tender offer reported in accordance with Article 21-2(1)-5, on the day when
the period of tender offer ends.

(4) The provisions of Articles 11 (1) and (2) and 22 shall apply mutatis mutandis to any tender
offer statement and any amendment statement. <Amended by Act No. 6423, Mar. 28, 2001; Jan. 17,
2005>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 24 (Preparation and Use of Prospectus for Tender Offer)

(1) A tender offerer (including any person handling tender offer affairs), when he intends to
purchase securities through tender offer, shall prepare a prospectus for such tender offer
(hereinafter referred to as “prospectus for tender offer”) under the conditions as prescribed by
the Ordinance of the Ministry of Finance and Economy, and shall keep it at the place as prescribed
by the Ordinance of the Ministry of Finance and Economy in order to make it available for public
inspection. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Jan. 17,
2005>

(2) The provisions of Article 13 shall apply mutatis mutandis to the use of a prospectus for

 

 

tender offer.

Article 24-2 (Withdrawal of Tender Offer)

(1) A tender offerer may not withdraw a tender offer after it filed a tender offer pursuant to
Article 21-2(2): Provided, That in such case as prescribed by the Presidential Decree, he may
withdraw a tender offer by the last day of the tender offer period. <Amended Jan. 17, 2005>

(2) In case where a tender offerer intends to withdraw a tender offer pursuant to paragraph (1), a
withdrawal statement shall be filed with the Financial Supervisory Commission and the Korea
Exchange, and the contents thereof shall be announced publicly. <Amended by Act No. 5423, Dec.
13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000; Jan.
29, 2004>

(3) A person who accepts an offer to buy stocks, etc. subject to tender offer or gives his offer
(hereinafter referred to as “tender”) to sell them (hereinafter referred to as a “tendering
stockholder”), may cancel such tender at any time during tender offer period. In this case, a
tender offerer may claim damages or penalty due to cancellation of tender by a tendering
stockholder.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 25 (Presentation of Opinion on Tender Offer)

An issuer of stocks, etc. for which a tender offer statement has been filed, may present his
opinion on the tender offer concerned under the conditions as prescribed by the Presidential
Decree. In this case, the issuer shall file a written statement describing the contents of such
opinion without delay with the Financial Supervisory Commission and the Korea Exchange. <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Jan. 29, 2004>

Article 25-2 (Conditions and Manners of Tender Offer)

 

 

(1) A tender offerer shall purchase without delay all the stocks, etc. tendered according to the
purchase conditions and manners stated in the tender offer statement on and after the day following
the expiration date of tender offer period: Provided, That in case where the Presidential Decree
prescribes, the same shall not apply.

(2) Price of tender offer shall be uniform. <Amended by Act No. 5521, Feb. 24, 1998>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 25-3 (Liability for Damages of Tender Offerer)

(1) The provisions of Article 14 (1) shall apply mutatis mutandis to damages which a person falling
under any of the following subparagraphs causes to tendering stockholder in connection with a
tender offer statement and public notice thereof, an amendment statement and public notice thereof
pursuant to Article 23-2, and a prospectus for tender offer: <Amended by Act No. 5736, Feb. 1,
1999>

1. A registrant stated in a tender offer statement and an amendment statement thereof (including
specially related persons of the registrant, and in case where the registrant is a juristic person,
including directors of the juristic person) and his agent; and

2. A person who prepares a prospectus for tender offer and his agent.

(2) The provisions of Article 16 shall apply mutatis mutandis to liability for damages pursuant to
the provisions of paragraph (1).

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 26 (Public Notice of Statements, etc.)

The Financial Supervisory Commission and the Korea Exchange shall keep the tender offer statement,
amendment statement pursuant to Article 23-2, withdrawal statement pursuant to Article 24-2 (2),
and written statement pursuant to Article 25 for 3 years from the date on which such statements
have been received and shall make them available for public inspection. <Amended by Act No.
5498, Jan. 8, 1998; Act No. 6423, Mar. 28, 2001; Jan. 29. 2004>

 

 

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

Article 27 (Request for Materials to Tender Offerer)

The Financial Supervisory Commission, if necessary in the public interest or for the protection of
investors, may order any tender offerer, any person related to the tender offerer, and any issuer
of the securities concerned to file a report or material for reference. <Amended by Act No.
5498, Jan. 8, 1998>

Article 27-2 (Provisions to be Applied Mutatis Mutandis)

The provisions of Articles 17, 19 and 20 shall apply mutatis mutandis to the tender offer. In this
case, the “Financial Supervisory Commission” as referred to in Article 17 shall be deemed to be the
“Financial Supervisory Commission and Korea Exchange.” <Amended by Act No. 5736, Feb. 1, 1999;
Jan. 29, 2004>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

CHAPTER V SECURITIES BUSINESS

          SECTION 1 License

Article 28 (License)

(1) A person who may be engaged in the securities business shall be a stock company which has
obtained a license from the Financial Supervisory Commission by the type of business. <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999>

(2) The type of business referred to in paragraph (1) shall be as follows: <Amended by Act No.
6423, Mar. 28, 2001>

1. The business referred to in Article 2 (8) 1;

 

 

2. The business referred to in Article 2 (8) 2 through 4;

3. The business referred to in Article 2 (8) 5 through 7; and

4. The business referred to in Article 2 (8) 8.

(3) The capital of a securities company shall not be less than one billion won and an amount
prescribed by the Presidential Decree according to the scope of its business. <Amended by Act
No. 6176, Jan. 21, 2000>

(4) Deleted. <by Act No. 5254, Jan. 13, 1997>

(5) The Financial Supervisory Commission may set conditions to a license referred to in paragraph
(1). <Newly Inserted by Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>

(6) Deleted. <by Act No. 5254, Jan. 13, 1997>

(7) Deleted. <by Act No. 5736, Feb. 1, 1999>

Article 28-2 (Securities Business by Foreign Securities Company)

(1) If a foreign securities company (this refers to a person engaged in securities business in a
foreign country pursuant to the relevant Acts and subordinate statutes of such country; hereinafter
the same shall apply) intends to establish a branch office or any other business office in order to
operate the securities business in the Republic of Korea, it shall obtain a license from the
Financial Supervisory Commission by the type of business in accordance with the provisions of each
subparagraph of Article 28 (2). <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25,
1998; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000>

(2) The business fund for any branch office or any other business office under the provisions of
paragraph (1) shall not be less than one billion won and an amount prescribed by the Presidential
Decree according to the scope of its business. <Newly Inserted by Act No. 6176, Jan. 21,
2000>

 

 

(3) A foreign securities company which has not obtained the license for establishment of branch
office, etc. pursuant to paragraph (1) shall not conduct the securities business with domestic
residents. <Newly Inserted by Act No. 5254, Jan. 13, 1997>

(4) The branch office or any other business office licensed pursuant to paragraph (1) shall be
regarded as a securities company organized under this Act, except for the provisions of Article 28
(3). <Amended by Act No. 5254, Jan. 13, 1997>

(5) If a domestic branch office or other business office of a foreign securities company goes into
liquidation or becomes bankrupt, its domestic holding assets shall be appropriated preferentially
for a performance of obligation to a person who is the other party of securities transaction and
has a domicile or residence in Korea at the time of the transaction. In this case, the scope of its
domestic holding assets shall be determined by the Presidential Decree. <Newly Inserted by Act
No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>

(6) If it is deemed difficult to conduct the securities business because a domestic branch office
or other business office of a foreign securities company has violated this Act, an order or
disposition made under this Act, or foreign Acts and subordinate statutes, the Financial
Supervisory Commission may revoke the business license, suspend business, or take other necessary
measures for the purpose of protecting the public interest or investors. The same shall apply in
case where it is deemed difficult to conduct securities business of a domestic branch office or
other business office of the foreign securities company by reason that the foreign securities
company has violated foreign Acts and subordinate statutes, etc. <Newly Inserted by Act No.
4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25,
1998; Act No. 5982, May 24, 1999>

(7) The Financial Supervisory Commission may set conditions to the license referred to in paragraph
(1). <Newly Inserted by Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>

(8) Necessary matters relating to the operation of the securities company by a foreign securities
company shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 3541, Mar. 29, 1982]

Article 29 (Provisions Applicable to Persons Who Operate Securities Business as Side

 

 

Business)

(1) Deleted. <by Act No. 5736, Feb. 1, 1999>

(2) This Chapter shall apply within the scope of licensed business to a person who, upon license of
securities business pursuant to this Chapter, operates securities business as a side business:
Provided, That the provisions of Articles 28 (3), 33, 47, and 62 shall not apply. <Amended by
Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999>

Article 30 (Application for License)

(1) Any person who intends to obtain a license pursuant to the provisions of Articles 28 (1) and
28-2 (1) shall file an application with the Financial Supervisory Commission under the conditions
as prescribed by the Presidential Decree.

(2) The Financial Supervisory Commission may, where such application it receives under the
provisions of paragraph (1) is found to be insufficient, ask the applicant to supplement such
application. In this case, the period required to supplement such application shall not be added to
the period under the provisions of Article 31 (1).

[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]

Article 31 (Procedure of License)

(1) When the Financial Supervisory Commission has received the written application pursuant to the
provisions of Article 30, it shall make a decision either granting or denying a license and shall
notify the applicant of the decision in writing without delay. <Amended by Act No. 5254, Jan.
13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999>

(2) Deleted. <by Act No. 3945, Nov. 28, 1987>

 

 

Article 32 (Requirements for License)

(1) Any person who intends to obtain a license for his securities business in accordance with the
provisions of Article 28 (1) shall satisfy requirements falling under each of the following
subparagraphs:

1. He is required to satisfy requirements under the provisions of Article 28 (3);

2. He is required to be able to protect investors and have manpower, computer installations and
other physical facilities enough to carry out securities business he intends to run;

3. He is required to have a proper and sound business plan; and

4. Any such major investor as prescribed by the Presidential Decree (in case that an investor is a
corporation, this includes any person who virtually exercises his influence over important matters
concerning the management of such corporation and is prescribed by the Presidential Decree shall be
included) is required to have a sufficient investment capability, a sound financial standing and
social credit.

(2) Any foreign stockbroker who intends to obtain a license for the establishment of his branch
office or other business office pursuant to the provisions of Article 28-2 (1) shall meet
requirements falling under each of the following subparagraphs:

1. He has to satisfy requirements under the provisions of Article 28-2 (2);

2. He has to have property, financial standing, and business capability enough to carry out
securities business in the country and has to have a full and high international credit rating; and

3. He has to meet requirements under paragraph (1) 2 and 3.

(3) Necessary matters concerning detailed requirements for a license under paragraphs (1) and (2)
shall be prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]

 

 

Article 32-2 (Public Notice of License)

The Financial Supervisory Commission shall, when it grants a license in accordance with the
provisions of Articles 28 (1) and 28-2 (1), promptly publish the grant of such license in the
Official Gazette and make the grant of such license known to the public through computer
communications, etc.

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 32-3 (Approval of Change of Controlling Shareholder, etc.)

(1) Any person desiring to be a controlling shareholder within the meaning of the Presidential
Decree by way of purchasing shares in a securities company shall meet the requirements by the
Presidential Decree to promote sound management, among the requirements for a major investor under
Article 32(1)4 and 32(3), and obtain a prior approval from the Financial Supervisory Commission.

(2) The Financial Supervisory Commission may order that any shares purchased without the approval
in Article 32-3(1) be disposed within such a period of time not exceeding 6 months as set by the
Financial Supervisory Commission.

(3) Any person purchasing shares without the approval in Article 32-3(1) may not exercise its
voting right in respect of such shares purchased without the approval.

(4) Detail requirements for the approval and order in Article 32-3(1) and 32-3(2) shall be
determined by the Presidential Decree

[Newly inserted July 29, 2005]

          SECTION 2 Maintenance of Sound Business Order

Article 33 (Eligibility of Officers)

(1) Deleted. <by Act No. 5736, Feb. 1, 1999>

(2) Any person who falls under any of the following subparagraphs shall not be an officer of a
securities company, and any officer of a securities company who falls under any of the following
subparagraphs shall lose his office: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5423,

 

 

Dec. 13, 1997; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Mar. 31, 2005; Dec. 29,
2005>

1. A minor, an incompetent, or a quasi-incompetent;

2. A person who is declared bankrupt who has not been reinstated yet;

3. A person who has been sentenced to imprisonment without prison labor or a heavier punishment or
to a fine or a heavier punishment under this Act, foreign Acts and subordinate statutes
corresponding to this Act (hereinafter referred to as “foreign securities Acts and subordinate
statutes”) and other Acts and subordinate statutes which are related to finance (“finance related
Acts and subordinate statutes”) as prescribed by the Presidential Decree, and for whom 5 years have
not elapsed since the execution of such punishment was terminated (including the cases where the
execution is deemed to have been terminated) or exempted;

3-2. A person who has been sentenced to the suspension of execution of imprisonment without prison
labor or a heavier punishment and is still in the suspended period of execution;

4. Any person who was an officer or an employee of a corporation or a company whose business license
or authorization, etc. was cancelled pursuant to this Act, foreign securities Acts and subordinate
statutes, or finance-related Acts and subordinate statutes (limited to any person who is directly
or correspondingly responsible for the occurrence of the cause of cancellation and prescribed by
the Presidential Decree), and for whom 5 years have yet to elapse from the date on which such
license or authorization was canceled against the corporation or the company; and

5. A person who was discharged or dismissed from a securities company under this Act, foreign
securities Acts and subordinate statutes, or finance-related Acts and subordinate statutes and for
whom 5 years have not elapsed since the date of such discharge or dismissal.

6. A retired officer or employee who is notified that he or she would have been demanded to be
discharged or dismissed from a securities company under this Act or finance-related Acts and
subordinate statutes if he or she had been in office and for whom 5 years have yet to elapse from
the date of such notification (or, if the fifth anniversary of the date of notification is later
than the seventh anniversary of the date of retirement or resignation, 7 years from the date of
retirement or resignation)

 

 

[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]

Articles 33-2 and 34

Deleted. <by Act No. 3945, Nov. 28, 1987>

Article 35 (Matters to be Authorized)

(1) When a securities company intends to merge with another company, transfer its whole business,
or take over the whole business of another company (including equivalent cases), such securities
company shall obtain authorization from the Financial Supervisory Commission with respect thereto.
In this case, the provisions of Article 32 shall apply mutatis mutandis. <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24,
1999>

(2) The Financial Supervisory Commission shall, in determining whether to grant such authorization
under the provisions of paragraph (1), take into account matters prescribed by the Presidential
Decree. <Newly Inserted by Act No. 6176, Jan. 21, 2000>

Article 36 (Matters to be Reported)

In case where a securities company falls under any of the following subparagraphs, it shall
promptly report the fact to the Financial Supervisory Commission: <Amended by Act No. 5254, Jan.
13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000>

1. When a securities company appoints or discharges its officer;

2. When a securities company establishes newly a branch office or other business office, or when it
changes the location of its principal office, branch office or other business office, or when it
suspends, resumes or discontinues the business of its principal office, branch office or other
business office;

 

 

3. When a person and such relatives of him and other specially related persons of him as designated
by the Presidential Decree (hereinafter referred to as the “specially related persons”), who
possess the largest number of stocks of a securities company, are changed;

4. When a trade name of a securities company is changed;

4-2. When a cause to dissolve a securities company occurs; and

5. Cases as prescribed by the Presidential Decree, other than those under subparagraphs 1 through
4-2.

Article 37 (Public Notice of Discontinuance of Securities Business)

When a securities company intends to discontinue its securities business or the business of its
branch office or any other business office, the securities company shall print a public notice to
that effect in 2 or more daily newspapers 3 or more times not later than 30 days before the date of
discontinuance, and shall notify directly the creditors who are known to the securities company at
the same time. <Amended by Act No. 3541, Mar. 29, 1982>

Article 38

Deleted. <by Act No. 4469, Dec. 31, 1991>

Article 39

Deleted. <by Act No. 5423, Dec. 13, 1997>

Article 40

Deleted. <by Act No. 6623, Jan. 26, 2002>

Article 41 (Liabilities for Branch Office or Other Business Office)

If a branch office or other business office of any securities company causes any damage to

 

 

other persons in connection with the purchase and sale of securities or other securities
transaction, such securities company shall be liable to compensate the damage to the person who
suffers the damage.

Article 42 (Restrictions on Officers’ Securities Transaction)

No officer or employee of any securities company shall make or entrust sale and purchase
transactions of securities for his own account in whatsoever name except for securities savings
through payroll deduction plans and for other cases as prescribed by the Presidential Decree.

Article 43 (Manifestation of Type of Transaction)

When any securities company receives an order from any customer for a securities transaction, such
securities company shall make clear in advance to such customer as to whether it will act as the
other party, or as an intermediary, an agent, or a factor in effectuating such transaction.

Article 44 (Prohibition of Representation of Other Party)

No securities company may act as a principal and concurrently as a factor, an intermediary or an
agent for other party with respect to the same securities transaction.

Article 44-2

Deleted. <by Act No. 6423, Mar. 28, 2001>

Article 44-3 (Separate Deposit of Customer Deposit Money)

(1) Any securities company shall deposit (including trust; hereinafter the same shall apply) any
money deposited by customers (referring to the money deposited by customers in connection with sale
and purchase and any other transactions of securities; hereinafter the same shall apply) separately
from his property at a securities finance company (hereinafter referred to as a

 

 

“depository institution”) under Article 145. <Amended by Act No. 6423, Mar. 28, 2001; Act No.
6623, Jan. 26, 2002>

(2) Where a securities company deposits customer deposit money in a depository institution pursuant
to paragraph (1), it shall specify that the money is the customers’ property.

(3) A securities company which has received customer deposit money (hereinafter referred to as a
“depositing securities company”) pursuant to paragraph (1) shall not transfer or offer as security
customer deposit money deposited in a depository institution except as otherwise determined by the
Presidential Decree, and no person shall set off or seize it (including provisional seizure).

(4) A depositing securities company shall, where it falls under any of the following subparagraphs,
withdraw customer deposit money deposited in a depository institution and preferentially pay it to
customers. In this case, the securities company concerned shall publicly announce payment time and
place of customer deposit money and other matters relating to the payment of customer deposit money
in two daily newspapers or more within the period as determined by the Presidential Decree:

1. Where it resolves to discontinue its business;

2. Where it receives an order for suspension of business;

3. Where it has its license revoked;

4. Where it resolves to dissolve itself;

5. Where it has been declared bankrupt; and

6. Where any cause equivalent to those listed in subparagraphs 1 through 5 occurs.

(5) A depository institution, where it falls under any subparagraph of paragraph (4), shall
preferentially pay customer deposit money deposited to the depositing securities company.

(6) A depository institution shall manage customer deposit money by the following methods:

 

 

1. Purchase of Government bonds and municipal bonds;

2. Purchase of bonds whose payment is guaranteed by the Government, local governments or financial
institutions; and

3. Other methods recognized as being capable of safely managing customer deposit money, as
determined by the Presidential Decree.

(7) The scope of customer deposit money to be deposited by a securities company in a depository
institution pursuant to paragraph (1), the ratio to be deposited, matters relating to withdrawal of
customer deposit money, matters on the management of customer deposit money by a depository
institution or other matters necessary for the depositing of customer deposit money shall be
determined by the Presidential decree. In this case, the ratio to be deposited may be otherwise
determined by securities company taking into account the securities company’s financial status,
etc.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 44-4 (Depositing of Securities, etc. Deposited by Customers)

(1) A securities company shall promptly deposit securities which come to be held by customers due
to buying and selling consignment or other transactions and bonds or deeds as determined by the
Presidential Decree in the Korea Securities Depository established under Article 173 (hereafter in
this Article, referred to as the “Korea Securities Depository”). <Amended Jan. 29, 2004>

(2) A securities company shall promptly deposit securities, bonds, and deeds to be held by managing
assets on hand as determined by the Presidential Decree in the Korea Securities Depository.
<Amended Jan. 29, 2004>

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 45

Deleted. <by Act No. 5736, Feb. 1, 1999>

 

 

Article 46 (Notification of Sale and Purchase Transactions, etc.)

A securities company shall notify the customer concerned of the purchase and sale by a customer’s
order and other contents of transactions, etc. under the conditions as prescribed by the
Presidential Decree.

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

Article 46-2 (Exceptional Acquisition of Treasury Stocks)

A securities company may, in case where the securities company has been entrusted by a customer,
acquire treasury stocks less than the minimum trading unit of the securities market or KOSDAQ
outside those markets. In this case, the acquired treasury stocks shall be disposed of within the
period as prescribed by the Presidential Decree. <Amended Jan. 29, 2004>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 47 (Business Report)

(1) Any securities company shall compile each business report stating its business achievements,
financial standing, and other matters prescribed by the Presidential Decree for 3 months, 6 months,
9 months and 12 months, respectively, from the date of the commencement of every business year and
file such business report with the Financial Supervisory Commission within forty-five days from the
date of the elapse of such months. <Amended by Act No. 6623, Jan. 26, 2002>

(2) Any securities company shall keep the business report referred to in paragraph (1) or its
computerized materials at its head office, branch office, or other business office and make them
accessible to the public for one year from the date on which the business report is filed with the
Financial Supervisory Commission. <Amended by Act No. 6623, Jan. 26, 2002>

(3) Detailed matters concerning the compilation of the business report under the provisions of
paragraph (1) and other necessary matters shall be determined by the Financial Supervisory
Commission.

 

 

[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]

Article 48 (Officers’ Engaging in Other Business)

Where the Presidential Decree determines that the interests of a fulltime officer of a securities
company are in conflict with those of customers or threaten to impair the sound management of the
securities company, the officer shall not be engaged in the regular business of another corporation
or in other businesses. <Amended by Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001>

[This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]

Article 49 (Credit Extension)

(1) Any securities company may extend credit in connection with securities as lending money or
securities to a customer.

(2) The method and contents of the credit extension referred to in paragraph (1) shall be
prescribed by the Presidential Decree. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539,
May 25, 1998; Act No. 6176, Jan. 21, 2000>

(3) The Financial Supervisory Commission shall provide for regulations on the maximum amount of
credit, the ratio of security and method of receiving security, etc. <Amended by Act No. 3541,
Mar. 29, 1982; Act No. 5498, Jan. 8, 1998>

(4) In case where a securities company sells such securities as underwritten thereby, the
securities company shall not lend funds or extend any other credit with respect to the purchase of
such securities, until 3 months have elapsed from the date of underwriting such securities.

Article 50 (Business of Securities Savings)

(1) A securities company may be engaged in the business of securities savings according to the

 

 

regulations as prescribed by the Financial Supervisory Commission. <Amended by Act No. 3541,
Mar. 29, 1982; Act No. 5498, Jan. 8, 1998>

(2) The method and the contents of the securities savings business referred to in paragraph (1)
shall be prescribed by the Presidential Decree. <Amended by Act No. 5254, Jan. 13, 1997; Act No.
5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

Article 51 (Restrictions on Engaging Concurrently in Other Business)

(1) Any securities company shall be prohibited from engaging in any other business than the
securities business falling under each of the following subparagraphs:

1. The financial business (referring to the business prescribed by this Act or finance-related Acts
and subordinate statutes; hereafter the same in this Article shall apply) that is prescribed by
relevant Acts and subordinate statutes as the business for securities companies to run;

2. The financial business prescribed by the Presidential Decree, which is authorized by the
Financial Supervisory Commission as the business for securities company to run; and

3. The business falling under any of the following items, which is prescribed by the Presidential
Decree as a collateral business:

(a) The business related to the securities business;

(b) The business of utilizing manpower, assets, or facilities and equipment, etc. owned by a
securities company; and

(c) The business that does not require any license, authorization, approval or registration, etc.
under other Acts and subordinate statutes.

(2) Any financial business under the provisions of paragraph (1) 2 for which a securities company
has obtained a license or authorization from the Financial Supervisory Commission or filed a
registration with the Financial Supervisory Commission in accordance with this Act or other Acts
and subordinate statutes shall be deemed to have been granted authorization by the

 

 

Financial Supervisory Commission in accordance with the provisions of paragraph (1) 2.

[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]

Article 52 (Prohibition of Unfair Solicitation, etc.)

A securities company, or officers and employees thereof shall not commit such acts as described in
the following subparagraphs: <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5254, Jan. 13,
1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>

1. To solicit sale and purchase transaction of securities by promising a customer to assume all or a
part of the loss incurred as a result of the transaction concerned;

2. To provide, directly or indirectly, any benefit which has a property value with a customer in
relation to the underwriting business of securities for the purpose of excluding competitors and
inducing the customers, or to restrict business activities of customers by making improper use of
its superior position in transactions; and

3. To do such acts relating to issuance, purchase and sale or other transaction of securities other
than those referred to in subparagraphs 1 and 2 as prescribed by the Presidential Decree as those
detrimental to the protection of investors or the fair transactions, or undermining the credibility
of the securities industry.

Article 52-2 (Business Method of Securities Company Making Use of Electronic Data-Processing
Equipment, etc., and Restrictions Thereon)

(1) Any securities company that runs the securities business prescribed in Article 2 (8) 8 shall
make business matters falling under each of the following subparagraphs conform to the standards
prescribed by the Presidential Decree:

1. Matters concerning securities subject to the brokering of sale and purchase transactions;

2. Matters concerning the suspension of sale and purchase of securities subject to the brokering

 

 

of sale and purchase transactions and the removal of such suspension;

3. Matters concerning the conclusion of a sale and purchase transaction contract and other matters
concerning settlement method and settlement responsibility, etc.;

4. Matters concerning sale and purchase transactions of securities on consignment, including the
consignment guarantee money, etc. of a securities company participating in such transactions;

5. Matters concerning the publication of issuers of securities subject to the brokering of sale and
purchase transactions;

6. Matters concerning the publication and report of the results of sale and purchase transactions;

7. Matters concerning the opening, closing, suspension, or interruption of the brokering of sale and
purchase transactions; and

8. Other necessary matters in connection with the brokering of sale and purchase transactions.

(2) Any securities company that only runs the securities business as prescribed n Article 2 (8) 8
shall be prohibited from running the business prescribed in Articles 49 and 50 and any subparagraph
of 51 (1).

(3) Any securities company that runs the securities business as prescribed in Article 2 (8) 8
shall, if such securities subject to the brokering of sale and purchase transactions are listed
stocks or stocks listed on KOSDAQ, be a member of either the Korea Exchange. <Amended Jan. 29,
2004>

(4) The provisions of Article 117 shall apply mutatis mutandis to any securities company that runs
the securities business as prescribed in Article 2 (8) 8.

(5) The provisions of Articles 43, 44, and 46 shall not apply to a case where any securities
company runs the securities business as prescribed in Article 2 (8) 8. <Amended by Act No. 6623,
Jan. 26, 2002>

[This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]

 

 

Article 52-3 (Prohibition of Arbitrary Purchase and Sale)

Officers and employees of a securities company shall not, unless they have received entrustment
with respect to purchase and sale transactions of securities from a customer or his agent, make
purchase and sale transactions of securities with property deposited by customers.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 52-4 (Prohibition of Unfair Demand to Securities Company, etc.)

No person shall unfairly receive money, service and other financial interests from a securities
company or officers and employees thereof in return for the payment of a commission relating to the
business which a securities company operates, or may request a securities company or officers and
employees thereof to furnish the person himself or third party with money, service and other
financial interests.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 53 (Inspection)

(1) A securities company shall be subject to inspection by the Governor of the Financial
Supervisory Service (hereinafter referred to as the “FSS Governor”) with respect to its business
condition and property. <Amended by Act No. 5498, Jan. 8, 1998>

(2) The FSS Governor may, if necessary for the inspection, request any securities company to report
on its business conditions or property, to file data, to make witness available, or to present any
evidence or opinion thereon. <Amended by Act No. 5498, Jan. 8, 1998>

(3) Any person who conducts inspection pursuant to the provisions of paragraph (1) shall show the
persons concerned a certificate which represents his authority to inspect.

(4) The FSS Governor shall, after the inspection referred to in paragraph (1), file a report on the
results of the inspection with the Financial Supervisory Commission. In this case, if the FSS
Governor finds that any securities company has violated the provisions of this Act, other Acts

 

 

and subordinate statutes relating to securities, any disposition taken under this Act, or the
regulations of the Financial Supervisory Commission, the Securities Futures Commission under the
Act on the Establishment, etc. of Financial Supervisory Organizations (hereinafter referred to as
the “Securities Futures Commission”), and the Korea Exchange, the FSS Governor shall add the
written opinion as to how to take actions against such violations. <Amended by Act No. 5498,
Jan. 8, 1998; Jan. 19, 2004>

(5) The Financial Supervisory Commission shall, reviewing the reports and the written opinion
referred to in paragraph (4), take such measures as prescribed in the following subparagraphs:
<Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000; Dec. 29,
2005>

1. Where any securities company falls under any subparagraph of Article 55 (1), the cancellation of
the securities business license of the securities company concerned; and

2. Where any securities company has, in the course of its business, committed unlawful or unfair
acts other than those referred to in subparagraph 1, the order to suspend the business in whole or
in part, request for the discharge of officers concerned or dismissal of employees concerned, or
other measures as prescribed by the Presidential Decree.

(6) The FSS Governor may, if necessary, entrust part of the inspection authority as referred to in
paragraph (1) to the Korea Securities Dealers Association (hereinafter referred to as the
“Association”) established under Article 162 under the conditions as prescribed by the Presidential
Decree. <Newly Inserted by Act No. 6623, Jan. 26, 2002; Jan. 29, 2004>

(7) The Financial Supervisory Commission may determine the method and procedure of inspection, the
criteria for measures against results of inspection, and other necessary matters relating to
inspection. <Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

Article 54 (Authority of Financial Supervisory Commission to Issue Order)

The Financial Supervisory Commission may issue such orders related to any of the following, as
necessary for preventing excessively speculative securities transactions or for the protection of

 

 

public interest or investors to a securities company. <Amended by Act No. 5498, Jan. 8, 1998>

     1. Operation of assets by the securities company;

     2. Custody and administration of customer deposit money and securities deposited by
customers;

     3. Improvements in management and activities of the securities company;

     4. Publication by the securities company;

     5. Maintenance of order in business within the meaning of Article 28(2)-3;

     6. Method of business within the meaning of Article 28(2)-4; or

     7. Reports, filings or other matters determined by the Presidential Decree as required the
supervision in the conduct of securities business.

[Wholly amended Dec. 29, 2005]

Article 54-2 (Maintenance of Equity Capital Regulation Rate)

(1) Any securities company shall maintain the rate (hereinafter referred to as the “equity capital
regulation rate”) higher than the rate prescribed by the Presidential Decree, which derives from
the division of the amount calculated by deducting the amount of the following subparagraph 3 from
the added amount of the following subparagraphs 1 and 2 by total risk amount (referring to the
amount added up with the risks calculated in terms of money, which is involved in the business or
is immanent in assets and debts of such securities company):

1. The amount obtained by deducting total amount of debts from total value of assets;

2. The allowance account for bad debts established in the floating asset, the posterity borrowings,
and the amount prescribed by the Presidential Decree; and

3. The appraised value of fixed assets, the amount of prepayment, and the amount prescribed by the
Presidential Decree.

(2) Any securities company shall calculate its equity capital regulation rate as of the last day of
every quarter (hereafter in this Article referred to as the “base day”) and file a report thereof
with the Financial Supervisory Commission within forty-five days from the base day and keep such
report or its computerized materials at its head office, branch office and other business office to
make it accessible to the public for three months from the date forty-five days have passed

 

 

since the base day. <Amended by Act No. 6623, Jan. 26, 2002>

(3) Specific standards for calculating the equity capital regulation rate shall be determined by
the Financial Supervisory Commission.

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 54-3 (Soundness of Asset Operation)

(1) Any securities company shall be prohibited from performing the act falling under each of the
following subparagraphs except as otherwise provided for by the Presidential Decree: <Amended by
Act No. 6423, Mar. 28, 2001>

1. The act of owning securities issued by the biggest stockholder (referring to the biggest
stockholder under the provisions of Article 54-5 (4) 2; hereafter in this paragraph the same shall
apply) or the major stockholder (referring to the major stockholder under the provisions of Article
188 (1); hereafter in this paragraph the same shall apply) of a relevant securities company;

2. The act of loaning money or extending credit to the person falling under each of the following
items:

(a) The biggest stockholder of the relevant company (including persons prescribed by the
Presidential Decree from persons specially related to him; hereafter in this paragraph the same
shall apply);

(b) The major stockholder of the relevant company; and

(c) The officers of the relevant company and specially related persons who are prescribed by the
Presidential Decree;

3. The act of directly or indirectly guaranteeing the repayment of debts for other persons;

4. The act of owning stocks, bonds or commercial papers (referring to bills issued by the business
for the purpose of raising funds) issued by the largest shareholder or the major shareholder of a
relevant securities company; and

 

 

5. Any act that may harm the sound management of assets of a securities company as prescribed by the
Presidential Decree other than acts in subparagraphs 1 through 4.

(2) The Financial Supervisory Commission may set detailed standards necessary to execute the
matters under paragraph (1).

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 54-4 (Internal Control Standards)

(1) Any securities company shall make basic procedures and standards (hereafter in this Article
referred to as the “internal control standards”) to be followed by its officers and employees when
they perform their duties in order to observe Acts and subordinate statutes, operate its assets in
a sound manner and protect customers.

(2) Any securities company shall have not less than one person assigned to check whether the
internal control standards are observed and to inspect any violation of the internal control
standards and report the results to the auditor or the inspection committee (hereinafter referred
to as the “compliance officer”).

(3) Any securities company shall, if it intends to appoint or dismiss a compliance officer, go
through a resolution thereon of the board of directors: Provided, That the same shall not apply to
any branch office of a foreign securities business operator. <Newly Inserted by Act No. 6423,
Mar. 28, 2001>

(4) Any compliance officer shall satisfy requirements falling under each of the following
subparagraphs: <Newly Inserted by Act No. 6423, Mar. 28, 2001>

1. He is required to be the person with the experience falling under any of the following items:

(a) A person who has served not less than 10 years in the Bank of Korea or an institution subject
to inspection (including any foreign financial institution corresponding thereto) under Article 38
of the Act on the Establishment, etc. of Financial Supervisory Organizations;

 

 

(b) A person with a master’s degree or higher in the finance-related area who has served not less
than 5 years in a university as a full-time lecturer or higher or in a research institute as a
researcher or higher;

(c) A person with the qualification of an attorney-at-law or a certified public accountant who has
served not less than 5 years in the service area related to such qualification; and

(d) A person who has served not less than 5 years in the Ministry of Finance and Economy, the
Financial Supervisory Commission, the Securities Futures Commission, or the Financial Supervisory
Service and for whom 5 years have yet to elapse from the date on which he resigned or retired from
each of such institutions;

2. He is required not to fall under each subparagraph of Article 33 (2); and

3. He is required not to have been subject to measures such as demand for caution or warning, etc.
for violating finance-related Acts and subordinate statutes from the Financial Supervisory
Commission or the Governor of the Financial Supervisory Service in the past 5 years.

(5) Necessary matters concerning the internal control standards and compliance officers shall be
prescribed by the Presidential Decree. <Amended by Act No. 6423, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 54-5 (Appointments of Outside Directors)

(1) Any securities company (limited to any securities company prescribed by the Presidential Decree
in the light of the size of its asset, etc.) shall have the board of directors in which the number
of outside directors is not less than half of total number of directors of the company. In this
case, not less than three outside directors shall be seated in the board of directors.

(2) Any securities company under the provisions of paragraph (1) shall establish a committee in
accordance with the provisions of Article 393-2 of the Commercial Act to recommend candidates for
outside directors (hereafter in this Article referred to as the “outside director candidate
recommendation committee”). In this case, outside directors shall make up not less than half of the
total members of the outside director candidate recommendation committee.

 

 

(3) In case of the securities company under the provisions of paragraph (1), a general meeting of
stockholders of the securities company, when it intends to appoint its outside directors, shall
appoint them from among candidates recommended by the outside director candidate recommendation
committee. In this case, when the outside director candidate recommendation committee of a
securities company, which is a stock-listed corporation or a KOSDAQ registered corporation,
recommends candidates for outside directors, it shall include therein candidates for outside
directors recommended by the stockholders who satisfy the requirements for exercising rights under
Article 191-14. <Amended by Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(4) Any person falling under any of the following subparagraphs shall be prohibited from becoming
an outside director of a securities company under the provisions of paragraph (1) and shall be
dismissed from the office of an outside director when he is found to fall under any of the
following subparagraphs after appointed as the outside director:

1. A person who falls under Article 191-12 (3) 1 through 4;

2. In case that a person who is a stockholder of a relevant securities company and another person in
a special relationship with him hold the largest number of stocks on the basis of total number of
issued voting stocks of the company, the former (hereinafter referred to as the “biggest
stockholder”);

3. A person in a special relationship with the biggest stockholder;

4. The major stockholder of a relevant securities company (referring to the major stockholder under
the provisions of Article 188 (1)) and his spouse and lineal ascendants and descendants;

5. A person who is an officer or employee (referring to a person who is engaged in a regular
business; hereafter the same in this paragraph shall apply) of a relevant securities company or its
affiliate (referring to the affiliate under the Monopoly Regulation and Fair Trade Act) or worked
as an officer or employee for such relevant securities company or its affiliate within the
preceding two years;

6. The spouse or lineal ascendants or descendants of an officer of a relevant securities company;

 

 

7. The officer or employee of a corporation that is in an important business relationship prescribed
by the Presidential Decree with a relevant securities company, a competitive relationship or a
cooperative relationship with such securities company or the person who worked as the officer or
employee for such corporation within the preceding two years;

8. The officer or employee of a company in which the officer or employee of a relevant securities
company works as a non-standing director; and

9. A person who has difficulty in faithfully performing his duties as an outside director or may
affect adversely the management of his company and is prescribed by the Presidential Decree.

(5) The securities company under the provisions of paragraph (1), when the number of its outside
directors does not meet the requirements for the composition of the board of directors under
paragraph (1) owing to any resignation or death, etc. of the outside directors, shall make sure
that it satisfies the requirements of paragraph (1) at a general meeting of stockholder called for
the first time after the occurrence of such cause.

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 54-6 (Inspection Committee)

(1) Any securities company (limited to the securities company prescribed by the Presidential Decree
taking into account the size of its asset, etc.) shall establish an inspection committee
(hereinafter referred to the “inspection committee”) pursuant to the provisions of Article 415-2 of
the Commercial Act.

(2) The inspection committee shall meet the requirements falling under each of the following
subparagraphs: <Amended by Act No. 7025, Dec. 31, 2003; Jan. 29, 2004>

1. Not less than 2/3 of the total members are required to be outside directors;

2. Not less than one member from among the members are required to be accounting or financial
specialists prescribed by the Presidential Decree; or

3. The representative of the inspection committee of any securities company that is either a

 

 

stock-listed corporation or a KOSDAQ registered corporation is required to be an outside director.

(3) Any members of the inspection committee who are not outside directors shall not fall under any
subparagraph of Article 191-12 (3): Provided, That any person who holds office not as a full-time
auditor or an outside director of the inspection committee under the provisions of Article 191-12
(3) but as a member of the inspection committee may become a non-outside-director member of the
inspection committee notwithstanding the provisions of Article 191-12 (3) 6.

(4) Where the securities company referred to in paragraph (1) is unable to fill the fixed number of
outside directors of the inspection committee under paragraph (2) due to such causes as the
resignation and death, etc. of outside directors, a general meeting of stockholders called for the
first time after the occurrence of such causes shall have the requirement of paragraph (2)
satisfied.

(5) The proviso of Article 415-2 (2) of the Commercial Act shall not apply to the composition of
the inspection committee under the provisions of paragraph (1).

(6) The provisions of Article 409 (2) and (3) of the Commercial Act shall apply mutatis mutandis to
the selection and appointment of any outside director who becomes a member of the inspection
committee. <Newly Inserted by Act No. 6423, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 55 (Cancellation of License)

(1) In case that any securities company falls under any of the following subparagraphs, the
Financial Supervisory Commission may show reason therefor and cancel the license of such securities
company: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb.
1, 1999; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

1. Where a securities company obtains the license of securities business by fraud or unfair means;

 

 

2. Where a securities company commits a violation of licensed contents or licensed terms or fails to
commence the business within 6 months from the date on which a license was granted;

3. Where a securities company has received money or securities from other person in connection with
its business by unfair means, or when it has acquired money or securities which shall be delivered
to other persons;

4. Where a securities company having received the order to suspend its business pursuant to the
provisions of Article 57 has not corrected the reason therefor within 1 month (where a period to
correct exceeding one month is determined in ordering to suspend its business, within the period)
from the date on which such securities company has received such order;

5. Where a securities company violates any contract in connection with purchase and sale or other
transactions effected on the securities market or KOSDAQ, or when it does not conduct delivery with
respect to such purchase and sale or other transactions;

6. Where a securities company commits a violation of the provisions of Articles 35 (1), 54-2 (1),
54-3, 54-5, 54-6 or 63;

7. Where a securities company violates the order issued pursuant to the provisions of Article 54;
and

8. Where a securities company violates this Act, order or disposition given under this Act other
than subparagraphs 1 through 7, and therefore it is deemed difficult for it to do business as a
securities company.

(2) Any securities company shall, when its securities business license is canceled, dissolve
itself. <Newly Inserted by Act No. 6176, Jan. 21, 2000>

(3) The provisions of Article 32-2 shall apply mutatis mutandis to the cancellation of license
under the provisions of paragraph (1). <Newly Inserted by Act No. 6176, Jan. 21, 2000>

Article 56 (Consummation of Unsettled Business)

When a securities company is cancelled its license (including the cancellation of a license under

 

 

Article 14 of the Act on the Structural Improvement of the Financial Industry) pursuant to Article
55 or closes its business by itself, it shall consummate the purchase and sale of securities and
other transactions which it has left unsettled. In this case, the securities company or the
successor of such securities company shall be regarded as a securities company to the extent
consistent with the purpose of consummating such unsettled purchase and sale of securities or other
transactions. <Amended by Act No. 5736, Feb. 1, 1999>

Article 57 (Suspension of Business)

(1) In case where any securities company falls under any of the following subparagraphs, the
Financial Supervisory Commission may order the suspension of the whole or part of the business:
<Amended by Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000;
Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002; Act No. 7025, Dec. 31, 2003>

1. Where it violates the provisions of Article 42, 44, 44-3, 44-4, 47, 49 through 52, 52-2, or 54-4;

2. Where it violates an order under Article 54;

3. Where it is involved in the act of unfair trade in violation of the provisions of Article 188
(1), 188-2 (1) or 188-4;

4. Where it fails to comply with a request to discharge an officer referred to in paragraph (3) or
Article 53 (5) 2 without any justifiable cause; and

5. Where it resolves to discontinue its business or dissolve itself in order to protect public
interests and investors.

(2) The provisions of Article 56 shall apply mutatis mutandis to the suspension of business
referred to in paragraph (1).

(3) In case where any securities company violates the provisions of Article 36, 43, 44, 46 or 48,
or any of officers violates the provisions of Article 52, the Financial Supervisory Commission may
request such securities company to discharge the officer concerned after showing the

 

 

reason therefor to such officer. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8,
1998; Act No. 5736, Feb. 1, 1999>

Article 57-2 (Notice of Measures against Retired Officers, etc.)

(1) If a retired officer or employee would have been subject to certain measure falling under
Article 53(5)-2 if he or she had been in office, the Financial Supervisory Commission may cause the
FSS Governor to give notice of such measure to the head of the securities company.

(2) The head of securities company who received the notice in Article 57-2(1) shall relayed the
notice to the relevant officer or employee and keep the record of the notice.

[Newly inserted Dec. 29, 2005]

Article 58 (Liabilities of Officers)

(1) In case where any director or auditor (referring to the members of the inspection committee if
such committee is established; hereafter the same in this Article shall apply) of a securities
company neglects to perform his duties on purpose or by negligence, or causes any damage to third
person in the course of performing his duties for such securities company, such director or auditor
and the biggest stockholder shall be jointly and severally made liable to compensate for the
damage: Provided, That the same shall not apply to the biggest stockholder who proves that the act
causing such damage to third person is not committed upon his request or with his consent.
<Amended by Act No. 3541, Mar. 29, 1982; Act No. 6176, Jan. 21, 2000>

(2) The provisions of paragraph (1) shall not affect the liabilities of the securities company
concerned.

(3) In case of paragraph (1), the provisions of Articles 399 (2) and (3) and 414 (3) of the
Commercial Act shall apply mutatis mutandis.

Article 59 (Prohibition of Offer or Divulgence of Information)

 

 

(1) Unless any officer or employee of a securities company receives a written request or a written
consent from the customer who makes or intends to make purchase and sale of securities through the
securities company (including any person who participates in the securities savings referred to in
Article 50; hereinafter the same shall apply), the officer or the employee of such securities
company shall not offer or divulge the information with respect to the customer, such as purchase
and sale of securities and other securities transaction, and the money or securities deposited by
such customer, to another person: Provided, That the same shall not apply to case where the
securities company is inspected by a supervisory institution with respect to its duties or where it
is requested pursuant to the provisions of Article 60.

(2) Any person who acquires the information in the ordinary course of inspection by a supervisory
institution shall not offer or divulge such information to any other person, or make use of the
information for any other purpose other than that of the inspection.

Article 60 (Prohibition of Request for Information)

(1) No person shall request any officer or employee of a securities company to offer the
information referred to in Article 59 (1), except when a court issues an order to submit such
information or a judge of a court issues a warrant therefor, or other cases as prescribed by the
Presidential Decree.

(2) Even when the offer of such information is requested pursuant to the provisions of paragraph
(1), the inquiry or investigation shall be limited within the necessary scope of the purpose.

Article 61 (Refusal of Illegal Investigation)

Any officer or employee of a securities company shall, by and after showing the reason therefor,
refuse the request, inquiry or investigation which is in contravention of the provisions of Article
60.

Article 62 (Trade Name)

 

 

(1) Any securities company shall use the letters of securities, securities brokerage, or bonds
brokerage in its trade name under the conditions as prescribed by the Presidential Decree.
<Amended by Act No. 6423, Mar. 28, 2001>

(2) No person who is not a securities company shall include any word which represents a securities
business in its trade name.

Article 63 (Prohibition of Lending Trade Name)

No securities company shall allow other persons to operate the securities business by lending its
trade name.

Article 64 (Exercise of Minority Stockholder’s Right, etc. of Securities Company)

(1) The provisions of Article 191-13 (1) through (6) shall apply mutatis mutandis to the
requirements, etc. for the exercise of the minority stockholder’s right of a securities company
(limited to any securities company prescribed by the Presidential Decree taking into account the
size, etc. of its asset; hereafter the same in this Article shall apply). In this case, “1/10,000
or more” in Article 191-13 (1) shall be deemed “5/100,000 or more”; “50/100,000 or more (25/100,000
or more in case of a corporation prescribed by the Presidential Decree)” in paragraph (2) of the
same Article, “250/100,000 or more (125/1,000,000 or more in case of a corporation prescribed by
the Presidential Decree)”; “10/10,000 or more (5/10,000 or more in case of a corporation prescribed
by the Presidential Decree)” in paragraph (3) of the same Article, “50/100,000 or more (25/100,000
or more in case of a corporation prescribed by the Presidential Decree)”; “50/10,000 or more
(25/10,000 or more in case of a corporation prescribed by the Presidential Decree)” in paragraph
(4) of the same Article, “250/100,000 or more (125/100,000 or more in case of a corporation
prescribed by the Presidential Decree)”; and “30/1,000 or more (15/1,000 or more in case of a
corporation prescribed by the Presidential Decree)” in paragraph (5) of the same Article,
“150/10,000 or more (75/10,000 or more in case of a corporation prescribed by the Presidential
Decree)”, respectively. <Amended by Act No. 6423, Mar. 28, 2001>

 

 

(2) The provisions of Article 191-14 (1) and (2) shall apply mutatis mutandis to the requirement,
etc. for the exercise of the right by stockholders of a securities company to make proposals. In
this case, “10/1,000 or more (5/1,000 or more in case of a corporation prescribed by the
Presidential Decree)” in Article 191-14 (1) shall be deemed “50/10,000 or more (25/10,000 or more
in case of a corporation prescribed by the Presidential Decree)”.

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Articles 65 through 69

Deleted. <by Act No. 5736, Feb. 1, 1999>

          SECTION 3 Deleted.

Articles 69-2 through 70

Deleted. <by Act No. 5736, Feb. 1, 1999>

CHAPTER V-2 Deleted.

Articles 70-2 through 70-11

Deleted. <by Act No. 6987, Oct. 4, 2003>

CHAPTER VI KOREA EXCHANGE <Amended Jan. 29, 2004>

          SECTION 1 [Articles 71 through 183-2 deleted Jan. 29, 2004]

Article 71

Deleted <Jan. 29, 2004>

Article 72

Deleted. <by Act No. 3945, Nov. 28, 1987>

 

 

Article 73

Deleted <Jan. 29, 2004>

Article 73-2

Deleted <Jan. 29, 2004>

Article 74

Deleted <Jan. 29, 2004>

Article 75

Deleted <Jan. 29, 2004>

Article 76

Deleted <Jan. 29, 2004>

Article 76-2

Deleted <Jan. 29, 2004>

Article 76-3

Deleted <Jan. 29, 2004>

Article 76-4

Deleted <Jan. 29, 2004>

Article 76-5

Deleted <Jan. 29, 2004>

 

 

Article 77

Deleted <Jan. 29, 2004>

Article 78

Deleted <Jan. 29, 2004>

Article 79

Deleted <Jan. 29, 2004>

Article 80

Deleted <Jan. 29, 2004>

Article 81

Deleted <Jan. 29, 2004>

Article 82

Deleted <Jan. 29, 2004>

Article 83

Deleted <Jan. 29, 2004>

Article 83-2

Deleted <Jan. 29, 2004>

SECTION 2 Sale and Purchase Transactions on Securities Market and KOSDAQ

<Amended Jan. 29, 2004>

 

 

Article 84

Deleted. <by Act No. 3945, Nov. 28, 1987>

Article 85 (Restrictions on Traders on Securities Markets)

(1) No person other than members of the Korea Exchange shall perform sale and purchase transactions
on the securities market (for the purpose of this Section, including KOSDAQ): Provided, That where
the membership regulations under Article 16 of the Korea Exchange Act determine that such person
may sell and buy specific securities, he may do so.

(2) A person who has been able to perform sale and purchase transactions on the securities market
under the proviso of paragraph (1) shall be deemed a member of the Korea Exchange in applying the
provisions of Articles 87, 94(2)-5, 95 through 97, 99, 100, and 206-3(6) hereof and Article 6,
Subparagraph 6, and Articles 16 and 19.

[This Article Wholly Amended Jan. 29, 2004]

Article 86

Deleted. <by Act No. 5736, Feb. 1, 1999>

Article 87 (Completion of Transactions)

(1) When a member is suspended from transactions or loses his qualification, the Korea Exchange
shall have the member or any other member complete the sale and purchase transactions which have
been initiated on the securities market by the member. In this case, the member who loses his
qualification shall be regarded as having the qualification of a member within the objective of
completion of those transactions. <Amended by Act No. 3945, Nov. 28, 1987; Jan. 29, 2004>

(2) In case where the Korea Exchange has any other member complete the sale and purchase
transactions pursuant to paragraph (1), it shall be regarded that a trust contract is in existence

 

 

between the member concerned and such other member. <Amended by Act No. 3945, Nov. 28, 1987;
Jan. 29, 2004>

Article 88 (Listing Regulations)

(1) Deleted. <by Act No. 5254, Jan. 13, 1997>

(2) The Korea Exchange shall adopt the Securities Listing Regulations (hereinafter referred to as
the “Listing Regulations”) in order to examine securities which are to be listed on the securities
market or administer the securities which have been listed on the securities market (hereinafter
referred to as “listed securities”). In such case, there shall be separate Listing Regulations
applicable to KOSDAQ. <Amended by Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

(3) The Listing Regulations referred to in paragraph (2) shall provide for the following matters:
<Amended by Act No. 5736, Feb. 1, 1999>

1. Matters relating to the listing standards for, listing examination of and delisting of
securities;

2. Matters relating to suspension from and release of suspension from the sale and purchase
transactions of securities; and

3. Matters necessary for the administration of listed securities other than those prescribed in
subparagraphs 1 and 2 of this paragraph.

Article 89 (Disclosure Regulations)

(1) The Korea Exchange shall adopt the Listed Corporation Disclosure Regulations (hereinafter
referred to as the “Disclosure Regulations”) in order to disclose the financial standing and
business activity of stock-listed corporations and KOSDAQ registered corporations and conduct the
supervision of stock-listed corporations and KOSDAQ registered corporations. <Amended Jan. 29,
2004>

 

 

(2) The Disclosure Regulations under paragraph (1) shall include the following matters. In this
case, the matters provided in subparagraphs 1 and 2 shall meet the provisions of Article 186
<Amended Jan. 29, 2004>:

1. Matters relating to the information on which a stock-listed corporation (for the purpose of this
Article, including KOSDAQ registered corporations) is to make a report or a disclosure;

2. Matters relating to the methods and procedures which a stock-listed corporation is to follow in
making a report or disclosure;

3. Matters relating to the standards for deciding upon whether or not a stock-listed corporation
follows the provisions of subparagraphs 1 and 2 and to the measures for a securities company
against such provisions;

4. Matters relating to the supervision of stock-listed corporations, such as the suspension of their
sale and purchase transactions; and

5. Other necessary matters relating to a report or disclosure which stock-listed corporations are to
make.

[This Article Newly Inserted by Act No. 6623, Jan. 26, 2002]

Articles 90 through 93

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 94 (Operating Rules)

(1) Matters relating to the sale and purchase transactions of securities on the securities market
shall be determined by the operating rules of the Korea Exchange. In this case, matters relating to
KOSDAQ may be determined by separate operating rules <Amended Jan. 29, 2004>.

(2) The operating rules as referred to in paragraph (1) shall provide for the following matters:
<Amended by Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26,
2002; Jan. 29, 2004>

 

 

1. Types of sale and purchase transactions and matters on consignment;

2. Matters relating to the opening, closing, suspending, or temporary closing of the securities
market;

3. Methods of the conclusion of sale and purchase transaction contract and the settlement;

4. Matters relating to the regulation of sale and purchase transactions, such as payment of deposit
money;

5. Deleted Jan. 29, 2004;

5-2. Deleted Jan. 29, 2004;

6. Deleted; and <by Act No. 6623, Jan. 26, 2002>

7. Matters necessary for the sale and purchase transactions in addition to those as referred to in
subparagraphs 1 through 4.

[This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]

Article 95 (Joint Compensation Fund for Damage Incurred from Contravention of Contracts)

(1) Members shall set aside a joint compensation fund for damage incurred from contraventions of
contracts (hereinafter referred to as the “compensation fund”) in the Korea Exchange in order to
compensate for the damage incurred from any contravention of trading contracts on the securities
market: Provided, That the same shall not apply to any member, etc. prescribed by the Korea
Exchange, who does not bear the responsibility for executing the settlement of sale and purchase
transactions. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 6423, Mar. 28, 2001; Jan. 29,
2004>

(2) Any member (excluding the member referred to in the proviso of paragraph (1)) shall, within the
extent of the compensation fund referred to in paragraph (1), be liable jointly and severally for
the damage incurred from any contravention of trading contract on the securities market.

 

 

<Amended by Act No. 3945, Nov. 28, 1987; Act No. 6423, Mar. 28, 2001>

(3) The rate and limit of reserve, use, management, repayment of the compensation fund referred to
in paragraph (1), and other necessary matters relating to the operation of the compensation fund
shall be prescribed by the Presidential Decree.

Article 96 (Appropriation of Member’s Deposit and Guarantee Fund for Obligation)

If a member has not fulfilled his obligation based on sale and purchase transactions on the
securities market for the Korea Exchange or other members, the Korea Exchange may appropriate the
member’s deposit and guarantee fund for the payment of that obligation. <Amended by Act No.
3945, Nov. 28, 1987; Jan. 29, 2004>

Article 97 (Compensation Liabilities of Korea Exchange) <Amended Jan. 29, 2004>

(1) The Korea Exchange shall be liable to compensate for the damage incurred from contravention of
trading contract by any member. <Amended by Act No. 3945, Nov. 28, 1987; Jan. 29, 2004>

(2) In case where the Korea Exchange compensates for the damage under paragraph (1), the
compensation fund set aside under the provisions of Article 95 shall be appropriated in preference.
<Amended Jan. 29, 2004>

(3) In case where the Korea Exchange compensates for the damage under paragraphs (1) and (2), the
Korea Exchange shall be entitled to the right to indemnification for the compensated amount and all
expenses required to do so against the member who contravened the trading contract. <Amended by
Act No. 3945, Nov. 28, 1987; Jan. 29, 2004>

(4) The amount of money collected in accordance with paragraph (3) shall be, in preference,
appropriated for such amount as the Korea Exchange has compensated with its own money and all
expenses required to do so, and the remainder shall be reserved in the compensation fund.
<Amended Jan. 29, 2004>

 

 

(5) Matters with respect to the exercise of the right to indemnification referred to in paragraph
(3) shall be prescribed by the Presidential Decree.

Article 98

Deleted. <by Act No. 3945, Nov. 28, 1987>

Article 99 (Preferential Right of Korea Exchange over Other Creditor) <Amended Jan. 29, 2004>

(1) The Korea Exchange shall have a right to be paid in preference to any other creditors with
respect to the deposit, member’s guarantee fund and money or securities paid for the delivery and
settlement. <Amended Jan. 29, 2004>

(2) When a member, in case where the Korea Exchange delivers securities to the member prior to the
settlement, causes any damage to the Korea Exchange due to the unfulfillment of delivery or
settlement by such member, the Korea Exchange shall have a right to be paid in preference to any
other creditors with respect to property of such member: Provided, That the right shall not be in
preference to obligations hypothecated by chonsegwon (right of registered lease on deposit basis),
pledges or mortgage created prior to the arrival of settlement date. <Amended by Act No. 3945,
Nov. 28, 1987; Jan. 29, 2004>

Article 100 (Preferential Right of Entruster Due to Contravention of Contract by Entrustee and
Right of Korea Exchange in Preference to Entruster) <Amended Jan. 29, 2004>

(1) Any person who entrusts the sale and purchase transactions on the securities market to a member
shall, in case where the member entrusted with the transactions contravenes the entrustment
contract, have a right to satisfy the claim based upon such contravention in preference to any
other creditors with respect to the deposit and member’s guarantee fund. <Amended by Act No.
3945, Nov. 28, 1987>

(2) The preferential right referred to in Article 99 shall be in preference to such preferential
right

 

 

as prescribed by the provisions of paragraph (1).

Article 101 (Prohibition of Sale and Purchase in Contravention of Contract)

Any securities company which has been entrusted with the sale and purchase transactions on the
securities market, shall have such transactions made only through the securities market without
fail. In this case, the provisions of Article 44 shall not apply. <Amended by Act No. 3945, Nov.
28, 1987; Act No. 4469, Dec. 31, 1991>

Article 102

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 103 (Publication of Quotations)

The Korea Exchange shall, under the conditions as prescribed by the Presidential Decree, make
public the quotations showing the daily trading volume, daily settled price, and the highest,
lowest and closing prices of the securities on the securities market. <Amended by Act No. 3541,
Mar. 29, 1982;Jan. 29, 2004>

Article 104

Deleted. <by Act No. 5736, Feb. 1, 1999>

Articles 105 and 106

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 107 (Restrictions on Discretionary Sale and Purchase Transactions)

(1) If a securities company is entrusted by a customer to make a sale and purchase transaction of
securities, the securities company may carry out such transaction under a discretionary

 

 

decision only on the quantity, price and time of the transaction. In this case, the types and items
of securities, the categories and methods of the transaction shall be determined only according to
a decision of the customer. <Amended by Act No. 4469, Dec. 31, 1991>

(2) The securities company, entrusted by the customer to make such sale and purchase transaction of
securities in accordance with Article 107(1) (“Discretionary Sale and Purchase”), shall fulfill its
duty of care as good manager and shall not <newly inserted Jan. 29, 2004>:

     1. Solicit for or be entrusted to do a Discretionary Sale and Purchase contrary to the
principle of investment based on customer’s own judgment and liability;

     2. Effect too frequent Discretionary Sale and Purchases comparatively with the purpose of
entrustment and the volume of monies or securities entrusted; or

     3. Use a Discretionary Sale and Purchase in the interest of itself or a third party.

(3) If a securities company carries out a sale and purchase transaction of securities pursuant to
paragraph (1), it shall observe the conditions as prescribed by the Ordinance of the Ministry of
Finance and Economy. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act
No. 5539, May 25, 1998>

[This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]

Article 108

Deleted. <by Act No. 5423, Dec. 13, 1997>

     SECTION 3 Entrustment with Sale and Purchase Transactions on Securities Market

Article 109 (Restrictions on Places of Entrustment)

(1) Deleted. <by Act No. 5736, Feb. 1, 1999>

(2) A securities company may be entrusted with the sale and purchase transactions of securities by
means of electronic communication and other manners as prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

 

 

Articles 110 and 111

Deleted. <by Act No. 5736, Feb. 1, 1999>

     SECTION 4 Accounting and Supervision

Article 112 (Report and Inspection)

(1) The Financial Supervisory Commission may, if deemed necessary in the public interest or for the
protection of investors, order the Korea Exchange to file reports or materials for reference with
respect to its business and property, and have the FSS Governor inspect its business, status of
property, accounting books, records, and other related materials. <Amended by Act No. 5254, Jan.
13, 1997; Act No. 5498, Jan. 8, 1998; Jan. 29, 2004>

(2) The provisions of Article 53 (3) shall apply mutatis mutandis to the inspection referred to in
paragraph (1).

(3) In case where the FSS Governor inspects according to the provisions of paragraph (1), the FSS
Governor shall report the result of the inspection to the Financial Supervisory Commission.
<Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

Article 113

Deleted. <by Act No. 3945, Nov. 28, 1987>

Article 114

Deleted. <by Act No. 6176, Jan. 21, 2000>

Article 115 (Approval of Regulations)

 

 

(1) Where the Korea Exchange intends to adopt the Business Regulations, Listing Regulations,
Disclosure Regulations and other regulations (including rules; hereinafter the same shall apply)
relating to business which are necessary for the administration of the securities market, the Korea
Exchange shall obtain the approval of the Financial Supervisory Commission. The same shall also
apply in case of the amendment or repeal thereof. <Amended by Act No. 3945, Nov. 28, 1987; Act
No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5736, Feb.
1, 1999; Act No. 5982, May 24, 1999; Jan. 29, 2004>

(2) Where the Financial Supervisory Commission intends to grant approval referred to in paragraph
(1), it shall consult in advance with the Minister of Finance and Economy. <Newly Inserted by
Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999>

Article 116

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 117 (Disposition in Emergency)

(1) Deleted. <by Act No. 5736, Feb. 1, 1999>

(2) When the Minister of Finance and Economy deems that the sale and purchase transactions of
securities cannot be normally made because of natural disaster, warfare, disturbance, sudden and
significant change in economic conditions or other incidents similar thereto, he may order the
temporary closing of the securities market or take other necessary measures. <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>

     CHAPTER VII Deleted.

Articles 118 through 144

Deleted. <by Act No. 5498, Jan. 8, 1998>

 

 

     CHAPTER VIII ORGANIZATIONS CONCERNED WITH SECURITIES

     SECTION 1 Securities Finance Company

Article 145 (Establishment)

(1) Any person who is engaged in the business referred to in Article 147 (hereinafter referred to
as a “securities finance company”) shall be a licensed stock company by the Minister of Finance and
Economy. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>

(2) Any person who intends to obtain a license referred to in paragraph (1) shall file a written
application including such information as designated in the following subparagraphs with the
Minister of Finance and Economy: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25,
1998>

1. Name;

2. Location of business office; and

3. Matters relating to stated capital and assets.

(3) A written application referred to in paragraph (2) shall be accompanied by such documents as
designated in the following subparagraphs: <Amended by Act No. 5254, Jan. 13, 1997; Act No.
5539, May 25, 1998>

1. Articles of association and the regulations relating to business;

2. Curricula vitae and certificates of identity of promoters;

3. Project planning statement and the estimated income and expenditure statement for a period of two
years after its establishment; and

4. Documents prescribed by the Minister of Finance and Economy other than those referred to in
subparagraphs 1 through 3.

 

 

Article 146 (Amount of Stated Capital)

Amount of stated capital of a securities finance company shall be two billion won or more.

Article 147 (Business)

(1) A securities finance company may manage any business referred to in the following
subparagraphs: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No.
6623, Jan. 26, 2002; Act No. 6987, Oct. 4, 2003; Jan. 29, 2004>

1. To loan money for securities market making and money for underwriting to underwriters;

2. To loan through the clearing organ of the Korea Exchange such money or securities as may be
necessary in the settlement of sale and purchase transactions on the securities market or the
KOSDAQ;

3. To lend money by collateralizing securities or lend securities;

4. To lend money to public investors through underwriters for purchasing stocks through public
offering;

5. To effect sale and purchase transactions of bonds within such extent as may be prescribed by the
Presidential Decree;

6. To undertake safekeeping in connection with securities;

7. To trust money under the Trust Business Act;

8. To perform the affairs of a trustee company under the Act on Business of Operating Indirect
Investment and Assets;

9. To perform the affairs of an asset deposit company under the Act on Business of Operating
Indirect Investment and Assets; and

 

 

10. To be approved by the Minister of Finance and Economy other than those referred to in
subparagraphs 1 through 9.

(2) Where a securities finance company carries on the trust business under paragraph (1) 7, it
shall be deemed a financial institution engaging concurrently in the trust business under the Trust
Business Act, which is not subject to the provisions of Articles 7 (1), 8-2, 15, 15-2, 16, and 24-3
of the Trust Business Act. <Newly Inserted by Act No. 6623, Jan. 26, 2002>

Article 148

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 149 (Restrictions on Officers)

(1) Any officer who is engaged in the regular business of a securities finance company (including a
person who practically performs the function of officer; hereinafter the same shall apply) shall be
a person other than officers and employees of a securities company. <Amended by Act No. 3541,
Mar. 29, 1982>

(2) The provisions of Article 33 (2) shall apply mutatis mutandis to any officer of a securities
finance company. <Amended by Act No. 3541, Mar. 29, 1982; Jan. 29, 2004>

Article 150

Deleted. <by Act No. 3945, Nov. 28, 1987>

Article 151 (Report on Articles of Association and Regulations)

(1) Any securities finance company shall, when it changes its articles of association, file a
report thereof with the Financial Supervisory Commission. <Amended by Act No. 6176, Jan. 21,
2000>

 

 

(2) When a securities finance company has adopted, amended or repealed the regulations relating to
its business, it shall report such fact to the Financial Supervisory Commission. <Amended by Act
No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

(3) Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 152

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 153 (Request to Discharge Officers)

When any officer of a securities finance company is elected by the illegal means, or violates this
Act, the orders pursuant to this Act or the articles of association of the securities finance
company, the Financial Supervisory Commission may request it to discharge such officer. <Amended
by Act No. 5498, Jan. 8, 1998>

Article 154 (Liabilities of Officers)

The provisions of Article 58 hereof and Article 11 of the Korea Exchange Act shall apply mutatis
mutandis to a securities finance company: Provided, That the provisions of Article 11(3) of the
same Act shall not apply mutatis mutandis to officers who are not engaged in full time. <Jan.
29, 2004>

Article 155 (Dispositions against Violations of Acts and Subordinate Statutes)

(1) The provisions of Article 55 (excluding paragraph (1) 5 through 7 of the same Article) shall
apply mutatis mutandis to the cancellation of a securities financial business license for a
securities finance company. In this case, the “Financial Supervisory Commission” shall be deemed
the “Minister of Finance and Economy”. <Amended by Act No. 6176, Jan. 21, 2000>

(2) Where any securities finance company falls under any of the following subparagraphs, the

 

 

Financial Supervisory Commission may order the suspension of its business in whole or in part for a
specified period not exceeding six months: <Amended by Act No. 6623, Jan. 26, 2002>

1. Where it does business without obtaining approval under Article 147 (1) 10;

2. Where it fails to comply with a request to discharge its officer under Article 153 without any
justifiable cause; and

3. Where it violates the provisions of Article 154.

[This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]

Article 156

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 157 (Inspection)

The provisions of Article 53 shall apply mutatis mutandis to a securities finance company. In this
case, the “cancellation of a securities business license” referred to in Article 53 (5) 1 shall be
deemed a “request for the cancellation of license to the Minister of Finance and Economy”.
<Amended by Act No. 6176, Jan. 21, 2000>

Article 158 (Discontinuance of Business and Dissolution)

The resolution of a securities finance company for the discontinuance of its business and for the
dissolution shall be subject to the authorization of the Minister of Finance and Economy.
<Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>

Article 159

Deleted. <by Act No. 5736, Feb. 1, 1999>

Article 160 (Issuance of Corporate Bonds)

 

 

(1) Notwithstanding the provisions of Article 470 of the Commercial Act, any securities finance
company may issue the corporate bonds up to 20 times the aggregate amount of its stated capital and
reserve. <Amended by Act No. 5521, Feb. 24, 1998; Act No. 6176, Jan. 21, 2000>

(2) The corporate bonds issued by a securities finance company pursuant to the provisions of
paragraph (1) shall be considered to be the bonds pursuant to the provisions of Article 2 (1) 3.

(3) Any securities finance company may temporarily issue corporate bonds in excess of the limit to
redeem corporate bonds issued in accordance with paragraph (1). In this case, it shall be subject
to the redemption of corporate bonds already issued within one month after they are issued.
<Newly Inserted by Act No. 6176, Jan. 21, 2000>

(4) Matters necessary for the issuance of corporate bonds by a securities finance company pursuant
to the provisions of paragraph (1), shall be prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

Article 161 (Deposit of Money)

(1) Any securities finance company may receive a deposit of money from the Korea Exchange,
securities companies, other securities-related institutions, and such persons as designated by the
Ordinance of the Ministry of Finance and Economy. <Amended by Act No. 5254, Jan. 13, 1997; Act
No. 5539, May 25, 1998; Jan. 29, 2004>

(2) Any securities finance company may, if necessary for the performance of deposit pursuant to
paragraph (1), issue debt instruments in accordance with the Ordinance of the Ministry of Finance
and Economy. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>

(3) In case of paragraphs (1) and (2), the Bank of Korea Act and the Banking Act shall not apply.

     SECTION 2 Korea Securities Dealers Association

 

 

     Sub-Section 1 Establishment and Supervision

Article 162 (Establishment)

(1) A Korea Securities Dealers Association shall be established for the purpose of maintaining
business orders between securities companies, assuring fair trading of securities, and protecting
investors.

(2) The Association shall be a juristic person as the organ consisting of members.

(3) The Association shall place its principal office in the Seoul Special Metropolitan City, and
may establish its branch offices in necessary places.

(4) The Association shall come into existence by the registration of incorporation at the location
of the principal office under the conditions as prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

Article 162-2 (Business)

The Association shall do such business as described in the following subparagraphs: <Amended by
Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 6423,
Mar. 28, 2001; Act No. 6623, Jan. 26, 2002; Jan. 29, 2004>

1. Business relating to the maintenance of sound business orders between members and for the
protection of investors;

2. Business relating to self-regulatory mediation of disputes in connection with the operation of
members;

2-2. Business relating to over-the-counter transaction of stocks not listed on the securities
market or KOSDAQ

3. Operation and management of fund managers in order to maintain sound order in business

 

 

under Article 28 (2) 2;

4. Examination and research of the system relating to securities;

5. Business relating to the study and training with respect to securities;

6. Business incidental to those as referred to in subparagraphs 1 through 5; and

7. Business as determined by the Presidential Decree other than those as referred to in
subparagraphs 1 through 6.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 162-3

Deleted Jan. 29, 2004

Article 163 (Matters to be Provided for in Articles of Association)

Matters to be provided for in the articles of association of the Association shall be prescribed by
the Presidential Decree.

Article 164 (Report on Regulations, etc.)

(1) Where the Association has adopted, amended or repealed regulations relating to its business, it
shall report such fact to the Financial Supervisory Commission within ten days. <Amended by Act
No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999>

(2) The Association shall, where it intends to change matters prescribed by the Presidential Decree
in the articles of association, obtain approval from the Financial Supervisory Commission.
<Newly Inserted by Act No. 6176, Jan. 21, 2000>

 

 

Article 165 (Membership Dues)

The Association may collect membership dues from members under the conditions as prescribed by the
articles of association.

Article 166

Deleted. <by Act No. 5423, Dec. 13, 1997>

Article 167

Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 168 (Order of Suspension of Business, etc.)

In case where any event described in the following subparagraphs occurs, the Financial Supervisory
Commission may order the Association to suspend its business or may request it to discharge the
officer concerned in the public interest and for the protection of investors: <Amended by Act
No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998>

1. When the Association has violated Acts and subordinate statutes or disposition taken by
administrative authorities pursuant to Acts and subordinate statutes; and

2. When any officer of the Association has violated the articles of association of the Association
or regulations relating to the business of the Association or has abused his authorities.

Article 169 (Officers and Supervision, etc.)

The provisions of Articles 33, 42, 53 and 117 shall apply mutatis mutandis to the Association.
<Amended by Act No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21,
2000>

[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]

 

 

Article 170 (Provisions of Civil Act Applied Mutatis Mutandis)

The provisions of the Civil Act relating to an incorporated association shall apply mutatis
mutandis to the Association except otherwise provided for in this Act or the orders pursuant to
this Act.

Article 171 (Prohibition of Use of Similar Name)

Any person other than the Korea Securities Dealers Association shall not use the name “Securities
Dealers Association” or any other name similar thereto. <Amended by Act No. 5254, Jan. 13,
1997>

Article 172 (Securities Training Institute)

The Association may establish a Securities Training Institute in order to improve qualifications of
persons who engage in securities business and to diffuse professional knowledge about securities.

     Sub-Section 2 Articles 172-2 through 172-4 Deleted Jan. 29, 2004

Article 172-2

Deleted Jan. 29, 2004

Article 172-3

Deleted Jan. 29, 2004

Article 172-4

Deleted Jan. 29, 2004

     SECTION 3 Securities Depository

 

 

Article 173 (Establishment)

(1) A Securities Depository (hereinafter referred to as the “Depository”) shall be established in
order to promote a concentrated deposition of securities, transfer of securities between their
accounts, and harmonious trading of securities. <Amended 29, 2004>

(2) The Depository shall be a juristic person.

(3) The Depository shall come into existence by the registration of incorporation at the location
of the principal office under the conditions as prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]

Article 173-2 (Business)

(1) The Depository shall carry on the business as prescribed in the following subparagraphs in
order to attain its objects: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1,
1999>

1. Business concentrating the deposition of securities;

2. Business transferring securities between accounts;

3. Business depositing securities and transferring between accounts through opening of a mutual
account with a foreign juristic person (hereinafter referred to as a “foreign deposition
institution”) which carries on the business similar to the Depository;

4. Securities transfer agency business (including the agency business for payment of dividend,
interest, and redemption of securities and the agency business for issuing securities);

5. Undertaking safekeeping of securities;

6. Business other than those as referred to in subparagraphs 1 through 5, which is authorized

 

 

under this Act and other Acts;

7. Business incidental to those as referred to in subparagraphs 1 through 6; and

8. Businesses as determined by the articles of association other than those as referred to in
subparagraphs 1 through 7.

(2) Deleted. <by Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

Article 173-3 (Prohibition of Carrying on Depositing Business)

No person other than the Depository may carry on any business receiving securities, and settling
accounts by means of a transfer between accounts in lieu of giving and receiving such securities.

[This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

Article 173-4 (Matters to be Provided for in Articles of Association)

The articles of association of the Depository shall include the following matters <Amended 29,
2004>:

1. Objectives;

2. Name;

3. Location of a principal office;

4. Matters relating to stocks and stated capital;

4-2. Matters relating to the qualification for acquisition and ceiling of holding of stocks

5. Matters relating to the general meeting of stockholders and the board of directors;

 

 

6. Matters relating to officers;

7. Matters relating to the accounting; and

8. Method of the public notice.

[This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

Article 173-5 (Provisions of Commercial Act Applied Mutatis Mutandis)

The provisions of the Commercial Act concerning the stock company shall apply mutatis mutandis to
the depositor, unless otherwise prescribed by this Act or any order issued pursuant to this Act.

[This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

Article 173-6 (Officers)

(1) The officers of the Depository shall be the president, managing director, director and auditor.

(2) The president shall be appointed by the general meeting of stockholders, but he shall be
subject to approval of the Minister of Finance and Economy. <Amended by Act No. 5736, Feb. 1,
1999>

(3) The standing auditor shall be appointed by the general meeting of stockholders. <Newly
Inserted by Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

Article 173-7 (Designation of Securities to be Deposited)

(1) The securities which may be deposited at the Depository (hereinafter referred to as “securities
to be deposited”), shall be designated by the Depository.

 

 

(2) Deleted. <by Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 173-8 (Notification of Details of Issuance and Details of Securities Stolen, Lost or
Destroyed)

(1) In case where an issuer of securities to be deposited issues newly securities, the issuer shall
notify the type of such securities and other matters as prescribed by the Ordinance of the Ministry
of Finance and Economy to the Depository without delay. <Amended by Act No. 5539, May 25,
1998>

(2) In case where an issuer of securities to be deposited is notified of orders with respect to the
seizure, provisional seizure or provisional disposition of securities or receives a report that the
securities are stolen, lost or destroyed (including public summons and nullification judgment
pursuant to the Civil Procedure Act), such issuer shall notify the type of such securities and
other matters as prescribed by the Ordinance of the Ministry of Finance and Economy to the
Depository without delay. <Amended by Act No. 5539, May 25, 1998; Act No. 6423, Mar. 28,
2001>

(3) The Depository which has received the notifications pursuant to paragraphs (1) and (2) shall
make public the details of such reports.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 174 (Deposition in Depository, etc.)

(1) Any person who intends to deposit securities in the Depository, shall open an account in the
Depository. <Amended by Act No. 4701, Jan. 5, 1994>

(2) Any person who has opened an account pursuant to paragraph (1) (hereinafter referred to as a
“depositor”), may deposit securities which he holds and has been deposited by his customers in the
Depository with the consent of customers. <Amended by Act No. 4701, Jan. 5, 1994>

 

 

(3) The Depository shall prepare and keep the depositors account book in which the following
matters are stated, but shall establish therein a distinction between the portion owned by
depositors and the portion deposited by customers: <Amended by Act No. 4701, Jan. 5, 1994; Act
No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>

1. Name and address of a depositor;

2. Type and number of securities which are deposited (hereinafter referred to as “deposited
securities”) and the name of an issuer; and

3. Other matters as prescribed by the Ordinance of the Ministry of Finance and Economy.

(4) The Depository may keep deposited securities in a state mixed by type and item. <Amended by
Act No. 4701, Jan. 5, 1994>

(5) In case where a depositor or his customer accepts or subscribes for securities or requests
issuance of securities based on other grounds, an issuer of securities may, upon a request of the
depositor or his customer, issue or register (this refers to a registration pursuant to the State
Bond Act or the Registration of Bonds and Debentures Act; hereinafter the same shall apply)
securities by the name of the Depository in lieu of the depositor or his customer. <Newly
Inserted by Act No. 4469, Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13,
1997>

[This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]

Article 174-2 (Deposition, etc. to Depositor by Customers)

(1) Any depositor who redeposits securities deposited by customers in the Depository, shall prepare
and keep the customers account book in which the following matters are stated: <Amended by Act
No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>

1. Names and addresses of customers;

2. Types and number of deposited securities, and names of issuers; and

 

 

3. Other matters as prescribed by the Ordinance of the Ministry of Finance and Economy.

(2) When a depositor has stated matters referred to in paragraph (1), he shall deposit without
delay securities in the Depository specifying that such securities are deposited by customers.
<Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997>

(3) When a depositor has stated matters referred to in paragraph (1), he shall keep the securities
separately from his own until he deposits them in the Depository pursuant to paragraph (2).
<Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997>

(4) The securities stated in the customers account book pursuant to paragraph (1) shall be
considered deposited in the Depository at the time of statement. <Amended by Act No. 4701, Jan.
5, 1994>

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-3 (Effect of Statement in Account Book)

(1) Persons who are stated in the customers account book and the depositors account book shall be
considered to hold the respective securities.

(2) If a transfer between accounts is stated in the customers account book and the depositors
account book, the purpose of which is a transfer of or creation of pledge on securities, the
statement of such transfer or creation shall have the same effect as if the securities had been
delivered.

(3) Notwithstanding the provisions of Article 3 (2) of the Trust Act, a trust of deposited
securities may oppose against the third person, by stating that they are the trust properties in
the customers account book or the depositors account book.

(4) In case where a sale and purchase transaction of stocks on the securities market or KOSDAQ is
settled by means of a transfer between accounts in the customers account book or the depositors
account book before the stock certificates thereof are issued, notwithstanding the provisions of
Article 335 (3) of the Commercial Act, it shall be effective against an issuing

 

 

company. <Newly Inserted by Act No. 5254, Jan. 13, 1997; Jan. 29, 2004>

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-4 (Presumption of Right, etc.)

(1) Customers of a depositor and the depositor shall be presumed to have co-ownership share on the
deposited securities according to the types, items and quantity of securities stated respectively
in the customers account book and the depositors account book.

(2) Any customer of a depositor or his pledgee may request at any time the depositor to return the
deposited securities corresponding to a co-ownership share of the customer, and the depositor may
request the Depository to return the deposited securities corresponding to his co-ownership share.
In this case, a consent of the pledgee shall be required with respect to the deposited securities
which are the object of the right of pledge. <Amended by Act No. 4701, Jan. 5, 1994>

(3) The Depository may, in case where such causes as prescribed by the Presidential Decree occur,
limit the return or inter-account transfer of the portion deposited by customers among deposited
securities under the conditions as designated by the Ordinance of the Ministry of Finance and
Economy. <Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No 5423, Dec. 13, 1997; Act No.
5539, May 25, 1998; Act No. 6423, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-5 (Liability for Coverage)

(1) In case where the deposited securities becomes insufficient, the Depository and the depositor
as prescribed in Article 174-2 (1) shall make up such insufficient portion according to the methods
and procedure as prescribed by the Presidential Decree. In this case, the Depository and the
depositor may exercise a right to indemnification to a person who is liable for such insufficiency.
<Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997>

(2) The depositor as referred to in paragraph (1) shall bear a liability for coverage pursuant to

 

 

paragraph (1), even after closing the account as prescribed in Article 174 (1): Provided, That in
case where five years has elapsed from the time at which the account is closed, he shall be
exempted from the liability.

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-6 (Exercise of Right to Deposited Securities)

(1) The Depository may exercise the right to the deposited securities according to a request of a
depositor or customer. In this case, a request of a customer shall be made through the depositor.
<Amended by Act No. 4701, Jan. 5, 1994>

(2) The Depository may request a change of entry in the register or a registration in its own name
with respect to the deposited securities. <Amended by Act No. 5254, Jan. 13, 1997>

(3) With respect to stocks with regard to which the entry in the register is changed in the name of
the Depository pursuant to paragraph (2), it may exercise the right as a stockholder as to matters
as prescribed in Article 358-2 of the Commercial Act, as to statement in the register of
stockholders and as to stock certificates, even though there is no request by the depositor.
<Amended by Act No. 4701, Jan. 5, 1994>

(4) In case where a company issuing stock certificates makes a notification or public notice on a
convocation of the general meeting of stockholders, with respect to stockholders holding stock
certificates with regard to which the entry in the register is changed in the name of the
Depository, the company shall notify personally or publicly the particulars concerning the exercise
of voting rights held by the Depository as referred to in paragraph (5). <Newly Inserted by Act
No. 4469, Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997>

(5) If a stockholder holding stock certificates with regard to which the entry in the register is
changed in the name of the Depository fails to express his intention to exercise directly or by
proxy or not to exercise his voting right to the Depository not later than five days before the
date of the general meeting of stockholders, the Depository may exercise such voting right:
Provided, That the same shall not apply to the following cases: <Newly Inserted by Act No. 4469,
Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 6623, Jan. 26, 2002>

 

 

1. Where a company issuing the stock certificates fails to make a notification or public notice on
the exercise of voting right by the Depository pursuant to paragraph (4);

2. Where a company issuing the stock certificates requests the Financial Supervisory Commission to
prevent the Depository from exercising its voting right;

3. Where subject matters of the general meeting of stockholders fall under any of matters as
prescribed in Articles 360-3, 360-16, 374, 438, 518, 519, 522, 530-3 and 604 of the Commercial Act;
and

4. Where a stockholder concerned exercises directly or by proxy his voting right at the general
meeting of stockholders.

(6) Matters with respect to which any company issuing stock certificates is required to notify the
Depository in order for the Depository to exercise its rights under paragraph (1) and other matters
necessary for the Depository to exercise its voting right under paragraph (5) shall be prescribed
by the Presidential Decree. <Amended by Act No. 6423, Mar. 28, 2001>

(7) The provisions of paragraph (3) shall apply mutatis mutandis to registered securities among the
deposited securities. <Newly Inserted by Act No. 6423, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-7 (Exercise of Right by Beneficial Owner)

(1) Co-owners of stock certificates of deposited securities (hereinafter referred to as “beneficial
owners”) shall be considered to hold stocks equivalent to the co-ownership shares as prescribed in
Article 174-4 (1) in exercising the rights as stockholders.

(2) A beneficial owner may not exercise the right as prescribed in Article 174-6 (3): Provided,
That the same shall not apply with respect to a notification to stockholders by a company, and an
inspection or transcription of the register of stockholders as prescribed in Article 396 (2) of the
Commercial Act.

 

 

(3) When a company issuing stock certificates of deposited securities has fixed a certain period or
date pursuant to Article 354 of the Commercial Act, the company shall notify the Depository of such
fact without delay; and the Depository shall notify a company issuing stock certificates concerned
or a company which conducts change of entry in a register as an agent of the matters referred to in
the following subparagraphs with respect to beneficial owners on the first day of the period or on
the date (hereafter in this Article referred to as “fixed date for the closing of register of
stockholders”) without delay: <Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13,
1997>

1. Name and address; and

2. Types and number of stocks as prescribed in paragraph (1).

(4) The Depository may request a depositor as prescribed in Article 174-2 (1) to notify matters as
referred to in subparagraphs of paragraph (3) with respect to beneficial owners on the fixed date
for the closing of register of stockholders. In this case, the depositor, upon receiving the
request, shall notify it without delay. <Amended by Act No. 4701, Jan. 5, 1994>

(5) The provisions of paragraphs (3) and (4) shall apply mutatis mutandis where the issuer of
stocks, etc. whose tender offer statement was submitted requests the Depository to communicate
matters on beneficial owners in order to know the stockholding status by setting a specified date.
<Newly Inserted by Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-8 (Preparation of Register of Beneficial Owners, etc.)

(1) Any issuing company or company which conducts change of entry in a register as an agent shall,
upon receiving a notification pursuant to Article 174-7 (3), prepare and keep a register of
beneficial owners, stating therein the notified matters and the date of notification.

(2) Any statement in a register of beneficial owners relating to stocks the certificates of which
are deposited in the Depository, shall have the same effect as the statement in a register of
stockholders. <Amended by Act No. 4701, Jan. 5, 1994>

 

 

(3) When an issuing company or a company which conducts change of entry in a register as an agent
pursuant to the provisions of paragraph (1) deems that a person stated in a register of
stockholders as a stockholder is the same as a person stated in a register of beneficial owners as
a beneficial owner, the issuing company or the company which conducts change of entry in a register
as an agent shall sum up the number of stocks on the register of stockholders and those on the
register of beneficial owners for the exercise of rights as a stockholder.

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-9 (Civil Execution)

Matters necessary for the compulsory execution, execution of provisional seizure and provisional
disposition, or auction with respect to the deposited securities, shall be determined by the
Supreme Court Regulations.

[This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

Article 174-10 (Certificate of Beneficial Ownership)

(1) In case where a depositor or a customer of depositor requests the Depository to issue a
document certifying the deposition of securities (hereinafter referred to as a “certificate of
beneficial ownership”) in order to exercise the right as a stockholder, the Depository may issue
the certificate of beneficial ownership under the conditions as prescribed by the Ordinance of the
Ministry of Finance and Economy. In this case, a request of the customer shall be made through the
depositor. <Amended by Act No. 5539, May 25, 1998>

(2) The Depository shall, in case of issuing the certificate of beneficial ownership pursuant to
paragraph (1), notify the issuing company concerned of such fact without delay.

(3) In case where a depositor or a customer of depositor has filed the certificate of beneficial
ownership which is issued pursuant to paragraph (1) with the issuing company, notwithstanding the
provisions of Article 337 (1) of the Commercial Act, the depositor or the customer of depositor may
set up against the issuing company.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

 

 

Article 174-11 (Special Case for Deposition in Foreign Depositing Institutions and Foreign
Corporations, etc.)

(1) The provisions of Articles 174-2, 174-5, 174-6 (4) through (6), 174-7 and 174-8 (3) shall not
apply to foreign depositing institutions: Provided, That this shall not apply where any foreign
depositing institution makes a request for its application. <Amended by Act No. 5736, Feb. 1,
1999>

(2) In the event that an issuer of deposited securities is a foreign corporation, etc., the
provisions of Articles 174 (5), 174-6 (4) through (6), 174-7, 174-8 and 174-10 shall not apply:
Provided, That the same shall not apply to a case where the relevant foreign corporation, etc.
requests the application thereof. <Newly Inserted by Act No. 6423, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 174-12 (Report and Confirmation, etc.)

The Depository may request a depositor to file the report or data concerning the depositing
business, inspect the relating account books, or confirm the status of custody, etc. of securities
kept under the depositor’s own custody.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 175 (Report on Regulations)

Where the Depository makes, changes, or repeals the regulations relating to deposition and other
business, it shall file a report thereof with the Financial Supervisory Commission. <Amended by
Act No. 6176, Jan. 21, 2000>

[This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]

Article 176

Deleted. <by Act No. 5736, Feb. 1, 1999>

 

 

Article 176-2 (Control of Securities)

(1) A listed corporation, KOSDAQ registered corporation and company which conducts change of entry
in a register as an agent (referring to a person who obtains a license pursuant to Article 180 (1);
hereinafter the same shall apply) shall be subject to the Securities Handling Regulations as
determined by the Depository with respect to printed form, issuance, retirement, issuance for
replacement, effacement, and other matters regarding control of securities. <Amended Jan. 29,
2004>

(2) The Depository may control the printed forms of securities which any listed corporation or
KOSDAQ registered corporation keeps as spares for issuance of securities (hereinafter referred to
as “spare certificates”). <Amended Jan. 29, 2004>

(3) The Depository may, if it deems necessary, ask any listed corporation, KOSDAQ registered
corporation and any company which conducts change of entry in a register as an agent to submit data
regarding the procedure of handling securities and the control of spare certificates pursuant to
paragraph (1) and may direct it’s staff personnels to confirm the data. <Amended Jan. 29,
2004>

(4) When an unlisted corporation intends to use printed forms pursuant to the Securities Handling
Regulations of the Depository with respect to securities of the corporation concerned, it shall
obtain the approval of the Depository. In this case, the provisions of paragraphs (1) through (3)
shall apply mutatis mutandis.

(5) If any listed corporation becomes an unlisted corporation, the provisions of paragraphs (1)
through (3) shall apply mutatis mutandis to such corporation until all of printed forms pursuant to
the Securities Handling Regulations of the Depository and the securities issued by using the
printed forms is entirely effaced.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 177

Deleted. <by Act No. 3945, Nov. 28, 1987>

 

 

Article 178 (Officers, Supervision, etc.)

The provisions of Articles 59 through 61, 117 and 157 hereof and Articles 5(2), and Articles 10
through 12 of the Korea Exchange Act shall apply mutatis mutandis to the Depository.

[This Article Wholly Amended Jan. 29, 2004]

     SECTION 4 Order Matching Company and Transfer Agent

Article 179 (Order Matching Company)

(1) Any person who may conduct the business of matching orders of sale and purchase transactions on
the securities market shall be a stock company which obtains the license of the Financial
Supervisory Commission. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act
No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>

(2) Any person who obtained the license pursuant to paragraph (1) (hereinafter referred to as an
“order matching company”) may conduct the business of purchase and sale of securities which is
necessary in performing the function of order matching on the securities market.

(3) Any order matching company shall be subject to inspection by the Korea Exchange with respect to
its business and properties. <Amended Jan. 29, 2004>

(4) The provisions of Articles 53, 149, 151 (1), 153, 154, 155 and 158 shall apply mutatis mutandis
to an order matching company. <Amended by Act No. 5498, Jan. 8, 1998>

Article 180 (Transfer Agent)

(1) A company which may conduct the business of changing entry in a register as an agent
(hereinafter referred to as a “transfer agent”) shall be a stock company registered with the
Financial Supervisory Commission. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25,
1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>

 

 

(2) A transfer agent may conduct business of paying dividends, interests and redemption in
connection with securities and issuing securities as an agent. <Amended by Act No. 3541, Mar.
29, 1982; Act No. 5254, Jan. 13, 1997>

(3) The provisions of Articles 53, 149, 151 (1), 153, 154, 155 (2) and 158 of this Act and the
provisions of Article 152 of the Act on Business of Operating Indirect Investment and Assets shall
apply mutatis mutandis to a transfer agent. <Amended by Act No. 6987, Oct. 4, 2003>

Article 181 (License and Supervision of Other Organizations relating to Securities)

(1) Any person who intends to establish an organization which is composed of investors in
securities, stock-listed corporations, or other persons prescribed by the Presidential Decree for
the purpose of assuring public interest, protecting investors or maintaining orderly securities
market, shall obtain the license of the Minister of Finance and Economy under the conditions as
prescribed by the Presidential Decree. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5254,
Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999>

(2) The provisions of Articles 53, 151 (1) and 168 shall apply mutatis mutandis to organizations
relating to securities which are established with the license pursuant to paragraph (1).
<Amended by Act No. 5254, Jan. 13, 1997>

     CHAPTER IX CONTROL OF LISTED CORPORATIONS, ETC.

     SECTION 1 Disclosure by Listed Corporations, etc.

Article 182

Deleted. <by Act No. 5254, Jan. 13, 1997>

Articles 183 through 185

Deleted. <by Act No. 3541, Mar. 29, 1982>

 

 

Article 186 (Duty of Report and Disclosure of Listed Corporation, etc.)

(1) Where a listed corporation or a KOSDAQ registered corporation falls under any of the following
subparagraphs, such corporation shall report to the Financial Supervisory Commission and the Korea
Exchange such fact or the contents of a resolution adopted at the meeting of the board of directors
under the conditions as prescribed by the Presidential Decree without delay: <Amended by Act No.
3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan.
13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act
No. 6423, Mar. 28, 2001; Jan. 29, 2004>

1. Where any issued bill or check is dishonored, or when transaction with banks is suspended or
prohibited;

2. Where the business is suspended in part or in whole;

3. Where a petition for the reorganization procedure of the corporation is filed or the
reorganization thereof is virtually commenced pursuant to the provisions of relevant Act;

4. Where there is a resolution of the board of directors with respect to changing the objective of
business;

5. Where it suffers enormous damages caused by a disaster;

6. Where a lawsuit which may have great influence upon the listed securities or the securities
listed on KOSDAQ is filed against it;

7. Where any of the events referred to in Articles 374, 522, 527-2, 527-3 and 530-2 of the
Commercial Act occurs;

8. Where causes for dissolution pursuant to the provisions of relevant Act take place;

9. Where there is a resolution of the board of directors with respect to increase or decrease of
capital or the retirement of stocks;

 

 

10. Where the operation is suspended or is unable to be continued due to special causes;

11. Where a correspondent bank commences a control of the corporation concerned;

12. Where there is a resolution of the board of directors, or a decision of the representative
director or other person who is prescribed by the Presidential Decree with respect to the
acquisition and disposal of the treasury stocks; and

13. Where the fact, which is prescribed by the Presidential Decree as the matters having serious
effects on the management and properties, etc. of corporation other than subparagraphs 1 through
12, occurs.

(2) The Korea Exchange may, if it is necessary for the fair transaction of securities and the
protection of investors, request a listed corporation or a KOSDAQ registered corporation to confirm
as to whether a rumor and news concerning such listed corporation or such KOSDAQ registered
corporation is true or not; and the Korea Exchange may, if the price or the trading volume of
securities issued by the listed corporation or the KOSDAQ registered corporation is changed
remarkably, request such corporation to disclose as to whether there is important information as
prescribed in Article 188-2. In this case, the corresponding corporation shall comply with it
without delay, except in case where it is difficult to make such disclosure due to other Acts and
subordinate statutes, natural disaster and/or other reasons similar thereto. <Amended by Act No.
4469, Dec. 31, 1991; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

(3) If a listed corporation or a KOSDAQ registered corporation fails to discharge faithfully the
duty of report pursuant to paragraph (1) or to comply with a request for confirmation or disclosure
pursuant to paragraph (2), the Korea Exchange or the Association shall notify it to the Financial
Supervisory Commission so as to take a measure as prescribed in the provisions of Article 193.
<Newly Inserted by Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5498, Jan.
8, 1998; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

(4) The provisions of Articles 8 (2) and 14 through 16 shall apply mutatis mutandis to the case of
the report pursuant to the provisions of paragraph (1). <Newly Inserted by Act No. 5254, Jan.
13, 1997; Act No. 5736, Feb. 1, 1999>

(5) Where the Financial Supervisory Commission or the Korea Exchange deems it necessary to promptly
inform an investor of the contents of the matters listed in paragraph (1) 1, 3, 6, 8 and

 

 

11 and matters requested to be confirmed or disclosed under paragraph (2) as they threaten to have
important effect on the investors’ judgement to invest, it may request any administrative agency or
other related agencies to provide or exchange necessary information pursuant to the Presidential
Decree. In this case, the agency which has received such request shall cooperate with it unless
there exists any special cause. <Newly Inserted by Act No. 5736, Feb. 1, 1999; Act No. 6176,
Jan. 21, 2000; Jan. 29, 2004>

Article 186-2 (Submission of Annual Business Report, etc.)

(1) A stock-listed corporation, KOSDAQ registered corporation and such corporations as prescribed
by the Presidential Decree shall submit an annual business report to the Financial Supervisory
Commission and the Korea Exchange within 90 days after the lapse of each business year: Provided,
That the same shall not apply to the case as determined by the Presidential Decree. <Amended by
Act No. 5498, Jan. 8, 1998; Jan. 29, 2004>

(2) Any business report under paragraph (1) shall include the objectives, firm name, details of the
business, the remunerations of officers (including stock options granted in accordance with Article
189-4 and such stock options shall be limited to those prescribed by the Presidential Decree),
financial matters and other matters prescribed by the Presidential Decree. <Amended by Act No.
5539, May 25, 1998; Act No. 6176, Jan. 21, 2000; Act No. 7025, Dec. 31, 2003>

(3) Where a corporation is subject to submission of a business report under paragraph (1) for the
first time, it shall promptly (by the time limit for submission, where a corporation is subject to
submission of an annual business report during the period to submit the business report referred to
in paragraph (1)) submit the annual business report of the immediately preceding business year to
the Financial Supervisory Commission and the Korea Exchange: Provided, That this shall not apply
where the corporation has already disclosed the matters equivalent to the annual business report of
the immediately preceding business year through a registration statement of securities, etc.
<Amended by Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

(4) The annual business report pursuant to paragraph (1) shall be prepared in accordance with such
method and form determined by the Financial Supervisory Commission by type and line of business.
<Amended by Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21,
2000>

 

 

(5) Where a corporation which has to submit an annual business report pursuant to paragraph
(1) is a company affiliated with a conglomerate which has to prepare conglomerate combined
financial statements pursuant to Article 1-3 of the Act on External Audit of Stock Companies, it
shall submit conglomerate combined financial statements as prescribed by subparagraph 3 of Article
1-2 of the same Act to the Financial Supervisory Commission and the Korea Exchange within six
months from the end of a business year. <Newly Inserted by Act No. 5736, Feb. 1, 1999; Jan. 29,
2004>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 186-3 (Submission of Semiannual Report, etc.)

A corporation which is under obligation to submit an annual report pursuant to the provisions of
Article 186-2 (1), shall submit a business report for 6 months from the beginning of a business
year (hereinafter referred to as a “semiannual report”) and business reports for 3 months and 9
months from the beginning of a business year (hereinafter referred to as “quarterly reports”),
respectively, to the Financial Supervisory Commission and the Korea Exchange within 45 days after
the lapse of the period. <Amended by Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 186-4 (Special Treatment concerning Foreign Corporation, etc.)

Notwithstanding the provisions of Articles 186-2 and 186-3, different regulations, such as
providing for different period of submission, etc., may apply with respect to a foreign
corporation, etc. under the conditions as prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 186-5 (Provisions Applied Mutatis Mutandis)

The provisions of Articles 8 (2) and (4), 11 (1) through (3), 14 through 16, 18, 19, and 20 shall
apply mutatis mutandis to the annual business report, semiannual business report, and quarterly
business report. <Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21,

 

 

2000; Act No. 7025, Dec. 31, 2003>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 187

Deleted. <by Act No. 5254, Jan. 13, 1997>

SECTION 2 Prohibition of Unfair Trade, etc.

Article 188 (Disgorgement of Short-Term Sales Margin of Insider, etc.)

(1) Officers, employees or major stockholders (referring to those who hold stocks or contribution
certificates of 10/100 or more of the total number of voting stocks issued or of the total amount
of contributions for their own account regardless of the title thereof, and those who are
prescribed by the Presidential Decree; hereinafter the same shall apply) of a stock-listed
corporation or KOSDAQ registered corporation shall not sell certificates of stocks (including
contribution certificates), convertible bonds, bonds with warrants, warrants and securities as
prescribed by the Ordinance of the Ministry of Finance and Economy (hereinafter referred to as
“stock certificates, etc.”) of the corporation listed on the Korea Exchange or KOSDAQ, unless they
own the stock certificates, etc. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13,
1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

(2) Where officers, employees or major stockholders of a stock-listed corporation or KOSDAQ
registered corporation gain any profit by selling stock certificates, etc. of the corporation
concerned within six months after purchasing them, or by purchasing such stock certificates within
six months after selling them, the corporation concerned may request such officers, employees or
major stockholders to give such profit to the corporation. In this case, necessary matters relating
to standards for calculation of such profit and procedures for return, etc. shall be determined by
the Presidential Decree. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997;
Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176,
Jan. 21, 2000; Jan. 29, 2004>

(3) Stockholders of the corporation concerned or the Securities Futures Commission may demand that
such corporation make the request pursuant to the provisions of paragraph (2),

 

 

and such stockholders or the Securities Futures Commission may, unless the corporation
concerned makes such request within two months after the date on which such stockholders or the
Securities Futures Commission have demanded such request, make such request by subrogating the
corporation concerned. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

(4) When stockholders or the Securities Futures Commission instituting a lawsuit according to the
provisions of paragraph (3) wins the lawsuit, the Securities Futures Commission or such
stockholders may claim the legal cost and other actual expenses actually incurred in the lawsuit
against the corporation concerned. <Newly Inserted by Act No. 3541, Mar. 29, 1982; Act No. 5254,
Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>

(5) The right referred to in paragraphs (2) and (3) shall lapse, unless the right is exercised
within two years after the date on which such profit is gained.

(6) Any officer or major stockholder of a stock-listed corporation or KOSDAQ registered corporation
shall report the situation of such stocks of the corporation concerned, held by him for his own
account regardless of the title thereof to the Securities Futures Commission, and the Korea
Exchange or the Association under the conditions as designated by the Presidential Decree within
ten days after he becomes an officer or major stockholder; and if the number of stocks held by him
is changed, he shall report such fact to the Securities Futures Commission and the Korea Exchange
under the conditions as prescribed by the Presidential Decree within the 10th day of the month
following the month in which the date on which such change occurs is included. <Amended by Act
No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5498,
Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000;
Jan. 29, 2004>

(7) The Securities Futures Commission and the Korea Exchange shall keep the report pursuant to
paragraph (6), and shall make it available for public inspection. <Newly Inserted by Act No.
3541, Mar. 29, 1982; Act No. 4469, Dec. 31, 1991; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1,
1999; Jan. 29, 2004>

(8) The provisions of paragraph (2) shall not apply in such case as prescribed by the Presidential
Decree taking into consideration of the nature of selling or purchasing which was carried out in
the capacity of an officer, employee or major stockholder, and in such case where a major
stockholder does not hold such capacity at a time when he sells or purchases stocks.

 

 

<Amended by Act No. 4469, Dec. 31, 1991>

(9) The provisions of paragraphs (2) and (3) shall apply mutatis mutandis to a securities company
which makes arrangements for a public offering of new or outstanding securities or underwrites
stocks issued by a stock-listed corporation or KOSDAQ registered corporation during the period as
determined by the Presidential Decree. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 4469,
Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

Article 188-2 (Prohibition of Using Undisclosed Information)

(1) Any person who is informed of material information which is undisclosed to the public in
relation with affairs, etc. of a listed corporation or KOSDAQ registered corporation (including
corporations listed within six months) in the course of performing his duties, from among those who
fall under any of the following subparagraphs (including those for whom one year has not passed
after they become not to fall under any of subparagraphs 1 through 5 of this paragraph), and those
who are informed of such information from him, shall not use or have another person use the
information in connection with sale and purchase or any other transaction of securities issued by
the corporation concerned: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5521, Feb. 24, 1998;
Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

1. The corporation concerned and its officers, employees and agents;

2. Major stockholders of the corporation concerned;

3. A person who has the authority pursuant to Acts and subordinate statutes of license,
authorization, direction, supervision or other authorities with respect to the corporation
concerned;

4. A person who entered into a contract with the corporation concerned; and

5. An agent, employee, and other staff personnel of a person who falls under any of subparagraphs 2
through 4 (in case where a person who falls under any of subparagraphs 2 through 4 is a
corporation, the officers, employees and agents of such corporation).

 

 

(2) The term “material information which is undisclosed to the public” in paragraph (1) means
information which may have important effect on investors’ judgment on investment and is undisclosed
yet to the public by the corporation concerned under the conditions as prescribed by the Ordinance
of the Ministry of Finance and Economy from among any information on fact, etc. falling under any
subparagraph of Article 186 (1). <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25,
1998>

(3) The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the case of performing
tender offer pursuant to Article 21. In this case, the term “the corporation concerned” in the main
sentence of paragraph (1) shall be considered as the term “issuer of securities which are subject
to tender offer”; the term “material information”, as the term “information on carrying out or
stopping tender offer”; and the term “the corporation concerned” in each subparagraph of paragraph
(1), as the term “tender offerer”. <Amended by Act No. 5254, Jan. 13, 1997>

[This Article Newly Inserted by Act No. 4469, Dec. 31, 1991]

Article 188-3 (Liability for Damages against Using Undisclosed Information)

(1) Any person who violates the provisions of Article 188-2, shall be liable for damages which a
person who has made a purchase or sale of securities or other transaction suffers from that
transaction.

(2) The claim for damages pursuant to paragraph (1) shall be extinguished by prescription, unless a
claimant exercises such claim for damages for one year after the claimant is informed of the fact
that an act in violation of the provisions of Article 188-2 is committed or for three years after
the offense takes place. <Amended by Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 4469, Dec. 31, 1991]

Article 188-4 (Prohibition of Unfair Transaction such as Market Manipulation)

(1) No person shall do any acts which fall under any of the following subparagraphs for the

 

 

purpose of creating a misleading appearance of active trading or causing any person to make a
false judgment with respect to the sale and purchase transaction of securities listed on the
securities market or registered on the KOSDAQ <Amended Jan. 29, 2004>:

1. Selling securities after a person has conspired in advance with other person that other person
purchases securities at the same time when the person sells securities and at the same price;

2. Purchasing securities after a person has conspired in advance with other person that other person
sells securities at the same time when the person purchases securities and at the same price;

3. Making fictitious sale and purchase transaction which does not accompany the transfer of
ownership in the securities transaction; and

4. Entrusting or being entrusted with action as prescribed in subparagraphs 1 through 3 of this
paragraph.

(2) No person shall do any acts which fall under any of the following subparagraphs for the purpose
of inducing the sale and purchase transaction of securities on the securities market or KOSDAQ
<Amended Jan. 29, 2004>:

1. To effect, to entrust or to be entrusted with, alone or in conspiracy with other persons, sale
and purchase transactions in the securities, creating a false or misleading appearance of active
trading or making the price of such securities fluctuate;

2. Disseminating the rumor that the price of concerned securities fluctuates by his or other
person’s manipulation; and

3. Making willfully the representation which is false or misleading with respect to important
matters in selling or purchasing the concerned securities.

(3) No person shall effect, entrust or to be entrusted with, independently or jointly, the sale and
purchase transaction of securities on the securities market or KOSDAQ, for the purpose of pegging
or stabilizing price of securities except as <Amended Jan. 29, 2004>:

1. A securities company (that for the purpose of this Article refers to a securities company
that

 

 

enters into an underwriting agreement with the issuer or holder of the securities to be
offered
for sale or sold, as prescribed by the Presidential Decree) effects sale and purchase transactions
in accordance with the Presidential Decree to facilitate the offer for sale or sale of securities
by stabilizing the price of securities during the period from such a date as prescribed by the
Presidential Decree within 30 days prior to the end of the period of offering to the end of the
period of offering (“Stabilization”);

2. A securities company effects sale and purchase transactions to make supplies and demands of
securities offered for sale or sold in accordance with the Presidential Decree during such a period
not exceeding 6 months from the listing as prescribed by the Presidential Decree (“Market Making”);

3. An officer or employee of the issuer of the securities to be offered for sale or sold or any
other person prescribed by the Presidential Decree entrust Stabilization to the securities company;

4. The securities company is entrusted with Stabilization in accordance with Subparagraph 3 above;

5. An underwriter of the securities offered for sale or to be sold entrusts the securities company
with Market Making; or

6. The securities company is entrusted with Market Making in accordance with Subparagraph 5 above.

(4) With respect to purchase and sale or other transaction of securities, no person shall commit an
act which falls under any of the following subparagraphs:

1. Disseminating intentionally the false quotations or untrue facts or other rumors or using a
deceptive scheme for the purpose of gaining unjust benefits; and

2. Intending to gain money or other benefits which has property value by inducing misunderstanding
of other persons, through false representation of any material fact or making use of document in
which any fact required is omitted.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

 

 

Article 188-5 (Liability for Damages against Market Manipulation)

(1) A person who violates the provisions of Article 188-4 shall be liable for damages which a
person who has effected a sale and purchase transaction of securities or has entrusted such
securities transaction at the price formed due to such violative act on the securities market or
KOSDAQ suffers from such transaction or entrustment. <Amended Jan. 29, 2004>

(2) The claim for damages pursuant to paragraph (1) shall be extinguished by prescription, unless a
claimant exercises such claim for damages for one year after the claimant is informed of the fact
that an act in violation of the provisions of Article 188-4 is committed or for three years after
the offense has taken place. <Amended by Act No. 5736, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 188-6 (Report on Act of Unfair Trade, etc.)

(1) In the event that any person who has known the act of violating this Act, including the act of
unfair trade, etc. provided for in this Section, or has been coerced or solicited to commit the act
of violating this Act, including the act of unfair trade, reports or tips his knowledge or such
cohesion and solicitation to the Securities Futures Commission under the conditions as prescribed
by the Presidential Decree, the receiver of such report and tip shall keep the identity, etc. of
such reporter or such tipper in secret (hereafter in this Article referred to as the “reporter,
etc.”).

(2) Any agency to which the reporters, etc. belong and any company to which the reporters, etc.
belong shall not disadvantageously treat them in a direct and indirect manner in connection with
such reports or tips.

(3) The Securities Futures Commission may pay bounties to the reporters, etc. under the conditions
as prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 7025, Dec. 31, 2003]

SECTION 3 Special Treatment for Listed Corporation, etc.

 

 

Article 189 (Retirement of Stocks)

(1) Any stock-listed corporation or any KOSDAQ registered corporation may, if the articles of
incorporation of such corporation provide that such corporation may retire its stocks based on a
resolution of the board of directors under Article 434 of the Commercial Act as dividends for its
stockholders, retire its stocks based on a resolution of the boards of directors except as
otherwise provided for in the provisions of other Acts. <Amended Jan. 29, 2004>

(2) In the event that it is intended to retire stocks under paragraph (1), the board of directors
shall vote on matters falling under each of the following subparagraphs. In this case, the stocks
to be retired shall be limited to stocks acquired after a resolution of the board of directors:

1. Kinds and numbers of stocks to be retired;

2. Total value of stocks to be acquired for retirement; and

3. Period for which it is intended to acquire stocks. In this case, such period shall expire prior
to a regular general meeting of stockholders called for the first time after the resolution of the
board of directors.

(3) Any stock-listed corporation or any KOSDAQ registered corporation shall, if it acquires its
stocks for the purpose of retiring such stocks under paragraph (1), acquire such stocks according
to the standards falling under each of the following subparagraphs <Amended Jan. 29, 2004; Dec.
29, 2005>:

1. The stocks shall be acquired according to the method of Article 189-2 (1)-1 or 2. In this case,
where the stocks are acquired according to the method of subparagraph 1 of the same paragraph, the
acquisition period therefor and method thereof shall be made to conform to the standards prescribed
by the Presidential Decree; and

2. The amount to be acquired for retiring stocks shall not exceed the amount prescribed by the
Presidential Decree within limits of dividends available for stockholders at the end of the
relevant business year under Article 462 (1) of the Commercial Act.

 

 

(4) Any stock-listed corporation or any KOSDAQ registered corporation shall, if it retires its
stocks under paragraph (1), report the matters of each subparagraph of paragraph (2) and the fact
of retiring such stocks to a regular general meeting of stockholders called for the first time
after a resolution of the board of directors with respect to the retirement of such stocks.
<Amended Jan. 29, 2004>

(5) In the event that any stock-listed corporation or any KOSDAQ registered corporation acquires
stocks and retires them in violation of the limits as prescribed in paragraph (3) 2, directors who
vote for retiring such stocks at a meeting of the board of directors shall be jointly and severally
liable for compensating for the value accruing from the acquisition of the stocks in excess of the
limits: Provided, That the same shall not apply to a case where such directors prove that the
stocks are acquired and retired in excess of the limits despite their reasonable care. <Amended
Jan. 29, 2004>

[This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]

Article 189-2 (Acquisition of Treasury Stocks)

(1) Any stock-listed corporation or any KOSDAQ registered corporation shall acquire treasury stocks
(excluding the acquisition under the provisions of Article 341 of the Commercial Act) in a manner
falling under any of the following subparagraphs under its name and for its own account. In this
case, the acquisition amount shall be within the limit of allowing any dividend in accordance with
the provisions of Article 462 (1) of the Commercial Act: <Amended by Act No. 6176, Jan. 21,
2000; Act No. 6423, Mar. 28, 2001; Jan. 29, 2004; Dec. 29, 2005>

1. A manner in which the acquisition is made on the securities market or KOSDAQ;

2. A manner in which the open purchase is made in accordance with the provisions of Chapter IV; or

3. A manner in which the stocks are returned from a trustee that has acquired the stocks under a
trust agreement in accordance with Article 189-2(2) upon termination or expiration of the trust
agreement; provided that the trustee shall have acquired the stocks in accordance with Subparagraph
1 or 2 above.

 

 

(2) Where a stock-listed corporation or a KOSDAQ registered corporation acquires treasury
securities through money trust contract as determined by the Presidential Decree, an amount
calculated according to what is prescribed by the Presidential Decree shall be deemed the
acquisition amount as described in the provisions of the later part of paragraph (1). <Amended
by Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

(3) Where a stock-listed corporation or a KOSDAQ registered corporation acquires the treasury
stocks (including the conclusion of a trust contract, etc.; hereafter the same in this Article
shall apply) pursuant to paragraphs (1) and (2) or intends to dispose of the treasury stocks
acquired pursuant to paragraphs (1) and (2) (including the cancellation of a trust contract, etc.;
hereafter the same in this Article shall apply), it shall report the matters relating to the
acquisition or disposal of treasury stocks to the Financial Supervisory Commission and the Korea
Exchange according to the criteria as prescribed by the Presidential Decree, such as necessary
conditions and procedure, etc. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8,
1998; Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Jan.
29, 2004>

(4) Where a stock-listed corporation or a KOSDAQ registered corporation acquires the treasury
stocks in excess of the limit as referred to in paragraph (1) due to a reduction of the limit to
distribute the dividend, the stock-listed corporation shall dispose of the excessive portion within
such period as determined by the Presidential Decree from that day. <Amended by Act No. 5254,
Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001;
Jan. 29, 2004>

(5) The provisions of Articles 14 (1), 15, 16, 19 and 20 shall apply mutatis mutandis in the case
of acquiring or disposing of the treasury stocks. <Newly Inserted by Act No. 5254, Jan. 13,
1997; Act No. 5736, Feb. 1, 1999>

(6) The provisions of Article 341-2 (1) of the Commercial Act shall not apply to the case in which
a stock-listed corporation or a KOSDAQ registered corporation acquires treasury securities pursuant
to the provisions of paragraph (1). <Newly Inserted by Act No. 6176, Jan. 21, 2000; Jan. 29,
2004>

[This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

Article 189-3 (Capital Increase by Public Offering)

 

 

(1) A stock-listed corporation or KOSDAQ registered corporation may issue new stocks by public
offering as prescribed in the Presidential Decree by a resolution of the board of directors in
accordance with the articles of association of the corporation. <Amended by Act No. 5736, Feb.
1, 1999; Jan. 29, 2004>

(2) In case where new stocks are issued by public offering pursuant to paragraph (1), the price of
the new stocks shall not be less than the price calculated by the methods as prescribed by the
Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 189-4 (Stock Options)

(1) Notwithstanding the provisions of Articles 340-2 through 340-5 of the Commercial Act, any
stock-listed corporation or any KOSDAQ registered corporation shall offer newly issued stocks at
the pre-set price to officers and employees of such corporation or its affiliated company as
prescribed by the Presidential Decree (for the purpose of this Article, excluding any officer or
employee prescribed by the Presidential Decree) who have contributed or are able to contribute to
the establishment, management, overseas business, technological renovations, etc. of such
corporation in compliance with a resolution (hereafter in this Article referred to as the “special
resolution”) adopted as prescribed by the articles of association in accordance with the provisions
of Article 434 of the Commercial Act and grant such officers and employees the right to purchase
its stocks (hereinafter referred to as the “stock option”) in accordance with the provisions of
this Article under the conditions as prescribed by the Presidential Decree. <Amended by Act No.
6176, Jan. 21, 2000; Act No. 6623, Jan. 26, 2002; Jan. 29, 2004; Dec. 29, 2005>

(2) Any stock-listed corporation or any KOSDAQ registered corporation (hereinafter referred to as
the “stock option granting corporation”) that intends to grant the stock option shall enter matters
falling under each of the following subparagraphs in its articles of association: <Amended by
Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

1. The fact that the corporation may grant the stock option in certain cases;

 

 

2. The types and total number of stocks to be issued through the exercise of the stock option;

3. The qualifications of a person who is to be granted the stock option; and

4. The fact that a corporation may cancel the stock option in certain cases.

(3) Any stock option granting corporation may, if there is a special resolution containing matters
falling under each of the following subparagraphs, grant to officers and employees of such
corporation or its affiliated company as provided in Article 189-4(1) (for the purpose of this
Article, excluding any officer or employee prescribed by the Presidential Decree) stock option up
to the limits prescribed by the Presidential Decree within the scope of 20/100 of the total number
of stocks issued: Provided, That notwithstanding paragraph (1) and the main sentence of this
paragraph, such corporation may offer such stock option up to the limits prescribed by the
Presidential Decree within the scope of 10/100 of the total number of stocks issued according to a
resolution that contains matters falling under each of the following subparagraphs and is adopted
by the board of directors as prescribed by the articles of association: <Amended by Act No.
6423, Mar. 28, 2001; Dec. 29, 2005>

1. The names of persons who are to be granted the stock option;

2. The method of granting the stock option;

3. The matters concerning option prices of the stock option and adjustment thereof;

4. The period for which the stock option is exercised; and

5. The kinds and numbers of stocks to be offered by the exercise of the stock option to each of
persons who are granted such stock option.

(4) Grant of stock options in accordance with the proviso of Article 189-4(3) shall require an
approval of the first general shareholders’ meeting to be held following the date of such grant.
<Newly inserted Dec. 29, 2005>

(5) The stock option shall have the effect on a company that grants such stock option for a period
ranging from the date of a resolution under paragraph (1) or the proviso of paragraph (3)

 

 

to the date on which the exercise of the stock option prescribed by the relevant corporation in
the articles of association expires. In this case, any person who is granted the stock option shall
be allowed to exercise such stock option only after holding office or serving for not less than two
years from the date of a resolution under paragraph (1) or the proviso of paragraph (3) save the
case prescribed by the Ordinance of the Ministry of Finance and Economy. <Amended by Act No.
6423, Mar. 28, 2001; Dec. 29, 2005>

(6) The stock option shall not be transferred to other persons: Provided, That when a person who
has been granted the stock option dies, a successor of the person shall be deemed to be granted
such option. <Amended by Act No. 6176, Jan. 21, 2000; Dec. 29, 2005>

(7) The provisions of Articles 340-3 (3) and 350 (2), the latter part of Article 350 (3), Articles
351 and 516-8 (1), (3), and (4), and the former part of Article 516-9 of the Commercial Act shall
apply mutatis mutandis to the cas in which new stocks are issued as a result of the exercise of the
stock option. <Amended by Act No. 6176, Jan. 21, 2000; Dec. 29, 2005>

(8) The Financial Supervisory Commission may give necessary recommendations to a stock option
granting corporation under the conditions as determined by the Presidential Decree. <Amended by
Act No. 5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000; Dec. 29, 2005>

(8) A stock option granting corporation shall, when making a resolution pursuant to paragraph (1)
or the proviso of paragraph (3) of this Article, report such fact to the Financial Supervisory
Commission and the Korea Exchange under the conditions as prescribed by the Presidential Decree,
and the Financial Supervisory Commission and the Korea Exchange shall keep the content of such
resolution to make it available for public inspection during the period from the date of report to
the end of duration of stock option. <Amended by Act No. 5498, Jan. 8, 1998; Act No. 6176, Jan.
21, 2000; Jan. 29, 2004; Dec. 29, 2005>

(9) Matters necessary for stock option other than those provided in paragraphs (1) through (9)
shall be determined by the Presidential Decree. <Newly Inserted by Act No. 5423, Dec. 13, 1997;
Act No. 6176, Jan. 21, 2000; Dec. 29, 2005>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 190 (Merger with Stock-Listed Corporation or KOSDAQ registered corporation) <Amended
Jan. 29, 2004>

 

 

In the event that any corporation that is neither a stock-listed corporation nor a KOSDAQ
registered corporation intends to merge with a stock-listed corporation or a KOSDAQ registered
corporation, any approval therefor of a general meeting of stockholders under Article 522 of the
Commercial Act shall not take effect unless it is made after two months from the date on which the
relevant corporation has registered under Article 3. <Amended by Act No. 3541, Mar. 29, 1982;
Act No. 5254, Jan. 13, 1997; Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6423,
Mar. 28, 2001; Jan. 29, 2004>

Article 190-2 (Merger, etc.)

(1) Any stock-listed corporation or any KOSDAQ registered corporation shall, where it intends to
merge with other corporations, report to the Financial Supervisory Commission and the Korea
Exchange. In this case, the stock-listed corporation or KOSDAQ registered corporation shall report
the matters relating to the merger according to standards for merger conditions such as the
requirements and procedures as prescribed by the Presidential Decree. <Amended by Act No. 5736,
Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(2) In the event that any stock-listed corporation or any KOSDAQ registered corporation falls under
any case of the following subparagraphs, the provisions of paragraph (1) shall apply mutatis
mutandis thereto: <Amended by Act No. 7025, Dec. 31, 2003; Jan. 29, 2004>

1. Where it intends to acquire by transfer or transfer any important business or assets prescribed
by the Presidential Decree;

2. Where it intends to execute a comprehensive swap or a comprehensive transfer of shares; and

3. Where it intends to split itself or merge with other corporation after splitting itself.

(3) The provisions of Articles 8 (2), 14 through 16, 19 and 20 shall apply mutatis mutandis to the
case of report under paragraphs (1) and (2). <Amended by Act No. 5736, Feb. 1, 1999>

[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

 

 

Article 191 (Appraisal Rights of Stockholders)

(1) A stockholder (including stockholders who have non-voting rights pursuant to Article 370 (1) of
the Commercial Act; hereafter the same shall apply in this Article) who opposes a resolution made
at the meeting of the board of directors of a stock-listed corporation or a KOSDAQ registered
corporation with regard to the matters under Articles 360-3, 360-9, 360-16, 374, 522, 527-2 and
530-3 of the Commercial Act (limited to a merger by split-off referred to in Article 530-2 of the
said Act) may demand of the corporation concerned the purchase of the stocks that he owns within
twenty days after the date on which such resolution is made at the general meeting of stockholders
(after the date on which two weeks have passed since the public notice or notification referred to
in Articles 360-9 (2) and 527-2 (2) of the Commercial Act for stockholders of a company to become a
complete subsidiary under Article 360-9 of the said Act and stockholders of a company to be
extinguished under Article 527-2 of the said Act) by a written request in which class and number of
stocks are stated, only in case where he has made written notification that he opposes the
resolution of the corporation concerned prior to the general meeting of stockholders (within two
weeks from the date on which a public notice or notification is made under Articles 360-9 (2) and
527-2 (2) of the Commercial Act for stockholders of a company to become a complete subsidiary under
Article 360-9 of the same Act and stockholders of a company to be extinguished under Article 527-2
of the same Act). <Amended by Act No. 4469, Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No.
5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan.
26, 2002; Jan. 29, 2004>

(2) A stock-listed corporation or a KOSDAQ registered corporation which has received a demand
pursuant to paragraph (1) shall purchase the stocks concerned within one month after the expiration
of the period for demand for purchase. <Amended by Act No. 5736, Feb. 1, 1999>

(3) The purchase price under paragraph (2) shall be determined by consultation between the
stockholder concerned and the corporation concerned: Provided, That the purchase price shall, where
a purchase agreement has not been reached among them, be an amount calculated through the methods
as determined by the Presidential Decree based on transaction price of the stocks concerned traded
on the securities market or KOSDAQ prior to the date on which a resolution by the board of
directors is made, and where the corporation concerned or the

 

 

stockholders holding 30/100 or more
of total number of stocks subject to such purchase object
to this purchase price, the Financial Supervisory Commission may adjust it. In this case, an
application for adjusting purchase price shall be made not later than ten days prior to the date on
which such a purchase is to be finalized pursuant to paragraph (2). <Amended by Act No. 5498,
Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(4) Any stock-listed corporation or any KOSDAQ registered corporation shall, where it purchases
stocks pursuant to paragraph (1), dispose of them within a period as prescribed by the Presidential
Decree: Provided, That in the event that it is intended to retire stocks with dividends to be
offered to stockholders, such stocks shall be retired in accordance with Article 189 (excluding the
latter part other than each subparagraph of paragraph (2) of the same Article and paragraph (3) 1
of the same Article). In this case, in the application of paragraph (2) 2 of the same Article, “the
total value of stocks to be acquired for retirement” shall be read “the total value of stocks to be
retired,” in the application of paragraph (2) 3 of the same Article, “the period for which it is
intended to acquire stocks. In this case, the period” shall be read “the date on which it is
intended to retire stocks. In this case, the date”, and in the application of paragraph (3) 2 of
the same Article, “the amount to be acquired for retirement” shall be read “the total value of
stocks to be retired,” respectively. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 6423, Mar.
28, 2001; Jan. 29, 2004>

(5) Where any stock-listed corporation or any KOSDAQ registered corporation makes notification or
public notice for the convocation of a general meeting of stockholders in order to resolve the
matters prescribed in Articles 360-3, 360-16, 374, 522 and 530-3 of the Commercial Act (limited to
merger by split-off referred to in Article 530-2 of the said Act) or makes notification or public
notice pursuant to Articles 360-9 (2) and 527-2 (2) of the same Act, under the conditions as
prescribed by Article 363 of the same Act, it shall specify the contents and exercising methods of
appraisal rights of stockholders pursuant to paragraph (1). In this case, the stock-listed
corporation or KOSDAQ registered corporation shall notify stockholders having no voting rights
pursuant to Article 370 (1) of the same Act or give a public notice thereof to them. <Newly
Inserted by Act No. 3945, Nov. 28, 1987; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997;
Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002; Jan. 29,
2004>

[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]

Article 191-2 (Special Cases for Nonvoting Stocks)

 

 

(1) In applying the limit on the number of nonvoting stocks pursuant to Article 370 (2) of the
Commercial Act, where a stock-listed corporation (including a corporation which makes a public
offering of new or outstanding stocks for the purpose of listing them initially) or a KOSDAQ
registered corporation (including a corporation which makes an initial public offering of stocks)
falls under any of the following subparagraphs, the nonvoting stocks issued by such corporation
shall not be counted in the calculation of the limit: <Amended by Act No. 5423, Dec. 13, 1997;
Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Jan. 29,
2004>

1. In case where such corporation issues stocks in a foreign country as prescribed by the Ordinance
of the Ministry of Finance and Economy or issues stocks as a result of the excercise of the rights
upon convertible bonds, bonds with warrants or any other certificates or instruments related to
stocks issued in a foreign country; and

2. In case where a corporation which is deemed necessary to issue nonvoting stocks in the public
interest by the Financial Supervisory Commission and satisfies the criteria as prescribed by the
Presidential Decree from among corporations carrying on an industry important for the national
economy, such as the national key industry, issues stocks.

(2) The aggregate number of nonvoting stocks falling under any subparagraph of paragraph (1) and
those pursuant to Article 370 (2) of the Commercial Act shall not exceed 1/2 of the total number of
issued and outstanding stocks.

(3) A corporation of which the total number of nonvoting stocks exceeds 1/4 of the total number of
issued and outstanding stocks may issue nonvoting stocks within the ratio, by means of exercising
preemptive right, capitalization of reserve or stock dividend, etc., as determined by the
Presidential Decree. <Amended by Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act
No. 6176, Jan. 21, 2000>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-3 (Special Treatment of Stock Dividend)

 

 

(1) Notwithstanding the proviso of Article 462-2 (1) of the Commercial Act, a stock-listed
corporation or KOSDAQ registered corporation may make a dividend by newly issued stocks up to the
limit of the total amount of dividend: Provided, That in case where the current price of concerned
stock is less than par value thereof, the same shall not apply. <Amended by Act No. 5736, Feb.
1, 1999; Jan. 29, 2004>

(2) The method calculating the price of stock pursuant to the proviso of paragraph (1) shall be
prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-4 (Issuance of New Type Corporate Bonds)

(1) A stock-listed corporation or KOSDAQ registered corporation may issue new type of bonds which
are different from those under Articles 513 (1) and 516-2 (1) of the Commercial Act, such as bonds
entitled to participate in dividend, bonds with rights to demand an exchange with stocks or other
securities, or other bonds as prescribed by the Presidential Decree. <Amended by Act No. 5736,
Feb. 1, 1999; Jan. 29, 2004>

(2) Necessary matters such as contents and issuance method of bonds issued pursuant to the
provisions of paragraph (1) shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-5 (Special Treatment of Issuance of Bonds)

The amount corresponding to the portion with respect to which the conversion to stocks or the
exercise of preemptive right is possible, of convertible bonds or bonds with warrants which are
issued by a stock-listed corporation or KOSDAQ registered corporation, shall not be subject to the
limits of the issuance of bonds pursuant to the provisions of Article 470 of the Commercial Act.
<Amended by Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-6 (Special Treatment of Dividend by Public Corporation)

 

 

(1) In paying dividend of profits or interests, a public corporation (this refers to a public
corporation pursuant to the provisions of Article 199 (2)) may, notwithstanding the provisions of
Article 464 of the Commercial Act, pay all or part of dividend to which the Government is entitled
to persons who fall under any of the following subparagraphs from among stockholders of the
concerned corporation under the conditions as prescribed by the Presidential Decree:

1. Employees who are members of an employee stock ownership association of the corporation which
issued the stocks concerned; and

2. Any person as prescribed by the Presidential Decree, taking into consideration a level of yearly
income and amount of property owned.

(2) In capitalizing all or a part of reserve, a public corporation may, notwithstanding the
provisions of Article 461 (2) of the Commercial Act, issue stocks to which the Government is
entitled in whole or in part, to stockholders who hold stocks issued by the public corporation for
a period as prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-7 (Preferential Allocation to Member of Employee Stock Ownership Association)

(1) In case where a stock-listed corporation or a corporation which intends to list stocks publicly
offers or sells its stocks, member of employee stock ownership association of such corporation
shall have the right to be allocated preferentially with stocks within the limit of 20/100 of the
total number of stocks to be offered or sold: Provided, That in case where it falls under any of
the following subparagraphs, this shall not apply: <Amended by Act No. 5559, Sep. 16, 1998>

1. A case where a corporation as prescribed by the Presidential Decree from among foreign-invested
enterprises pursuant to the Foreign Investment Promotion Act issues stocks; and

2. Other case prescribed by the Presidential Decree as the case where preferential allocation to
member of employee stock ownership association is difficult.

 

 

(2) In case where the number of stocks owned by members of employee stock ownership
association is more than 20/100 of the total number of stocks issued newly and stocks to have been
issued already, paragraph (1) shall not apply.

(3) The Minister of Finance and Economy may determine the criteria necessary for the stock dividend
for member of employee stock ownership association pursuant to paragraph (1) and for the disposal
of such stocks. <Amended by Act No. 5539, May 25, 1998>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-8 (Payment of Deposit with Listed Securities, etc.)

(1) Deposit or deposit money as prescribed by the Presidential Decree from among those which are to
be paid to the State, a local government or a government-invested institution pursuant to the
Framework Act on the Management of Government-Invested Institutions (hereinafter referred to as a
“government-invested institution”) may be paid with listed securities (including securities
registered with KOSDAQ; hereafter the same shall apply in this Article). <Amended by Act No.
5736, Feb. 1, 1999; Jan. 29, 2004>

(2) The State, a local government or a government-invested institution may not refuse the payment
with listed securities pursuant to paragraph (1).

(3) The listed securities which are eligible for a payment to the State, local government or
government-invested institution pursuant to paragraph (1) and the valuation standard of such
securities, shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-9

Deleted. <by Act No. 6176, Jan. 21, 2000>

Article 191-10 (Public Notice on Convocation of General Meeting)

 

 

(1) In case where a stock-listed corporation or KOSDAQ registered corporation convenes a
general meeting of stockholders, with respect to stockholders who hold stocks not more than the
number as prescribed by the Presidential Decree, the notice of convocation pursuant to Article 363
(1) of the Commercial Act may be substituted by determining the date of a general meeting of
stockholders under the conditions as prescribed by the articles of association of the corporation
and giving twice or more public notices to the effect that the such corporation convenes the
general meeting of stockholders and the subject matters of that meeting on two or more daily
newspapers not later than two weeks before the date of the general meeting of stockholders.
<Amended by Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

(2) In the event that any stock-listed corporation or any KOSDAQ registered corporation serves a
convocation notice to each of the stockholders under Article 363 (1) of the Commercial Act or makes
the public notice thereof under paragraph (1) for the purpose of holding a general meeting of
stockholders to select and appoint directors, such stock-listed corporation or such KOSDAQ
registered corporation shall notify each of the stockholders of names and brief personal records of
candidates for such directors, persons who recommend such candidates and other matters concerning
such candidates prescribed by the Presidential Decree or publish them. <Amended by Act No. 6423,
Mar. 28, 2001; Jan. 29, 2004>

(3) In the event that any stock-listed corporation or any KOSDAQ registered corporation serves the
convocation notice of a general meeting of stockholders on each of the stockholders or makes a
public notice thereof, such stock-listed corporation or such KOSDAQ registered corporation shall
notify each of the stockholders of matters falling under each of the following subparagraphs or
publish such matters: Provided, That the stock-listed corporation or the KOSDAQ registered
corporation may run such matters on the information communications network and offer such matters
for public perusal in places prescribed by the Ordinance of the Ministry of Finance and Economy in
lieu of the notice and publication: <Newly Inserted by Act No. 6423, Mar. 28, 2001; Jan. 29,
2004>

1. Matters concerning the attendance rates of outside directors and other non-standing directors at
meetings of board of directors, details of their activities such as pros and cons over the agendas
of meetings of the board of directors and their remunerations;

2. Matters prescribed by the Presidential Decree from among details of transactions with the biggest
stockholder, etc. under Article 191-19; and

 

 

3. Management reference matters prescribed by the Presidential Decree such as the outline of
the business, current operations.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-11 (Appointment and Dismissal of Auditor)

(1) In case where the total number of voting stocks of a stock-listed corporation or KOSDAQ
registered corporation owned by the biggest stockholder and his specially related persons and/or
other persons as prescribed by the Presidential Decree exceeds 3/100 of the total number of issued
voting stocks of such corporation (in case where the articles of association of the corporation
designates a ratio lower than 3/100, such ratio shall apply), such stockholders shall not exercise
the voting rights of stocks exceeding the ratio in case of the appointment or dismissal of an
auditor or a member of the inspection committee (limited to any member who is not an outside
director). <Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Jan. 29,
2004>

(2) A stock-listed corporation or KOSDAQ registered corporation shall, in case where it proposes
the appointment of an auditor or the determination of remuneration for auditor as the subject
matter of the general meeting of stockholders, propose and resolve that subject matter separately
from the appointment of director or for the determination of remuneration for director. <Amended
by Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

(3) The auditor or inspection committee of a stock-listed corporation or KOSDAQ registered
corporation may, notwithstanding Article 447-4 (1) of the Commercial Act, submit an auditing report
to directors not later than one week before the date of the general meeting of stockholders.
<Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-12 (Qualifications for Auditor)

(1) A stock-listed corporation or KOSDAQ registered corporation as prescribed by the

 

 

Presidential Decree, shall appoint one or more standing auditors: Provided, That the same shall
not apply to the case in which the inspection committee is established in accordance with this Act
or other Acts. <Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Jan. 29,
2004>

(2) Deleted. <by Act No. 5736, Feb. 1, 1999>

(3) A person who falls under any of the following subparagraphs shall not be a standing auditor of
a stock-listed corporation or KOSDAQ registered corporation, and any auditor of a stock-listed
corporation who falls under any of the following subparagraphs shall lose his office: <Amended
by Act No. 5736, Feb. 1, 1999; Jan. 29, 2004; Mar. 31, 2005>

1. A minor, an incompetent, or a quasi-incompetent;

2. A person who is declared bankrupt has not been reinstated yet;

3. A person who has been sentenced to imprisonment without prison labor or a heavier punishment and
for whom two years has not elapsed since the execution of such punishment was terminated or since
the final judgment was rendered that the punishment on him would not be executed;

4. A person who was discharged or dismissed from a stock-listed corporation or KOSDAQ registered
corporation under this Act and for whom two years has not elapsed since the date of such discharge
or dismissal;

5. A major stockholder of the corporation concerned;

6. A full-time officer or employee of the corporation concerned or a person who has been a full-time
officer or employee thereof in the last two years; and

7. A person who is capable of having influence on the management of the corporation concerned other
than those under subparagraphs 5 and 6 and who is prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

 

 

Article 191-13 (Exercise of Minority Stockholders’ Rights)

(1) Any person who has been holding 1/10,000 or more of the total number of outstanding stocks
issued by a stock-listed corporation or a KOSDAQ registered corporation for six months under the
conditions as prescribed by the Presidential Decree may exercise his right as a stockholder
prescribed in Article 403 of the Commercial Act (including where it is applicable mutatis mutandis
under Articles 324, 415, 424-2, 467-2, and 542 of the Commercial Act). <Amended by Act No. 5539,
May 25, 1998; Act No. 5736, Feb. 1, 1999; Jan. 29, 2004>

(2) Any person who has been holding 50/100,000 or more (in case of a corporation prescribed by the
Presidential Decree, 25/100,000 or more) of the total number of outstanding stocks issued by a
stock-listed corporation or a KOSDAQ registered corporation for 6 months under the conditions as
prescribed by the Presidential Decree may exercise his right as a stockholder prescribed in Article
402 of the Commercial Act. <Amended by Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(3) Any person who has been holding 10/10,000 or more (in case of a corporation prescribed by the
Presidential Decree, 5/10,000 or more) of the total number of outstanding stocks issued by a
stock-listed corporation or a KOSDAQ registered corporation for 6 months under the conditions as
prescribed by the Presidential Decree may exercise his right as a stockholder under Article 466 of
the Commercial Act. <Amended by Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Jan.
29, 2004>

(4) Any person who has been holding stocks 50/10,000 or more (in case of a corporation prescribed
by the Presidential Decree, 25/10,000 or more) of the total number of outstanding stocks issued by
a stock-listed corporation or a KOSDAQ registered corporation for 6 months under the conditions as
prescribed by the Presidential Decree may exercise his right as a stockholder under Articles 385
(including a case where it is applicable mutatis mutandis in Article 415 of the Commercial Act) and
539 of the Commercial Act. <Newly Inserted by Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(5) Any person who has been holding 30/1000 or more (in case of a corporation as prescribed by the
Presidential Decree, 15/1000 or more) of the total number of outstanding stocks issued by a
stock-listed corporation or a KOSDAQ registered corporation for six months under the conditions as
prescribed by the Presidential Decree may exercise his right as a stockholder

 

 

prescribed in Articles 366 and 467 of the Commercial Act. In this case, when a person exercises
his right as a stockholder prescribed in Article 366 of the Commercial Act, the number of stocks
shall be calculated based on voting stocks. <Amended by Act No. 5736, Feb. 1, 1999; Jan. 29,
2004>

(6) When a stockholder pursuant to paragraph (1) of this Article institutes a lawsuit as prescribed
in Article 403 of the Commercial Act (including where it is applicable mutatis mutandis under
Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act) and wins such lawsuit, the
stockholder may request the company concerned to pay the cost of the lawsuit and other costs
resulting from such lawsuit.

[This Article Wholly Amended by Act No. 5521, Feb. 24, 1998]

Article 191-14 (Stockholder’s Proposal)

(1) A person who has been holding 10/1000 or more (in case of a corporation as prescribed by the
Presidential Decree, 5/1000 or more) of the total number of issued and outstanding stocks of a
stock-listed corporation or KOSDAQ registered corporation for six months under the Presidential
Decree, may propose to the directors that such directors make certain matters as the subject
matters of the general meeting of stockholders under the conditions as prescribed by the
Presidential Decree (hereinafter referred to as a “stockholder’s proposal”). <Amended by Act No.
5736, Feb. 1, 1999; Jan. 29, 2004>

(2) Any person who makes a stockholder’s proposal pursuant to the provisions of paragraph (1) may
ask directors to enter the summary of his proposal in a publication and a notice thereof in
accordance with the provisions of Article 363 of the Commercial Act in addition to matters to be
put on the agenda of a general meeting of stockholders on the conditions as prescribed by the
Presidential Decree. <Newly Inserted by Act No. 6176, Jan. 21, 2000>

(3) The board of directors shall submit stockholder’s proposal before the general meeting of
stockholders as the subject matters thereof, except in the case where the contents of the
stockholder’s proposal violate Acts and subordinate statutes or the articles of association or in
the case as prescribed by the Presidential Decree, and in case where there is a demand of a person
who makes stockholder’s proposal, the board of directors shall give him an opportunity to explain
the concerned proposal in the general meeting of stockholders.

 

 

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 191-15 (Special Cases for Issuance below Par Value)

(1) Notwithstanding the provisions of Article 417 of the Commercial Act, any stock-listed
corporation or any KOSDAQ registered corporation may issue stocks below par value subject to a
resolution of the general meeting of stockholders under Article 434 of the Commercial Act without
authorization of a court: Provided, That this shall not apply where the corporation concerned fails
to complete a redemption under Article 455 (2) of the Commercial Act. <Amended by Act No. 6423,
Mar. 28, 2001; Jan. 29, 2004>

(2) The minimum issue value for stocks shall be determined by a resolution of the general meeting
of stockholders under paragraph (1). In this case, the minimum issue value shall not be lower than
price calculated according to the methods as determined by the Presidential Decree.

(3) Except as otherwise determined by the general meeting of stockholders, stocks under paragraph
(1) shall be issued within one month from the date on which a resolution of the general meeting of
stockholders is made.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 191-16 (Appointments of Outside Directors)

(1) Any stock-listed corporation or any KOSDAQ registered corporation prescribed by the
Presidential Decree shall make the number of outside directors not less than one fourth of total
number of its directors: Provided, That any stock-listed corporation or any KOSDAQ registered
corporation prescribed by the Presidential Decree shall have not less than three outside directors,
but make the number of such outside directors not less than a majority of the total number of its
directors. <Amended by Act No. 6423, Mar. 28, 2001; Act No. 7025, Dec. 31, 2003; Jan. 29,
2004>

(2) The provisions of paragraph (1) shall not apply to any stock-listed corporation or any KOSDAQ
registered corporation that is a mutual fund incorporated pursuant to the Mutual Fund

 

 

Act and any other stock-listed corporation or any other KOSDAQ registered corporation
prescribed by the Presidential Decree. <Amended by Act No. 6423, Mar. 28, 2001; Jan. 29,
2004>

(3) The provisions of Article 54-5 (4) and (5) shall apply mutatis mutandis to any outside director
of a stock-listed corporation or a KOSDAQ registered corporation referred to in paragraph (1) and
the provisions of Article 54-5 (2) and (3) shall apply mutatis mutandis to the stock-listed
corporation or the KOSDAQ registered corporation referred to in the proviso of paragraph (1).
<Amended by Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(4) Any non-standing or outside director appointed under the Act on the Improvement of Managerial
Structure and Privatization of Public Enterprises, the Banking Act and other Acts shall be deemed
an outside director appointed under this Act.

(5) Any director of a stock-listed corporation or a KOSDAQ registered corporation may seek
assistance from experts at the expense of his company according to a resolution of the board of
directors. <Newly Inserted by Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

(6) Where any stock-listed corporation or any KOSDAQ registered corporation appoints any outside
director or dismisses him or any outside director resigns prior to the expiration of his term of
office, such stock-listed corporation or such KOSDAQ registered corporation shall file a report
thereof with the Financial Supervisory Commission and the Korea Exchange by the day following the
day on which such appointment, dismissal or resignation occurs. <Amended by Act No. 6423, Mar.
28, 2001; Jan. 29, 2004>

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 191-17 (Inspection Committee)

(1) Any stock-listed corporation or any KOSDAQ registered corporation prescribed by the
Presidential Decree shall establish an inspection committee. <Amended by Act No. 6423, Mar. 28,
2001; Jan. 29, 2004>

(2) The provisions of Article 54-6 (2) through (6) shall apply mutatis mutandis to the composition
of the inspection committee referred to in paragraph (1). <Amended by Act No. 6423, Mar. 28,

 

 

2001>

[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

Article 191-18 (Special Cases for Cumulative Vote)

(1) In the event that a general meeting of stockholders is called for the purpose of selecting and
appointing not less than two directors, notwithstanding Article 382-2 (1) of the Commercial Act,
any stockholder holding stocks equivalent to not less than 1/100 of the total number of stocks
issued, with the exception of non-voting stocks of any stock-listed corporation or any KOSDAQ
registered corporation under the proviso of Article 191-16 (1), may apply to the relevant
corporation for selecting and appointing such directors in a cumulative vote manner, except as
otherwise provided for in the articles of association. <Amended Jan. 29, 2004>

(2) In the event that any stock-listed corporation or any KOSDAQ registered corporation referred to
in paragraph (1) intends to preclude the cumulative vote in the articles of association or to
change the articles of association for such preclusion, any stockholder holding stocks in excess of
3/100 (if the percentage is set lower than it by the articles of association, such percentage shall
be applied) of the total number of stocks issued, with the exception of non-voting stocks, shall be
prohibited from exercising his voting right on the stocks held in excess. <Amended Jan. 29,
2004>

(3) In the event that any stock-listed corporation or any KOSDAQ registered corporation referred to
in paragraph (1) intends to put on the agenda of a general meeting of stockholders the question of
whether to change the articles of association for precluding the cumulative vote referred to in
paragraph (2), such stock-listed corporation or such KOSDAQ registered corporation shall put such
question on the agenda separately from other agenda relating to a change in the articles of
association for other matters and resolve on changing the articles of association. <Amended Jan.
29, 2004>

[This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]

Article 191-19 (Transactions with Major Stockholders, etc. and Interested Persons of Stock-Listed
Corporation and KOSDAQ registered corporation)

 

 

(1) Any stock-listed corporation or any KOSDAQ registered corporation shall be prohibited from
performing the act falling under any of the following subparagraphs for its major stockholders
(including specially-related persons), directors (including any person falling under each
subparagraph of Article 401-2 (1) of the Commercial Act; hereafter the same in this paragraph shall
apply) or auditors (including members of the inspection committee; hereafter the same in this
paragraph shall apply) or such stockholders, directors or auditors shall not act as the other
parties of such corporation: Provided, That the same shall not apply to the case of each item of
subparagraph 2: <Newly Inserted by Act No. 7025, Dec. 31, 2003; Jan. 29, 2004>

1. Prohibited act:

(a) The act of renting any property that carries the economic value such as money, securities,
actual asset and incorporeal asset right;

(b) The act of offering immovable property, movable property, securities and other property in
security; or

(c) The act of guaranteeing the fulfillment of obligation; and

2. Exception of prohibited act:

(a) The act of lending money, etc. to directors and auditors for their welfare, which is prescribed
by the Presidential Decree;

(b) The act of giving credits, which is permitted in other finance-related Acts and subordinate
statutes; or

(c) The act of loaning money, etc., which is prescribed by the Presidential Decree.

(2) In the event that any corporation prescribed by the Presidential Decree from among stock-listed
corporations and KOSDAQ registered corporations intends to execute transactions (excluding the
transactions prohibited in paragraph (1)) falling under any of the following subparagraphs with the
biggest stockholder (including any person specially related to him) of such corporation and any
specially related person, such corporation shall obtain approval therefor from the board of
directors and report matters prescribed by the Presidential Decree in

 

 

connection with such transactions to a regular general meeting of stockholders called for the
first time after the board of directors resolves on such approval: <Amended by Act No. 7025,
Dec. 31, 2003>

1. The scale of the single transaction runs in excess of the scale prescribed by the Presidential
Decree in terms of the total amount of assets or the total amount of sales; and

2.The total amount of the transactions executed with a specified person during the current business
year runs in excess of the scale prescribed by the Presidential Decree.

(3) Notwithstanding the provisions of paragraph (2), any transactions falling under any of the
following subparagraphs, including the normal transactions executed according to the business line
of the relevant corporation, may be carried out without obtaining approval therefor from the board
of directors and details of the transaction falling under subparagraph 2 shall not be required to
be reported to a general meeting of stockholders: <Amended by Act No. 7025, Dec. 31, 2003>

1. In the event that the relevant corporation is a financial institution, the transaction that is
ordinarily executed according to the contractual terms and conditions under Article 11-2 (4) of the
Monopoly Regulation and Fair Trade Act and in conformity with the standards prescribed by the
Presidential Decree; and

2. The transaction that is executed within the total amount approved by the board of directors.

[This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]

Article 192 (Standards for Financial Management of Stock-Listed Corporation, etc.)

(1) The Financial Supervisory Commission may, for the protection of investors and the establishment
of a fair transaction order, prescribe the standards for financial management of any stock-listed
corporation or any KOSDAQ registered corporation and may give necessary recommendation, with
respect to the matters falling under any of the following subparagraphs on the conditions as
prescribed by the Presidential Decree: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498,
Jan. 8, 1998; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

 

 

1. Matters relating to requirements for paid-in capital increase;

2. Matters relating to reserves for improvement of financial structure;

3. Matters relating to dividend;

4. Matters relating to the issue of oversea securities prescribed by the Presidential Decree; and

5. Other matters that are corresponding to subparagraphs 1 through 4 and prescribed by the
Presidential Decree.

(2) Any stock-listed corporation or any KOSDAQ registered corporation shall act in accordance with
the standards for financial management referred to in paragraph (1). <Amended by Act No. 5254,
Jan. 13, 1997; Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

Article 192-2

Deleted. <by Act No. 5591, Dec. 28, 1998>

Article 192-3 (Special Cases on Dividends)

(1) Any stock-listed corporation or any KOSDAQ registered corporation which sets the term for the
settlement of accounts as once per year may pay profit dividends in money (hereinafter referred to
as “quarterly dividends”) through a resolution of the board of directors to the stockholders on the
last day of March, June and September from the date on which the business year commences under the
conditions as determined by the articles of incorporation. <Amended by Act No. 5591, Dec. 28,
1998; Act No. 7025, Dec. 31, 2003; Jan. 29, 2004>

(2) A resolution of the board of directors described in paragraph (1) shall be made not later than
45 days after the last day referred to in paragraph (1). <Amended by Act No. 7025, Dec. 31,
2003>

(3) The quarterly dividends referred to in paragraph (1) shall be paid not later than 20 days after
the date on which a resolution of the board of directors has been made: Provided, That this shall

 

 

not apply in case where the articles of association otherwise provide the time of paying the
quarterly dividends. <Amended by Act No. 7025, Dec. 31, 2003>

(4) The quarterly dividends shall be within the limit of the amount obtained by deducting the
following from the amount of net property in a balance sheet in the immediately preceding term for
the settlement of accounts: <Amended by Act No. 7025, Dec. 31, 2003>

1. The amount of capital in the immediately preceding term for the settlement of accounts;

2. The total amount of capital surplus reserve and the total amount of earned surplus reserve
accumulated until the immediately preceding term for the settlement of accounts;

3. The amount determined to pay profits at a regular general meeting of stockholders in the
immediately preceding term for the settlement of accounts; and

4. The earned surplus reserve to be accumulated in the term for the settlement of accounts pursuant
to quarterly dividends.

(5) Where the amount of net property in a balance sheet in the term for the settlement of accounts
is likely to fall short of the total amount listed in subparagraphs of Article 462 (1) of the
Commercial Act, no quarterly dividends shall be paid. <Amended by Act No. 7025, Dec. 31,
2003>

(6) Where the amount of net property in a balance sheet in the term for settlement of accounts
falls short of the total amount listed in subparagraphs of Article 462 (1) of the Commercial Act,
any directors who voted for a resolution of quarterly dividends made by the board of directors
shall be liable to compensate for the difference (where the total amount of the quarterly dividends
is smaller than the difference, the total amount of the quarterly dividends) jointly and severally
against the corporation: Provided, That this shall not apply in case where the director concerned
has proved that he could not know that there was a concern listed in paragraph (5) even though he
had paid considerable attention to it. <Amended by Act No. 7025, Dec. 31, 2003>

(7) In applying the provisions of Articles 340 (1), 344 (1), 350 (3) (including where the
provisions of Article 350 (3) are applicable mutatis mutandis under Articles 423 (1), 516 (2) and
516- of the Commercial Act; hereafter in this paragraph the same shall apply), 354 (1), 370 (1),
457 (2), 458,

 

 

and 464 and subparagraph 3 of Article 625 of the Commercial Act, the quarterly
dividends shall
be deemed profit dividends referred to in Article 462 (1) of the Commercial Act, in applying the
provisions of Article 350 (3) of the Commercial Act, a given date listed in paragraph (1) shall be
deemed the last day of a business year, and in applying the provisions of Article 635 (1) 22-2 of
the Commercial Act, the period listed in paragraph (3) shall be the period listed in Article 464-2
(1) of the Commercial Act. <Amended by Act No. 7025, Dec. 31, 2003>

(8) The provisions of Articles 399 (3) and 400 of the Commercial Act shall apply mutatis mutandis
where directors bear joint and several liability pursuant to paragraph (6) and the provisions of
Article 462 (2) and (3) of the Commercial Act shall apply mutatis mutandis where quarterly
dividends are paid in violation of paragraph (4). <Amended by Act No. 7025, Dec. 31, 2003>

[This Article Newly Inserted by Act No. 5423, Dec. 13, 1997]

Article 193 (Measures against Listed Corporation, etc.)

If any listed corporation or KOSDAQ registered corporation violates this Act, orders and
regulations pursuant to this Act or orders of the Financial Supervisory Commission, the Financial
Supervisory Commission may recommend the general meeting of stockholders of such corporation to
discharge officers concerned, or may set restrictions on issuance of securities for a fixed period
of time or take such measures as prescribed by the Presidential Decree. <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Jan. 29, 2004>

[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]

CHAPTER X SUPPLEMENTARY PROVISIONS

Article 194 (Over-the-Counter Transactions)

(1) Sale and purchase transactions of securities outside the securities market and KOSDAQ, method
of their settlement and other necessary matters shall be determined by the Presidential Decree.
<Amended by Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25,
1998; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004>

 

 

(2) Deleted. <by Act No. 3945, Nov. 28, 1987>

Article 194-2 (Report, etc. by Digitally Recorded Document)

In case where a registration statement, a report, or other documents or data, etc. are to be filed
with the Financial Supervisory Commission and the Securities Futures Commission, or the Korea
Exchange pursuant to this Act, such submission may be executed by digitally recorded document under
the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5498, Jan. 8, 1998;
Jan. 29, 2004>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 194-3 (Audit Certification by External Auditor)

(1) A person as prescribed by the Presidential Decree from among persons who files documents
concerning finance with the Financial Supervisory Commission and the Korea Exchange pursuant to
this Act, shall be audited with regard to financial accounting in accordance with the Act on
External Audit of Stock Companies: Provided, That in case where the Presidential Decree prescribes,
the same shall not apply. <Amended by Act No. 5498, Jan. 8, 1998; Jan. 29, 2004>

(2) The Financial Supervisory Commission may, if deemed necessary in the public interest or for the
protection of investors, request an external auditor pursuant to the Act on External Audit of Stock
Companies who audited with regard to financial accounting pursuant to paragraph (1) (hereinafter
referred to as an “external auditor”) or a corporation which is audited, to submit data and to
report, and may take other necessary measures to such external auditor and corporation. <Amended
by Act No. 5498, Jan. 8, 1998>

(3) In case where a foreign corporation, etc. has been audited with respect to financial accounting
to the foreign securities Acts and subordinate statutes, and when the audit meets the standards as
prescribed by the Presidential Decree, it shall be considered that the foreign corporation, etc.
has been audited pursuant to paragraph (1).

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

 

 

Articles 195 and 196

Deleted. <by Act No. 3541, Mar. 29, 1982>

Article 197 (Compensation Liabilities of Auditors)

(1) The provisions of Article 17 (2) through (7) of the Act on External Audit of Stock Companies
shall apply mutatis mutandis to the compensation liabilities of auditors to bona fide investors.
<Amended by Act No. 3541, Mar. 29, 1982; Act No. 5423, Dec. 13, 1997>

(2) The provisions of Article 15 shall apply mutatis mutandis to the calculation of the amount
compensated pursuant to paragraph (1). <Amended by Act No. 3541, Mar. 29, 1982>

(3) Deleted. <by Act No. 5423, Dec. 13, 1997>

Article 198

Deleted. <by Act No. 3541, Mar. 29, 1982>

Article 199 (Restriction on Solicitation for Exercise of Voting Rights as Proxy)

(1) No one shall make solicitation for exercise of voting rights either by himself or by other
persons as proxy with respect to listed stocks or stocks registered with KOSDAQ, in violation of
the provisions of the Presidential Decree. <Amended by Act No. 5736, Feb. 1, 1999; Jan. 29,
2004>

(2) In case of a listed corporation, KOSDAQ registered corporation, or registered corporation which
is prescribed by the Presidential Decree as corporations carrying on an industry important for the
national economy, such as the national key industry, etc. (hereinafter referred to as a “public
corporation”), only such public corporation may solicit for exercise of voting rights of its stocks
as proxy under the conditions as prescribed by the Presidential Decree. <Newly Inserted by Act
No. 3945, Nov. 28, 1987; Jan. 29, 2004>

 

 

Article 200 (Restriction, etc. on Ownership of Stocks Issued by Public Corporation)

(1) No one shall own, for his own account regardless of the title thereof, stocks issued by a
public corporation in excess of the criteria prescribed in the following subparagraphs. In this
case, nonvoting stocks shall not be counted in the total number of issued and outstanding stocks,
and stocks owned in the names of specially related persons shall be regarded as those owned for his
account: <Amended by Act No. 3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4469,
Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8,
1998>

1. The rate of ownership at the time of registration of securities concerned with the Financial
Supervisory Commission pursuant to Article 3, in case of stockholders who owned 10/100 or more of
the total number of issued and outstanding stocks at such time; and

2. The rate as determined by the articles of association within the limit of 3/100 of the total
number of issued and outstanding stocks, in case of persons other than stockholders pursuant to
subparagraph 1.

(2) Notwithstanding the provisions of paragraph (1), if any person obtains the approval by the
Financial Supervisory Commission on the rate limit of ownership, he may own the stocks issued by a
public corporation up to such limit. <Amended by Act No. 4701, Jan. 5, 1994; Act No. 5498, Jan.
8, 1998>

(3) Any person whose beneficial ownership is in excess of the criteria referred to in paragraphs
(1) and (2) shall not exercise voting rights on the stocks in excess, and the Financial Supervisory
Commission may order such person to rectify his stock holding position so as to comply with the
criteria concerned. <Newly Inserted by Act No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8,
1998>

Article 200-2 (Report on Mass Holding, etc. of Stocks)

 

 

(1) Any person (excluding those who are prescribed by the Presidential Decree) who holds
stocks, etc. of a stock-listed corporation or KOSDAQ registered corporation in large quantities
(this refers to such case where the number of the stocks, etc. owned by the person himself and
specially related person is 5/100 or more of the total number of such stocks, etc.), shall report
the situation of his holdings and the purpose thereof (whether the holding purports to affect the
management of the issuer) to the Financial Supervisory Commission and the Korea Exchange, within
five days (the day as prescribed by the Presidential Decree shall not be counted therein; hereafter
the same shall apply in this Paragraph, Article 200-2(4) and 200-3(2)) from the day on which he
comes to hold such stocks, etc., under the conditions as prescribed by the Presidential Decree, and
if the rate of his holding is changed in excess of 1/100 of the total number of the stocks, etc. of
such corporation (excluding such cases as prescribed by the Presidential Decree), he shall report
the contents of such change to the Financial Supervisory Commission and the Korea Exchange, within
five days after such change occurs, under the conditions as prescribed by the Presidential Decree.
In such case, unless the holding purports to affect the management of the issuer, including
appointment, dismissal or suspension of officers, amendments to the articles of incorporation
related to the board of directors and other corporate units and others prescribed by the
Presidential Decree, and with respect to the institutional investors, etc. as prescribed by the
Presidential Decree, the time, contents, etc. of such report may be determined separately by the
Presidential Decree. <Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act
No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000; Jan. 29, 2004;
Jan. 17, 2005>

(2) The provisions of Article 21 (4) shall apply mutatis mutandis with respect to the method of
calculating the number and total number of stocks, etc. as prescribed in paragraph (1). <Newly
Inserted by Act No. 5254, Jan. 13, 1997>

(3) In case where a report on the holding of stocks, etc. in large quantities and the purpose of
such holding or on a change therein is to be filed pursuant to paragraph (1), and another cause for
a report occurs by the day immediately preceding the day on which the original report should be
filed, such new change shall be reported together with the original cause to be reported. <Newly
Inserted by Act No. 5254, Jan. 13, 1997; Jan. 17, 2005>

(4) The person filing the report in accordance with Article 200-2(1) shall file a report of any
change in the purpose of holding within 5 days to the Financial Supervisory Commission and the
Korea Exchange. <Newly inserted Jan. 17, 2005>

 

 

(5) The Financial Supervisory Commission and the Korea Exchange shall keep the reports as
referred to in paragraphs (1) and (4) above and make them available for public inspection.
<Amended by Act No. 5498, Jan. 8, 1998; Jan. 29, 2004; Jan. 17, 2005>

(6) If it is deemed necessary for protecting the public interest or investors, the Financial
Supervisory Commission may order the reporter as referred to in paragraph (1), the company which
has issued the stocks, etc. and other interested persons to file any report or materials for
reference, or have the FSS Governor investigate any accounting books, documents and other things.
<Newly Inserted by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan.
8, 1998>

(7) Any person who conducts the investigation as referred to in paragraph (5), shall carry with
himself any certificate indicating his competence, and show it to any interested person. <Newly
Inserted by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997>

[This Article Newly Inserted by Act No. 4469, Dec. 31, 1991]

Article 200-3 (Restriction on Exercise of Voting Rights of Stocks, etc.) <Amended Jan. 17,
2005>

(1) Any person who fails to report or make a material false entry or omissions in the report on the
holdings of stocks, etc. in large quantities and the purpose thereof or on a change therein
(including the report on modification thereof) in violation of the provisions of Article 200-2 (1)
and (3), may not exercise the voting rights with respect to stocks held in violation of the
provisions concerning report from among stocks held in excess of 5/100 of the total number of
issued and outstanding voting stocks during the period as prescribed by the Presidential Decree,
and the Financial Supervisory Commission may order him to dispose of the violating portion
concerned. <Amended by Act No. 5498, Jan. 8, 1998; Jan. 17, 2005>

(2) Any person who has filed a report to the effect that the holding purports to affect the
management of the issuer in accordance with Article 200-2(1), (3) and (4) shall not acquire
additional stocks of that issuer or exercise its voting rights in respect of the stocks held within
5 days of the date of reporting <Newly inserted Jan. 17, 2005>

[Newly inserted Jan. 13, 1997]

Article 200-4 (Provisions to Apply Mutatis Mutandis)

 

 

The provisions of Articles 11 (1) and (2) and 20 shall apply mutatis mutandis to the cases of the
report on the situation of mass holdings and the report on the change of the situation of mass
holdings. <Amended Jan. 17, 2005>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 201

Deleted. <by Act No. 3541, Mar. 29, 1982>

Articles 202 and 202-2

Deleted. <by Act No. 5498, Jan. 8, 1998>

Article 203 (Restrictions on Acquisition of Securities by Foreigners)

(1) Acquisition of securities by a foreigner or foreign corporation, etc. may be restricted by the
provisions of the Presidential Decree. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254,
Jan. 13, 1997>

(2) With respect to an acquisition of stocks of a public corporation by a foreigner or foreign
corporation, etc., it may be restricted separately under the conditions as prescribed by the
articles of association of the public corporation in addition to a restriction pursuant to
paragraph (1). <Newly Inserted by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997>

(3) Any person who has acquired stocks in contravention of the provisions of paragraph (1) or (2),
may not exercise his voting rights to the stocks, and the Financial Supervisory Commission may
order a correction to the person who acquired stocks in contravention of the provisions of
paragraph (1) or (2). <Newly Inserted by Act No. 3945, Nov. 28, 1987; Act No. 5498, Jan. 8,
1998>

(4) Deleted. <by Act No. 5254, Jan. 13, 1997>

 

 

Articles 204 through 206

Deleted. <by Act No. 5498, Jan. 8, 1998>

Article 206-2 (Delegation of Authority)

(1) The Financial Supervisory Commission may delegate part of its authority under this Act to the
Securities Futures Commission under the conditions determined by the Presidential Decree.

(2) Where the Securities Futures Commission decides on the matters delegated pursuant to paragraph
(1), it shall make a report thereon without delay to the Financial Supervisory Commission.

(3) Where it is deemed that a decision by the Securities Futures Commission referred to in
paragraph (2) is illegal or extremely unjust in the light of the protection of the public interest
or investors, the Financial Supervisory Commission may cancel whole or part of the decision or
suspend its execution.

(4) Matters under the authority of the Financial Supervisory Commission or the Securities Futures
Commission under this Act which require urgent disposition may be delegated to the Chairman of the
Financial Supervisory Commission or the Chairman of the Securities Futures Commission,
respectively, and minor matters may be entrusted to the FSS Governor.

(5) The scope of urgent matters and minor matters listed in paragraph (4) shall be determined by
the Presidential Decree.

[This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]

Article 206-3 (Investigation, Seizure, and Search by Financial Supervisory Commission and
Securities Futures Commission)

(1) Where there is a violation of this Act or an order under this Act or, a violation of the
regulations of or an order under the Financial supervisory Commission, or where it is deemed
necessary to protect public interest or investors, the Financial Supervisory Commission

 

 

(referring to the Securities Futures Commission in case of the matters in violation of Articles 188,
188-2 and 188-4; hereafter in this Article the same shall apply) may order the person concerned to
submit a report or materials for reference or have the FSS Governor investigate books, documents or
other things.

(2) The Financial Supervisory Commission may demand the following matters from the persons
concerned in order to make an investigation referred to in paragraph (1):

1. Submission of a statement on the facts and situation with regard to matters to be invested;

2. Appearance for testimony pertaining to the matters to be invested; and

3. Submission of books, documents, or other things necessary for an investigation.

(3) In making investigation under paragraph (1), the Financial Supervisory Commission may take the
following measures if it is necessary to find out any violation of Articles 188, 188-2, and 188-4:
<Newly Inserted by Act No. 6623, Jan. 26, 2002>

1. Provisional holding of books, documents, or other things submitted under paragraph (2) 3; and

2. Investigation into the business, books, documents, or other things through the entry into an
office or workplace of the person concerned.

(4) Where it is deemed necessary to make an investigation referred to in paragraph (1), the
Financial Supervisory Commission may request a securities-related institution to submit documents
necessary for the investigation under the conditions as determined by the Presidential Decree.

(5) Where a violation of this Act or an order under this Act, or a violation of the regulations of
or an order under the Financial Supervisory Commission has been proved as a result of an
investigation referred to in paragraph (1), the Financial Supervisory Commission may make an order
for correction or take other measures as determined by the Presidential Decree, and may determine
the procedures necessary for the investigation and taking measures, standards for measures and
other necessary matters.

(6) Where the Korea Exchange has a suspicion that there is a violation of this Act or an order

 

 

under this Act or a violation of the regulations of or an order under the Financial Supervisory
Commission as a result of examination of an abnormal trade or supervision of its members, it shall
notify the Financial Supervisory Commission. <Amended by Act No. 6176, Jan. 21, 2000; Jan. 29,
2004>

(7) Where it is deemed necessary to investigate any violation of Articles 188, 188-2, and 188-4
(hereafter in this Article, referred to as the “violation”), the Securities Futures Commission may
order a public official of the Financial Supervisory Commission as determined by the Presidential
Decree (hereinafter referred to as the “investigating officer”), to interrogate a person suspected
of the violation, seize things, or search a workplace. <Newly Inserted by Act No. 6623, Jan. 26,
2002>

(8) Where an investigating officer conducts a search or seizure to investigate any violation, he
shall carry a warrant for search or seizure issued by a judge upon a request of a public
prosecutor. <Newly Inserted by Act No. 6623, Jan. 26, 2002>

(9) Where an investigating officer conducts an investigation, interrogation, search, or seizure
under paragraph (3) 2 or (7), he shall carry a certificate indicating his authority and present it
to the person concerned. <Newly Inserted by Act No. 6623, Jan. 26, 2002>

(10) The provisions of the Criminal Procedure Act concerning search and seizure, execution of a
warrant for search or seizure, return of seized articles, etc. shall apply mutatis mutandis to the
search and seizure and the warrant for search or seizure as provided in this Act. <Newly
Inserted by Act No. 6623, Jan. 26, 2002>

(11) Where an investigating officer has conducted a provisional holding, interrogation, search, or
seizure, he shall prepare a report thereon and add his signature and seal to it with an official
watchman or interrogated person after confirmation of the report by such person. If such an
official watchman or interrogated person fails or is unable to give any signature and seal, the
reasons therefor shall be added. <Newly Inserted by Act No. 6623, Jan. 26, 2002>

(12) Where an investigating officer has completed the investigation into a violation, he shall
report the results thereof to the Securities Futures Commission. <Newly Inserted by Act No.
6623, Jan. 26, 2002>

[This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]

 

 

Article 206-4 (Exchange of Information with Foreign Securities Supervisory Agencies, etc.)

(1) The Financial Supervisory Commission may exchange information with foreign securities
supervisory agencies.

(2) Where the Financial Supervisory Commission intends to exchange information under paragraph (1),
it shall consult in advance with the Minister of Finance and Economy: Provided, That this shall not
apply to cases as determined by the Presidential Decree. <Amended by Act No. 5539, May 25,
1998>

(3) The Financial Supervisory Commission (referring to the Securities Futures Commission in case of
matters relating to a violation of the provisions of Articles 188, 188-2, and 188-4) may, where any
foreign securities supervisory agency asks for its cooperation in conducting an investigation or
inspection under this Act, giving expressly the objective and scope, etc. of such investigation or
inspection, cooperate with such foreign securities supervisory agency. In this case, the Financial
Supervisory Commission may furnish the data on such investigation or inspection to such foreign
securities supervisory agency or be furnished with such data from such foreign securities
supervisory agency, according to the principle of reciprocity. <Newly Inserted by Act No. 6176,
Jan. 21, 2000; Act No. 6623, Jan. 26, 2002>

(4) The Financial Supervisory Commission may furnish the data on an investigation or inspection to
a foreign securities supervisory agency under the latter part of paragraph (3), only in case where
it meets the following requirements: <Newly Inserted by Act No. 6623, Jan. 26, 2002>

1. The data on an investigation or inspection furnished to a foreign securities supervisory agency
shall not be used for other than the purpose of furnishing;

2. Confidentiality shall be kept on the data on an investigation or inspection and the fact of
furnishing such data; and

3. The data on an investigation or inspection furnished to a foreign securities supervisory agency
shall not be used for the investigation into or trial of a criminal case in a foreign country
without any prior consent from the Financial Supervisory Commission.

 

 

[This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]

Article 206-5 (Deliberation by Securities Futures Commission)

Where there exists a case falling under any of the following subparagraphs, the Financial
Supervisory Commission shall go through prior deliberation by the Securities Futures Commission:
<Amended by Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21,
2000; Act No. 6623, Jan. 26, 2002; Act No. 6987, Oct. 4, 2003; Jan. 29, 2004>

1. Where it provides for matters falling under any of the following:

(a) Documents for registration referred to in Article 4;

(b) Criteria for administration of registered corporations referred to in Article 6;

(c) Procedures and criteria for taking measures referred to in Article 20 (including where it is
applicable mutatis mutandis under Articles 27-2, 186-5, 189-2 (5), 190-2 (3) and 200-4);

(d) Standards for financial management of stock-listed corporations or KOSDAQ registered
corporations referred to in Article 192 (1); and

(e) Procedures and standards for investigation and measures taken by the Financial Supervisory
Commission referred to in Article 206-3 (5);

2. Where it takes measures or issue orders falling under any of the following:

(a) Measures referred to in Article 20 (including where it is applicable mutatis mutandis under
Articles 27-2, 186-5, 189-2 (5), 190-2 (3) and 200-4);

(b) Orders referred to in Article 54;

(c) Adjustment of purchase price of stocks referred to in Article 191 (3);

(d) Deeming it necessary to issue non-voting stocks referred to in Article 191-2 (1) 2;

 

 

(e) Measures referred to in Article 193;

(f) Approval of stockholding rate limit referred to in Article 200 (2);

(g) Measures pursuant to the results of investigation referred to in Article 206-3 (5);

(h) Disposition to impose penalties referred to in Article 206-11; and

(i) Disposition to impose a fine for negligence referred to in Article 213 (3); and

3. Matters other than those listed in subparagraphs 1 and 2 for which the Financial Supervisory
Commission deems deliberation by the Securities Futures Commission to be necessary.

[This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]

Article 206-6 (Direction and Supervision, etc. over FSS Governor)

Where the Financial Supervisory Commission or the Securities Futures Commission deems it necessary
in order to exercise its powers under this Act, it may direct and supervise the FSS Governor and
have him change his method of executing his duties or give other supervisory orders.

[This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]

Article 206-7 (Duties of Financial Supervisory Service)

The Financial Supervisory Service shall carry out the following duties under the direction and
supervision of the Financial Supervisory Commission or the Securities Futures Commission:
<Amended by Act No. 5736, Feb. 1, 1999>

1. Matters on the registration of issuers of securities;

2. Matters on the registration statement of securities;

3. Matters on the tender offer of securities;

 

 

4. Matters on inspections of institutions which are subject to inspection by the FSS Governor
under this Act;

5. Matters on the administration of listed corporations or KOSDAQ registered corporations;

6. Matters on the public notification of the analysis and substance of business of registered
corporations and listed corporations or KOSDAQ registered corporations;

7. Matters on the supervision over sale and purchase transactions of securities outside the
securities market and KOSDAQ;

8. Business entrusted by the Government;

9. Business assigned under this Act other than those listed in subparagraphs 1 through 8; and

10. Business incidental to those listed in subparagraphs 1 through 9.

[This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]

Article 206-8 (Contributions)

(1) Any person falling under any of the following subparagraphs shall bear part of the working
expenses of the Financial Supervisory Service:

1. Securities companies which take commission from customers;

2. Issuers who submit a report to the Financial Supervisory Commission pursuant to Article 8;

3. Institutions which are subject to inspection by the FSS Governor under this Act; and

4. Registered corporations.

(2) The amount and limit of the contribution referred to in paragraph (1) and other matters
necessary for the payment of contributions shall be determined by the Presidential Decree.

[This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]

 

 

Article 206-9

Deleted Jan. 29, 2004

Article 206-10 (Hearing)

Where the Minister of Finance and Economy or the Financial Supervisory Commission intends to take a
disposition falling under any of the following subparagraphs, it shall hold a hearing: <Amended
by Act No. 6987, Oct. 4, 2003>

1. Cancellation of license or registration of securities companies or transfer agents under the
provisions of Article 55 of this Act or the provisions of Article 152 of the Act on Business of
Operating Indirect Investment and Assets which are applicable mutatis mutandis under Article 180
(3); and

2. Cancellation of license of securities financial companies and brokerage companies referred to in
Article 155 (1) (including where it is applicable mutatis mutandis under Article 179 (4)).

[This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]

CHAPTER X-2 IMPOSITION AND COLLECTION OF PENALTIES

Article 206-11 (Penalties)

(1) The Financial Supervisory Commission may impose penalties of up to 3/100 of the subscription or
sales value on a statement of securities (up to two billion won where the price exceeds two billion
won) on a person falling under any subparagraph of Article 14 (1) where he falls under any of the
following subparagraphs: <Amended by Act No. 6423, Mar. 28, 2001>

1. Where he makes a false entry or indication or fails to enter or indicate important matters in any
registration statement, prospectus, or other documents to be submitted under Article 8, 11 or 12;
and

 

 

2. Where he fails to submit a registration statement, prospectus, or other documents to be
submitted under Article 8, 11 or 12.

(2) The Financial Supervisory Commission may impose penalties of up to 3/100 of the total estimated
amount for tender offer stated in a tender offer statement (up to two billion won where the price
exceeds two billion won) on a person falling under any subparagraph of Article 25-3 (1) where he
falls under any of the following subparagraphs. In this case, a total estimated amount for tender
offer shall be an amount calculated by multiplying the tender offer price per stock by the number
of stocks: <Amended by Act No. 6423, Mar. 28, 2001>

1. Where he makes a false entry or indication or fails to enter or indicate important matters in any
registration statement, prospectus, or other documents to be submitted or in the public notice to
be made under Article 21-2, 22, 23-2 or 24; and

2. Where he fails to submit any registration statement, prospectus, or other documents to be
submitted or fails to make public notice of matters to be publicly notified under Article 21-2, 22,
23-2 or 24.

(3) The Financial Supervisory Commission may impose penalties within the limit of not exceeding two
billion won on any listed corporation or any KOSDAQ registered corporation where it falls under any
of the following subparagraphs: <Amended by Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28,
2001; Jan. 29, 2004>

1. Where it makes a false statement or indication in matters to be reported or disclosed under
Article 186 (1) or (2) or fails to enter or indicate important matters therein; and

2. Where it fails to report or disclose matters to be reported or disclosed under Article 186 (1) or
(2).

(4) The Financial Supervisory Commission may impose penalties of up to 10/100 of an average daily
transaction volume (up to two billion won where an amount exceeds two billion won or stocks issued
by a corporation are not traded on the securities market or KOSDAQ) of stocks issued by a
corporation quoted in the securities market or KOSDAQ in the immediately preceding year on the
corporation which has to submit an annual business report, a semiannual business report or a
quarterly report pursuant to Article 186-2 (1) or 186-3 where it falls under any of the following
subparagraphs: <Amended by Act No. 6423, Mar. 28, 2001; Jan. 29, 2004>

 

 

1. Where it makes a false entry or indication or fails to enter or indicate important matters in a
report under Article 186-2 (1) or 186-3; and

2. Where it fails to submit a report under Article 186-2 (1) or 186-3.

(5) The Financial Supervisory Commission may impose penalties of up to 2/100 (1/100 for a
consolidation and two billion won where the amount exceeds two billion won) of the total amount
(based on the amount entered in reported documents submitted under Article 190-2) of the book value
(for a transfer or takeover of business, the amount acquired or paid in compensation for the
transfer or takeover) of stocks granted in compensation for a merger (including a merger by
split-off) or split-off and the amount of debts taken over on a stock-listed corporation or KOSDAQ
registered corporation where it falls under any of the following subparagraphs: <Amended by Act
No. 6423, Mar. 28, 2001; Jan. 29, 2004>

1. Where it makes a false entry or indication or fails to enter or indicate important matters in
making a report under Article 190-2; and

2. Where it fails to make a report under Article 190-2.

(6) Where a securities company violates the provisions of Article 54-3 (1) 1, 2, or 4, the
Financial Supervisory Commission may impose penalties of up to 10/100 (up to one billion won where
the amount exceeds one billion won) of the violated amount of money (in case of Article 54-3 (1) 1,
the amount acquired; in case of Article 54-3 (1) 2, the amount loaned or the amount given on
credit; in case of Article 54-3 (1) 4, the amount acquired in excess of the ratio), on the
securities company. <Newly Inserted by Act No. 6623, Jan. 26, 2002>

(7) Penalties prescribed in paragraphs (1) through (6) shall be imposed on a person subject to the
imposition of such penalties who violates the respective corresponding provisions by intention or
by gross negligence. <Amended by Act No. 6623, Jan. 26, 2002>

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 206-12 (Imposition of Penalties)

 

 

(1) In imposing penalties pursuant to Article 206-11, the Financial Supervisory Commission shall
take account of the following matters according to the standards as determined by the Presidential
Decree:

1. Contents and severity of the offense;

2. Duration and frequency of the offense; and

3. Scale of benefits acquired by the offense.

(2) The Financial Supervisory Commission shall seek opinions from the Korea Exchange in advance
where it imposes penalties pursuant to Article 206-11 (3). <Amended by Act No. 6176, Jan. 21,
2000; Jan. 29, 2004>

(3) Where a corporation which has violated the provisions of this Act merges, the Financial
Supervisory Commission may impose and collect penalties on and from the corporation which continues
to exist or is newly established after the merger, deeming the offense committed by the previous
corporation to be an offense committed by the existing or newly established corporation.

(4) Matters necessary for the imposition of penalties shall be determined by the Presidential
Decree.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 206-13 (Presentation of Opinions)

(1) The Financial Supervisory Commission shall, in advance, give a concerned party or interested
person an opportunity to present his opinions prior to the imposition of penalties.

(2) A concerned party or interested person described in paragraph (1) may attend a meeting of the
Financial Supervisory Commission and state his opinions or present necessary materials.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

 

 

Article 206-14 (Formal Objection)

(1) A person who is dissatisfied with a disposition of imposition of penalties under Article 206-11
may raise an objection to the Financial Supervisory Commission within thirty days from the date of
receipt of notice of the said disposition by giving the reasons.

(2) The Financial Supervisory Commission shall make a decision on the objection under paragraph (1)
within thirty days: Provided, That where it cannot make a decision within such period for any
compelling cause, it may extend the period up to thirty days.

(3) A person who is dissatisfied with a decision under paragraph (2) may apply for administrative
appeal.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 206-15 (Extension of Time Limit for Payment for and Installment Payment of Penalties)

(1) Where the Financial Supervisory Commission deems that a person who has been subject to
penalties (hereinafter referred to as a “person liable for the payment of penalties”) has
difficulty in paying penalties in full in a lump sum for a cause falling under any of the following
subparagraphs, it may extend the time limit for payment or enable him to pay them in installments.
In this case, it may, if deemed necessary, have him offer a security:

1. Where he suffers a serious loss of property due to disaster or theft, etc.;

2. Where his business is in a crisis due to worsening business conditions;

3. Where he is expected to face serious financial difficulties due to payment of penalties in a lump
sum; and

4. Where there exist any other causes equivalent to those listed in subparagraphs 1 through 3.

(2) Where a person liable for the payment of penalties intends to have the time limit for payment
extended or pay them in installments, he shall apply for such extension or installments to the

 

 

Financial Supervisory Commission not later than ten days prior to the expiration of the time limit
for payment.

(3) Where a person liable for the payment of penalties for whom the time limit for payment thereof
is extended or payment thereof in installments is allowed pursuant to paragraph (1) falls under any
of the following subparagraphs, the Financial Supervisory Commission may cancel the extension of
the time limit for payment or decision on payment in installments and collect penalties in a lump
sum:

1. Where he fails to pay penalties in installments within the time limit for payment;

2. Where he fails to fulfill an order by the Financial Supervisory Commission which is necessary to
change securities or otherwise supplement security;

3. Where it deems that it cannot collect all or the residual of penalties due to compulsory
execution, opening of auction, declaration of bankruptcy, dissolution of the corporation,
disposition on default of national or local taxes; and

4. Where there exist any other causes equivalent to those listed in subparagraphs 1 through 3.

(4) Matters necessary for the extension of the time limit for payment of penalties, payment in
installments, or security under paragraphs (1) through (3) shall be determined by the Presidential
Decree.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 206-16 (Collection of Penalties and Disposition on Default)

(1) The Financial Supervisory Commission may collect additional dues as determined by the
Presidential Decree for the period from the date following the expiration date of the time limit
for payment to the date preceding the date of payment where a person liable for the payment of
penalties fails to pay penalties within the time limit for payment.

(2) Where a person liable for the payment of penalties fails to pay penalties within the time
limit, the Financial Supervisory Commission may urge him to pay the penalties, by specifying a
period,

 

 

and where he fails to pay penalties and additional dues under paragraph (1) within the
specified period, the Financial Supervisory Commission may collect them pursuant to the example of the
disposition of national taxes in arrears.

(3) The Financial Supervisory Commission may entrust its duties of the collection or disposition on
default of penalties and additional dues under paragraphs (1) and (2) to the Commissioner of the
National Tax Administration.

(4) Matters necessary for the collection of penalties shall be determined by the Presidential
Decree.

[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]

Article 207

Deleted. <by Act No. 5736, Feb. 1, 1999>

CHAPTER XI PENAL PROVISIONS

Article 207-2 (Penal Provisions)

(1) A person who falls under any of the following subparagraphs shall be punished by imprisonment
for not more than ten years or by a fine not exceeding twenty million won: Provided, That if the
amount equivalent to three times of the profit gained or loss evaded by the offense exceeds twenty
million won, he shall be punished by a fine of the amount equivalent to or less than three times of
such profit or loss amount evaded:

1. A person who violates the provisions of Article 188-2 (1) or (3); and

2. A person who violates the provisions of Article 188-4.

(2) Where the amount of the profit gained or loss evaded by any such offense as provided in any
subparagraph of paragraph (1) is not less than five hundred million won, aggravated punishment
shall be imposed according to the following subparagraphs: <Newly Inserted by Act No. 6695, Apr.
27, 2002>

 

 

1. Where the amount of the profit gained or loss evaded is not less than five billion won, the
punishment of imprisonment for life or for not less than five years shall be imposed; and

2. Where the amount of the profit gained or loss evaded is not less than five hundred million won
but less than five billion won, the punishment of imprisonment for a limited term of not less than
three years shall be imposed.

(3) Where the punishment of imprisonment is imposed under paragraphs (1) and (2), the suspension of
qualifications for not more than ten years may be imposed concurrently. <Newly Inserted by Act
No. 6695, Apr. 27, 2002>

[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]

Article 207-3 (Penal Provisions)

Any person falling under any of the following subparagraphs shall be punished by imprisonment for
not more than 5 years or by a fine not exceeding thirty million won: <Amended by Act No. 7025,
Dec. 31, 2003; Jan. 17, 2005>

1. A person who makes a public offering of new or outstanding securities or issued new stocks in
violation of Article 8 (excluding paragraph (4) of the same Article) or who violates Article 21-2
(1) and (2);

2. A person who intentionally omits or falsely enters or indicates such important matters as
prescribed by the Presidential Decree in the registration statement under Article 8, the additional
documents of shelf registration statement under Article 10 (2), the amendment statement under
Article 11 (including a case where the provisions are applied mutatis mutandis in Article 186-5 or
200-4), the tender offer statement under Article 21-2 (2), the amendment statement under Article
23-2 (1), the report documents under Article 186 (1), the business report under Article 186-2, the
semiannual report and the quarterly report under Article 186-3, or the report documents under
Article 190-2 (1) and (2) and a certified public accountant, an appraiser or a credit-rating
specialist who authenticates them, claiming their correctness with his knowledge of the omission
and false entries andindications;

2-2. A person who affixes his signature provided for in Article 8 (4) (including a case where the

 

 

provisions are applied mutatis mutandis under Article 186-5) with his knowledge of the omission
and false entries of the important matters prescribed by the Presidential Decree in the
registration statement provided for in Article 8, the business report provided for in Article 186-2
and the semiannual report and the quarterly report provided for in Article 186-3;

3. A person who fails to submit the amendment statement in violation of the latter part of Article
11 (3) (including a case where the provisions are applied mutatis mutandis in Article 186-5) or to
make an amendment publication in violation of Article 23-2 (2);

4. A person who falsely makes a tender offer publication required under Article 21-2 (1), an
amendment publication required under Article 23-2 (2), or disclosure required under Article 186 (2)
with respect to important matters;

5. A person who violates Article 52-3;

6. A person who leaks secrets, including the identity, etc. of the reporter, etc. in violation of
Article 188-6 (1); and

7. A person who violates Article 191-19 (1).

[This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]

Article 208 (Penal Provisions)

A person who falls under any of the following subparagraphs shall be punished by imprisonment for
not more than three years or a fine not exceeding twenty million won: <Amended by Act No. 3541,
Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 4701, Jan. 5,
1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No.
6176, Jan. 21, 2000; Act No. 6987, Oct. 4, 2003; Jan. 29, 2004>

1. A person who conducts the business concerned without a license therefor in accordance with the
provisions of Article 28 (1), 28-2 (1), 145 (1) or 179 (1), or who conducts the business concerned
after cancellation of a license therefor in accordance with the provisions of Article 55 or 155
(including where the provisions of Article 155 are applicable mutatis mutandis under Article 179);

 

 

2. A person who violates the provisions of Articles 28-2 (3) and 35 (1);

3. A person who violates the provisions of Articles 63, 95 (1), 107 (1) or 173-3;

4. A person who violates the provisions of Article 59 (including where it is applicable mutatis
mutandis under Article 178), Article 60 (1) (including where it is applicable mutatis mutandis
under Article 178), or Article 61 (including where it is applicable mutatis mutandis under Article
178), or who refuses any investigation conducted by the Financial Supervisory Commission referred
to in Article 206-3 (2) (meaning the Securities Futures Commission in case of violation of Articles
188, 188-2 and 188-4);

5. Deleted. <Jan. 29, 2004>

6. Deleted. <by Act No. 5254, Jan. 13, 1997>

Article 209 (Penal Provisions)

A person who falls under any of the following subparagraphs shall be punished by imprisonment for
not more than two years or by a fine not exceeding ten million won: <Amended by Act No. 3541,
Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 4701, Jan. 5,
1994; Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No.
5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Act No. 6987, Oct. 4,
2003; Jan. 17, 2005; July 29, 2005; Dec. 29, 2005>

1. Deleted; <by Act No. 6423, Mar. 28, 2001>

2. A person who makes arrangements for a public offering of new or outstanding securities in
violation of the provisions of Article 8;

3. A person who violates the provisions of Article 10;

4. A person who violates the provisions of Article 21(1) or Article 23;

4-2. A person who has acquired stocks without approval in violation of Article 32-3(1) hereof;

 

 

4-3. A person who has failed to dispose such stocks in violation of an order in accordance with
Article 32-3(2) hereof

5. A person who carries out the business concerned after being suspended from such business in
accordance with the provisions of Article 57 or 155 (2) (including where the provisions of Article
155 (2) are applicable mutatis mutandis under Article 179 (4));

6. A person who violates the provisions of Article 62;

7. A person who violates any order issued upon the basis of the provisions of Article 168;

8. A person who establishes an organization concerned with securities without a license in
accordance with the provisions of Article 181 (1); and

9. A person who violates the provisions of Article 188 (1), 189-2 (3), 190-2 (1) and (2), or 199 or
orders issued pursuant to Article 21-3, 200 (3), 200-3, or 203 (3).

Article 210 (Penal Provisions)

A person who falls under any of the following subparagraphs shall be punished by imprisonment for
not more than one year or by a fine not exceeding five million won: <Amended by Act No. 3541,
Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13,
1997; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5521, Feb. 24, 1998; Act No.
5736, Feb. 1, 1999; Act No. 6987, Oct. 4, 2003; Jan. 17, 2005>

1. A person who violates any disposition of the Financial Supervisory Commission taken upon the
basis of Article 20 (including where it is applicable mutatis mutandis under Article 27-2, 186-5,
189-2 (5), 190-2 (3) or 200-4);

2. A person who violates Articles 13 (including where it is applicable mutatis mutandis under
Article 24), 42 (including where it is applicable mutatis mutandis under Article 154, 169, 178, 179
or 180) through 44;

3. Deleted; <by Act No. 5254, Jan. 13, 1997>

 

 

4. Deleted; <by Act No. 5736, Feb. 1, 1999>

4-2. A person who conducts the business concerned without registration as prescribed in Article 180
(1), or who conducts the business concerned after registration is cancelled under the provisions of
Article 152 of the Act on Business of Operating Indirect Investment and Assets which are applicable
mutatis mutandis under Article 180 (3);

5. A person who violates Article 101, 188 (6), or 194-3;

5-2. A person who fails to make a report or makes a material false report or omission in violation
of Article 200-2(1) or (4);

6. Deleted; and <by Act No. 6423, Mar. 28, 2001>

7. A person who fails to prepare and keep a depositors account book as prescribed in Article 174 (3)
or a customers account book as prescribed in Article 174-2 (1), or who has made a false statement
therein.

Article 211 (Penal Provisions)

Any person who falls under any of the following subparagraphs shall be punished by a fine not
exceeding five million won: <Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13,
1997; Act No. 5736, Feb. 1, 1999; Act No. 6987, Oct. 4, 2003; Dec. 29, 2005>

1. A person who conducts the business concerned after it is suspended under Article 155 (2)
(including where it is applicable mutatis mutandis under Article 180 (3));

2. A person who violates Article 186 (1) and (2), 186-2 or 186-3;

3. A person who fails to report pursuant to the provisions of Article 189-4 (9); and

4. A person who violates the provisions of Article 200 (1).

Article 212 (Penal Provisions)

 

 

A person who violates the provisions of Article 171 shall be punished by a fine not exceeding two
million won. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736,
Feb. 1, 1999; Act No. 6176, Jan. 21, 2000>

[This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]

Article 213 (Fine for Negligence)

(1) A person who falls under any of the following subparagraphs shall be punished by a fine for
negligence of not more than ten million won: <Amended by Act No. 5254, Jan. 13, 1997; Act No.
5498, Jan. 8, 1998; Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21,
2000; Act No. 6623, Jan. 26, 2002; Act No. 6987, Oct. 4, 2003; Act No. 7025, Dec. 31, 2003; Jan.
17, 2005>

1. A person who fails to file a registration in contravention of the provisions of Article 3;

2. A person who violates Article 18-2;

3. A person who refuses, interferes with, or evades the inspection, investigation or confirmation
under Article 19 (1) (including where it is applicable mutatis mutandis under Article 27-2, 186-5,
189-2 (5) or 190-2 (3)), 53 (1) (including where it is applicable mutatis mutandis under Articles
70-7, 157, 169 or 178 through 181), 174-12 or 200-2 (6);

4. A person who commits a violation of the provisions of Article 37 (including where the provisions
are applicable mutatis mutandis under Article 70-7) or 70-8 (1);

5. A person who disadvantageously treats the reporter, etc. in violation of Article 188-6 (2);

6. A person who neglects the disposal of stocks in contravention of the provisions of Article 189-2
(4) or 191 (4); and

7. A person who violates Article 191-19 (2).

(2) A person who falls under any of the following subparagraphs shall be punished by a fine for

 

 

negligence not exceeding five million won: <Amended by Act No. 5254, Jan. 13, 1997; Act No.
5498, Jan. 8, 1998; Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6623, Jan. 26,
2002; Act No. 6987, Oct. 4, 2003; Act No. 7025, Dec. 31, 2003; Jan. 29, 2004>

1. A person who violates the provisions of Article 17 (including where they are applicable mutatis
mutandis under Article 27-2), 36, 46 or 107 (2) or (3);

2. A person who fails to comply with a demand for the report, etc. or violates the order pursuant to
Article 19 (1) (including where it is applicable mutatis mutandis under Article 27-2, 186-5, 189-2
(5) or 190-2 (3)) or 53 (2) (including where it is applicable mutatis mutandis under Article 157,
169 or 178 through 181);

3. A person who violates the provisions of Article 47;

4. A person who violates the provisions of Article 54-5 (1) through (3) or 191-16 (1) and (3);

5. A person who violates the provisions of Article 54-6 (1) and (2) or 191-17;

6. A person who violates the provisions of Article 174-2 (2) or who fails to make a notification, or
makes a false notification, to the beneficial owners in violation of the provisions of Article
174-7 (3) through (5);

7. A person who violates the provisions of Article 174-6 (4) or 174-8 (1); and

8. A person who violates the provisions of Article 191 (5), 191-10 (2) and (3), or 191-11 (2).

(3) The fine for negligence as referred to in paragraphs (1) and (2) shall be imposed and collected
by the Financial Supervisory Commission, under the conditions as prescribed by the Presidential
Decree. <Amended by Act No. 5498, Jan. 8, 1998>

(4) A person who is dissatisfied with the disposition of the fine for negligence as referred to in
paragraph (3), may raise an objection to the person who is authorized to take the disposition,
within thirty days after he is informed of such disposition.

(5) If the person, who is subject to a disposition of fine for negligence pursuant to paragraph
(3),

 

 

has raised an objection pursuant to paragraph (4) of this Article, the person who is
authorized to take the disposition shall without delay notify the competent court, which shall, upon receiving
the notification, bring the case of fine for negligence to a trial under the Non-Contentious Case
Litigation Procedure Act.

(6) If neither objection is raised, nor fine for negligence is paid, in the period as referred to
in paragraph (4) of this Article, it shall be collected according to the examples of the
disposition of national taxes in arrears.

[This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]

Article 214 (Concurrent Punishment)

(1) A person who commits a crime as referred to in Articles 207-2 through 210 may be confined to
imprisonment and fined concurrently. <Amended by Act No. 5254, Jan. 13, 1997>

(2) Where a violator of Article 207-2 (2) is subject to a fine in addition to the punishment of
imprisonment in accordance with paragraph (1), he shall be punished by the fine of the amount
equivalent to or less than three times of the profit gained or loss evaded in consequence of such
violation. <Newly Inserted by Act No. 6695, Apr. 27, 2002>

Article 215 (Joint Penal Provisions)

If a representative of a juristic person, or an agent, employee or other employed person of the
juristic person or an individual commits any offense as prescribed in Articles 207-2 through 212 in
connection with the affairs of the juristic person or individual, the fine as prescribed in the
respective Articles shall be imposed on such juristic person or individual, in addition to the
punishment of the offender. <Amended by Act No. 5254, Jan. 13, 1997>

[This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]

ADDENDA

 

 

Article 1 (Enforcement Date)

This Act shall enter into force on February 1, 1977: Provided, That the provisions of Article 12 of
the Addenda shall enter into force on the date of its promulgation.

Article 2 (Transitional Measures as to Filing of Registration Statement)

(1) Any registration statement (including amendment statement) and notification which the Minister
of Finance received prior to the effective date of this Act shall be regarded to have been received
by the Commission, and any designation of effective date thereof shall be regarded as designated by
the Commission.

(2) Notwithstanding the provisions of Article 9 (3) 1, the Commission may, by December 31, 1977,
designate an effective date of such registration statement filed by any corporation registered with
the Commission.

Article 3 (Transitional Measures as to Securities Companies)

A securities company, as of the enforcement date of this Act, shall be regarded as a securities
company under this Act: Provided, That unless a securities company obtains license by meeting the
requirements referred to in Article 28 (3) within three years from the effective date of this Act,
the license of such company shall be cancelled.

Article 4 (Transitional Measures as to Accounting)

Accounting of a securities company shall be in accordance with the previous provisions until the
Commission adopts the Regulations relating to the Accounting Standards of Securities Companies
pursuant to the provision of Article 47.

Article 5 (Transitional Measures as to Order by Minister of Finance)

 

 

Orders issued to a securities company by the Minister of Finance prior to the enforcement date
of this Act with respect to extension of credit or other matters shall be regarded as orders by the
Commission pursuant to the provisions of Articles 49 and 54.

Article 6 (Transitional Measures as to Registered Salesman)

A registered salesman who entered a registration with the Ministry of Finance as of the enforcement
date of this Act shall be regarded to have been registered with the Commission under this Act:
Provided, That when the qualification requirements are determined pursuant to the provisions of
Article 65 (3), the Commission shall examine every registered salesman and have such one register
again pursuant to the provisions thereof.

Article 7 (Transitional Measures as to Auditor of Korea Exchange)

An auditor of the Korea Exchange, as of the enforcement date of this Act, shall be regarded as a
standing auditor of the Korea Exchange under this Act.

Article 8 (Transitional Measures as to Exchange Members)

Any exchange member who was registered with the Korea Exchange, as of the enforcement date of this
Act, shall be regarded as registered under this Act.

Article 9 (Transitional Measures as to Listed Securities)

(1) Any security which was listed on the Korea Exchange as of the enforcement date of this Act
shall be regarded as a security listed under this Act.

(2) Previous provisions shall apply to the listing of securities referred to in Article 88 (1),
until the provisions of the Presidential Decree pursuant to the proviso of Article 88 (1) become
effective.

 

 

Article 10 (Transitional Measures as to Semiannual Reports)

Any listed corporation as of the enforcement date of this Act, for which a period of six months has
elapsed since its accounting period commenced, shall file a semiannual report referred to in
Article 92 within forty-five days from the enforcement date of this Act.

Article 11 (Transitional Measures as to Certificates of Contribution of Korea Exchange)

Any certificate of contribution of the Korea Exchange which was owned as of the enforcement date of
this Act by any person other than the Government or securities companies, may be cancelled through
purchases by the Korea Exchange from the enforcement date of this Act. In such a case, the method
of purchase, period, purchase price and other necessary matters shall be prescribed by the
Presidential Decree.

Article 12 (Establishment of Supervisory Board)

(1) The Minister of Finance shall organize an establishment commission composed of seven or less
members appointed by the Minister, and have it handle affairs concerned with the establishment of
the Supervisory Board.

(2) The establishment commission shall prepare the articles of association of the Supervisory Board
and obtain the authorization of the Minister of Finance with respect thereto.

(3) The establishment commission shall make the registration referred to in Article 130, after
obtaining the authorization pursuant to the provisions of paragraph (2).

(4) When the establishment commission has completed the registration referred to in paragraph (3),
it shall turn over its business and property to the director of the Supervisory Board.

(5) When the commission members were appointed pursuant to the provisions of paragraph (1), the
Government may deliver a contribution referred to in Article 204 to the establishment Commission.

 

 

Article 13 (Transitional Measures as to Authority of Commission)

Authority of the Commission and the Supervisory Board pursuant to this Act shall be exercised by
the Minister of Finance until the Commission is organized and the Supervisory Board is established.

Article 14 (Terms of Office of Commissioners First Taking Office)

Notwithstanding the provisions of Article 123, the terms of office of the Commissioners first
taking office after the effective date of this Act shall be one year for one, two years for one and
three years for one.

Article 15 (Transitional Measures as to Restrictions on Ownership of Stocks)

The time of original listing referred to in Article 200 (1) as to a listed corporation as of the
enforcement date of this Act shall be regarded as the record date for closing of a register of
stockholders first taken after the enforcement of this Act.

Article 16 (Transitional Measures as to Officers of Securities Finance Company)

Terms of office of directors and auditors of a securities finance company as of the enforcement
date of this Act shall be in accordance with the previous provisions.

Article 17 (Transitional Measures as to Securities Dealers Association)

Any direction which was issued to the Securities Dealers Association by the Minister of Finance
prior to the effective date of this Act shall be regarded as measures taken by the Commission under
this Act.

Article 18 (Transitional Measures as to Mutual Ownership of Stocks)

 

 

Any stock which a listed corporation owns in violation of the provisions of Article 189 as of the
effective date of this Act shall be transferred within one year from the effective date of this
Act.

Article 19 (Transitional Measures as to Mergers of Unlisted Corporations)

The provisions of Article 190 shall not apply until December 31, 1977, to the case where any listed
corporation merges any registered corporation.

Article 20 (Transitional Measures as to Act or Subordinate Statute which Cites Provisions of
Previous Act)

In case any other Act or subordinate statute cites the provisions of the previous Securities and
Exchange Act, the provisions which fall within the purview thereof in this Act shall, if any, be
regarded to be cited for replacement of the previous provisions.

ADDENDA <Act No. 3541, Mar. 29, 1982>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 1982.

Article 2 (Transitional Measures as to Filing of Registration Statement)

(1) Registration statements received in accordance with the previous provisions of Article 8 as of
the enforcement date of this Act shall take effect in accordance with the previous provisions.

(2) Previous provisions shall apply, even after the enforcement of this Act, to the registration
statement and documents accompanied thereby referred to in Article 8 (2), prospectus referred to in
Article 12 and after-report referred to in Article 17 as far as the forms thereof are concerned,

 

 

until the Commission fixes such forms in accordance with this Act.

Article 3 (Transitional Measures as to Eligibility of Officers)

(1) Notwithstanding the provisions of Article 33 (1) and (2) 5 (including the case where it shall
apply mutatis mutandis under Article 149, 169 or 178), officers of a securities company, securities
finance company, Securities Dealers Association and securities depository corporation as of the
enforcement date of this Act, may hold office for a period of their existing terms respectively.

(2) Notwithstanding the provisions of Article 33-2 (including the case where it shall apply mutatis
mutandis under Article 150 or 178), officers of a securities company, securities finance company
and securities depository corporation as of the enforcement date of this Act, may hold office for
the period of their existing terms.

Article 4 (Transitional Measures as to Securities Savings Business)

Previous provisions shall apply to a securities savings business of a securities company, until the
Commission adopts the Securities Savings Business Regulations in accordance with the provisions of
Article 50 (1).

Article 5 (Transitional Measures as to Investment Counsellors)

(1) A registered salesman registered with the Commission as of the enforcement date of this Act
shall be regarded an investment counsellor registered with the Supervisory Board in accordance with
this Act.

(2) A securities company may, notwithstanding the provisions of Article 65 (2), have its officer or
employee perform duties of an investment counsellor in the business office thereof until two years
have elapsed since the enforcement date of this Act.

 

 

(3) Matters reported to the Commission in accordance with the previous provisions of Article 68
as of the enforcement date of this Act shall be regarded as reported to the Supervisory Board in
accordance with this Act.

(4) Dispositions taken by the Commission in accordance with the previous provisions of Article 69
as of the enforcement date of this Act shall be regarded taken by the Supervisory Board in
accordance with this Act.

Article 6 (Transitional Measures as to Accounting Audit)

Previous provisions shall apply to an audit on such corporation which has entered into an audit
contract with certified public accountants as of the enforcement date of this Act.

Article 7 (Transitional Measures as to Ownership of Block Stocks)

(1) A stockholder, as of the enforcement date of this Act, who comes to exceed the maximum limit
referred to in the latter part of Article 200 (1) as a result of application of the provisions of
the former part of paragraph (1) of the said Article shall report the contents thereof to the
Commission within thirty days from the enforcement date of this Act and the person who reported
this shall be regarded as the owner as of the time of original listing.

(2) A person who reported the ownership of block stocks to the Commission in accordance with the
previous provisions of Article 201 as of the enforcement date of this Act shall be regarded as
reported as major stockholder to the Commission in accordance with the provisions of Article 188
(6).

ADDENDA <Act No. 3945, Nov. 28, 1987>

Article 1 (Enforcement Date)

 

 

(1) This Act shall enter into force on January 1, 1988, but the revised provisions of Articles 74
and 82 shall enter into force on the day on which the Government sells all of its contribution
certificates of the Korea Exchange.

(2) If the Government does not sell all of its contribution certificates of the Korea Exchange
until January 1, 1988, the revised provisions of those included in Chapter VI of this Act
(excluding the revised provisions of Articles 89, 92, 105 and 107; hereinafter the same shall
apply) shall enter into force on the date of its selling.

Article 2 (Application Example concerning Registration Statement)

The revised provisions of Article 8 (1) shall be applicable even in case where a registration
statement is filed pursuant to the previous provisions at the time this Act enters into force.

Article 3 (Transitional Measures concerning Investment Advisory Business)

Any person who operates an investment advisory business at the time this Act enters into force,
shall register the investment advisory business with the Ministry of Finance pursuant to the
revised provisions of Article 70-2 (1) within three months after this Act enters into force.

Article 4 (Transitional Measures concerning Korea Exchange)

(1) The Korea Exchange shall satisfy requirements pursuant to this Act within three months after
the enforcement of this Act (this refers to the enforcement of the revised provisions of those
included in Chapter VI; hereafter the same shall apply in this Article).

(2) Any exchange member registered with the Korea Exchange pursuant to the previous provisions at
the time this Act enters into force shall be considered as a member under this Act.

(3) The capital of the Korea Exchange under the previous provisions at the time this Act enters
into force shall be considered as the contribution of a member under this Act.

 

 

(4) The president, executive officers and auditors of the Korea Exchange at the time this Act
enters into force shall perform their duties according to the previous provisions until the chief
director, managing director, standing directors and auditors are appointed under this Act.

(5) If the president, standing officers and auditors existing at the time this Act enters into
force are reappointed to the chief director, managing director, standing directors and auditors,
respectively, their terms of office shall include the period of service pursuant to the previous
provisions.

Article 5 (Transitional Measure concerning Assistant Governor of Supervisory Board)

The Assistant Governor as prescribed by the articles of association of the Supervisory Board at the
time this Act enters into force shall be considered as the Assistant Governor as prescribed by this
Act, and his term of office shall run on the date he is appointed pursuant to the articles of
association of the Supervisory Board.

ADDENDA <Act No. 4469, Dec. 31, 1991>

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation: Provided,
That the revised provisions of Article 200 (1) shall enter into force at the expiration of six
months from the enforcement date of this Act, and the revised provisions of Articles 187 and 200-2,
at the expiration of three months from the enforcement date of this Act, respectively.

(2) (Transitional Measures concerning Capital of Securities Company) Notwithstanding the revised
provisions of Article 28 (3), securities companies existing at the time this Act enters into force
shall be considered to satisfy the requirements as prescribed by this Act.

(3) (Transitional Measures concerning Restriction, etc. of Mass Holding of Stocks) Any person who
falls under the revised provisions of Article 200 (1) 1 of this Act at the time this Act enters
into force, shall report the situation of his ownership to the Commission within one month after
this Act enters into force.

(4) (Transitional Measures concerning Report on Mass Holding of Stocks) Any person who is liable to
make a report pursuant to the revised provisions of Article 200-2 (1) at the time this Act

 

 

enters into force, shall report the situation of his ownership to the Commission and the Korea
Exchange within one month from the enforcement date of this Act.

ADDENDA <Act No. 4701, Jan. 5, 1994>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 1994: Provided, That the revised provisions of Article
200 shall enter into force on April 1, 1997; and those of Section 3 of Chapter VIII (Articles 173,
173-2 through 173-6, 174, 174-2, 174-4 through 174-8, 175, 176 and 178) and of Article 187, on the
date at which the Securities Depository comes into existence. <Amended by Act No. 5254, Jan. 13,
1997>

Article 2 (Examples of Application to Appraisal Rights of Stockholders)

The revised provisions of Article 191 shall be applicable to the portion for which a notification
or public notice on a convocation of the general meeting of stockholders is made on or after the
date this Act enters into force.

Article 3

Deleted. <by Act No. 4701, Feb. 1, 1999>

Article 4 (Transitional Measures concerning Registration, etc. of Investment Counsellor)

(1) Any investment counsellor who has registered with the Securities Supervisory Board at the time
this Act enters into force, shall be considered to have been registered as investment counsellor
with the Securities Dealers Association under this Act.

(2) Matters reported to the Securities Supervisory Board under the previous Article 68 at the time
this Act enters into force, shall be considered to have been reported to the Securities

 

 

Dealers Association under this Act.

Article 5 (Conversion of Securities Depository Corporation into Securities Depository)

(1) When the securities depository corporation as prescribed in the previous Article 173
(hereinafter referred to as the “securities depository corporation”) at the time this Act enters
into force, has obtained the approval of the Minister of Finance on the conversion to the
Securities Depository through a resolution of the general meeting of stockholders, it shall be
considered as the Securities Depository established under the revised provisions of Article 173.

(2) In the case as referred to in paragraph (1), the representative director of the securities
depository corporation shall prepare the articles of association of the Securities Depository
within three months after this Act enters into force, obtain the authorization of the Minister of
Finance, and take charge of the affairs concerning the registration of incorporation, etc. of the
Securities Depository.

(3) The securities depository corporation shall carry on the affairs pursuant to the previous
provisions until the Securities Depository comes into existence.

(4) When the Securities Depository comes into existence, the stockholders of the securities
depository corporation existing at that time shall be those of the Securities Depository, and all
rights and duties of the securities depository corporation shall be succeeded en bloc to the
Securities Depository. In this case, the securities depository corporation shall be extinguished on
the day of such succession without going through the procedure of dissolution and liquidation under
the Commercial Act.

(5) The officers of the securities depository corporation existing at the time the Securities
Depository comes into existence, shall be considered as those of the Securities Depository as
prescribed by this Act, and their terms of office shall count from the day on which they have been
appointed as officers of the securities depository corporation.

Article 6 (Transitional Measures concerning Approval on Use of Printed Forms of Securities)

 

 

Approval on the use of the printed forms of securities made by the Securities Supervisory Board
for a non-listed corporation before the revised provisions of Article 187 enter into force, shall
be considered as approval made by the Securities Depository.

Article 7 (Transitional Measures concerning Report on Mass Holding of Stocks)

Any person who is to make a report pursuant to the revised provisions of Article 200-2 (1) at the
time this Act enters into force, shall make a report on the situation of his holdings to the
Commission and the Korea Exchange within one month after this Act enters into force.

Article 8 (Transitional Measures concerning Conciliation Commission)

(1) The dispute conciliation institution established by the previous provisions at the time this
Act enters into force, shall be considered as the securities dispute conciliation commission under
this Act.

(2) Any request for a conciliation of dispute made pursuant to the previous provisions before this
Act enters into force, shall be considered as a request for dispute conciliation under this Act.

Article 9 (Relation with Other Acts and Subordinate Statutes)

Any citation of the securities depository corporation in other Acts and subordinate statutes at the
time the Securities Depository comes into existence, shall be considered as a citation of the
Securities Depositor.

ADDENDA <Act No. 5254, Jan. 13, 1997>

Article 1 (Enforcement Date)

 

 

This Act shall enter into force on April 1, 1997: Provided, That the revised provisions of
subparagraph 6 of Article 3 and Article 189-4 shall enter into force on the date of its
promulgation; and the revised provisions of Section 2 of Chapter VIII (excluding the provisions of
Article 167), on the date on which the Korea Dealers Association comes into existence,
respectively. <Amended by Act No. 5498, Jan. 8, 1998>

Article 2 (Applicable Cases concerning Liability for Damages due to False Statements)

The revised provisions of subparagraph 5 of Article 14 and Article 15 (2) shall apply to a
registration statement and a prospectus which are filed on or after the date this Act enters into
force.

Article 3 (Applicable Cases concerning Tender Offer of Securities)

The revised provisions of Chapter VI (Articles 21 through 27-2) shall not apply in case where a
tender offer statement is filed according to the previous provisions before this Act comes into
force.

Article 4 (Applicable Cases concerning Qualification of Officers of Securities Company)

The revised provisions of Article 33 (2) 3 and 5 (including the case where it shall apply mutatis
mutandis under Articles 70-7, 149 (2), 169, 178, 179 (4) and 180 (3)), subparagraphs 4 and 5 of
Article 80, subparagraphs 4 and 5 of Article 121 and Article 133 (8) shall not apply with respect
to an officer who is in office at the time of enforcement of this Act.

Article 5 (Applicable Cases concerning Term of Office of Auditor of Korea Exchange)

The revised provisions of Article 78 (7) shall apply to an auditor who is assigned on or after the
date this Act comes into force.

Article 6 (Applicable Cases concerning Annual Report and Semiannual Report)

 

 

The revised provisions of Articles 186-2 and 186-3 shall apply from the business year commencing
newly after this Act comes into force: Provided, That in the case of a corporation of which the
last day of business year falls under the period between December and February, they shall apply
from the business year to which the date of enforcement of this Act belongs.

Article 7 (Applicable Cases concerning Return of Short-Term Sales Margin of Insider)

The revised provisions of Article 188 (2) through (4) shall not apply, in case where six months has
not elapsed since securities, etc. are bought or sold before this Act comes into force.

Article 8 (Applicable Cases concerning Notification and Public Notice on Convocation of General
Meeting)

The revised provisions of Article 191-10 (2) shall apply from the notification or public notice on
the convocation of the general meeting effected for the first time after the enforcement of this
Act.

Article 9 (Applicable Cases concerning Appointment and Dismissal, etc. of Auditor)

The revised provisions of Article 191-11 (1) and (2) shall apply from the general meeting of
stockholders which is convened for the first time after this Act comes into force; and the revised
provisions of paragraph (3) of the said Article, from an auditing report which an auditor submits
to directors for the first time after this Act comes into force.

Article 10 (Applicable Cases concerning Qualifications of Standing Auditor)

The revised provisions of Article 191-12 (2) and (3) shall apply from an auditor who is appointed
in the general meeting of stockholders convened for the first time after this Act comes into force.

Article 11 (Transitional Measures concerning Employee Stock Ownership Association)

 

 

An employee stock ownership association pursuant to subparagraph 5 of Article 2 of the Capital
Market Promotion Act (Act No. 4679) at the time of enforcement of this Act, shall be considered as
an employee stock ownership association pursuant to the revised provisions of Article 2 (18) of
this Act.

Article 12 (Transitional Measures concerning License for Securities Business)

In case where the license for securities business referred to in the previous provisions of Article
2 (8) 4 is obtained pursuant to the provisions of Article 28 (2) 2 at the time of enforcement of
this Act, it shall be considered as a license for securities business pursuant to the revised
provisions of Article 2 (8) 4.

Article 13 (Transitional Measures concerning Protection Fund)

Securities company bound to set aside protection fund pursuant to the revised provisions of Article
69-2 (3), shall set aside the protection fund pursuant to the revised provisions of paragraph (2)
of the said Article within one month after this Act comes into force.

Article 14 (Transitional Measures concerning Report on Business Similar to Investment Advisory
Business)

A person who conducts a business similar to investment advisory business pursuant to Article 70-8
at the time of enforcement of this Act, shall report pursuant to the revised provisions of Article
70-8 within one month after the enforcement date of this Act.

Article 15 (Transitional Measures concerning Fees)

Fees which has been collected by the Supervisory Board during the period from January 1, 1997 to
the last day before the enforcement date of this Act according to the previous provisions of
Article 143, shall be considered as the fees pursuant to the revised provisions of Article 143.

 

 

Article 16 (Transitional Measures concerning Korea Securities Dealers Association)

(1) The Korea Securities Dealers Association, the incorporated association, which was established
pursuant to the previous provisions of Article 162 and is existing at the time of enforcement of
this Act (hereinafter referred to as the “Association”), shall be considered as the Korea
Securities Dealers Association which is established pursuant to the revised provisions of Article
162.

(2) In case of paragraph (1) of this Article, the president of the Association shall prepare the
articles of association of the Korea Securities Dealers Association within three months from the
enforcement date of this Act and shall obtain the authorization of the Minister of Finance and
Economy; and he shall manage the affairs relating to the registration of incorporation of the Korea
Securities Dealers Association.

(3) The Association shall conduct the business pursuant to the previous provisions until the Korea
Securities Dealers Association comes into existence.

(4) When the Korea Securities Dealers Association comes into existence, the members of the
Association at the time when it comes into existence shall become the members of the Korea
Securities Dealer Association, and the Korea Securities Dealers Association shall succeed to the
rights and obligations of the Association by a universal title. In this case, the Association shall
cease to exist at the date of succession by a universal title without being subject to the
procedure of dissolution and liquidation pursuant to the provisions of the Civil Act.

(5) Officers of the Association at the time when it comes into existence shall be considered as
officers of the Korea Securities Dealers Association pursuant to this Act, and the terms of office
of such officers shall begin on the date on which officers of the Association has been appointed.

Article 17 (Transitional Measures concerning Corporation Registered with Association)

A corporation listed on KOSDAQ pursuant to the previous provisions of Article 194 at the time this
Act enters into force shall be regarded as a corporation registered with the Korea Securities
Dealers Association pursuant to the revised provisions of Article 172-2.

 

 

Article 18 (Transitional Measures concerning Designation of Securities which are Object of
Depositing)

The securities which the Securities Depository has designated at the time this Act enters into
force shall be regarded that they have been designated pursuant to the revised provision of Article
173-7.

Article 19 (Transitional Measures concerning Korea Listed Companies Association)

The Korea Listed Companies Association, the incorporated association, which is established pursuant
to the Civil Act at the time this Act enters into force, shall be deemed to be established with the
license by the Minister of Finance and Economy under the revised provisions of Article 181 (1).

Article 20 (Transitional Measures concerning Nonvoting Stocks)

In case where the number of nonvoting stocks issued pursuant to Article 7 of the previous Capital
Market Promotion Act (Act No. 3946) (including the number of nonvoting stocks issued after the
enforcement of the Capital Market Promotion Act (Act No. 4679) due to the exercise of the rights of
convertible bonds or bonds with warrants which have been issued before the enforcement of the
Capital Market Promotion Act (Act No. 4679)), exceeds 1/4 of the total number of the issued stocks,
the portion exceeding such ratio shall be considered that it is issued under the revised provisions
of each subparagraph of Article 191-2 (1).

Article 21 (Transitional Measures concerning Issuance of New Type of Bonds)

New type bonds issued pursuant to Article 9 of the Capital Market Promotion Act at the time this
Act enters into force, shall be considered that they are issued pursuant to the revised provisions
of Article 191-4.

 

 

Article 22 (Transitional Measures concerning Public Notice on Convocation of General Meeting)

The public notice on the convocation of the general meeting of stockholders effected pursuant to
Article 23 of the Capital Market Promotion Act at the time this Act enters into force, shall be
considered that it is effected pursuant to the revised provisions of Article 191-10 (1).

Article 23 (Transitional Measures concerning Standing Auditor)

A stock listed corporation which shall appoint a standing auditor pursuant to the revised
provisions of Article 191-12 (1), shall appoint a standing auditor by the time of the regular
general meeting of stockholders convened for the first time after this Act enters into force.

Article 24 (Transitional Measures concerning Report on Mass Holding, etc. of Stocks)

A person who shall make the report pursuant to the revised provisions of Article 200-2 (1) at the
time this Act enters into force, shall report the situation of holdings to the Commission and the
Korea Exchange within two months from the enforcement date of this Act.

Article 25 (Repeal of Other Act, etc.)

(1) The Capital Market Promotion Act shall be repealed.

(2) In case where the provisions of the previous Capital Market Promotion Act was quoted in other
Acts and subordinate statutes at the time this Act enters into force, this Act and the provisions
in this Act corresponding to the provisions of the previous Capital Market Promotion Act shall be
considered to have been quoted in place of the provisions of the previous Capital Market Promotion
Act.

ADDENDA <Act No. 5423, Dec. 13, 1997>

(1) (Enforcement Date) This Act shall enter into force on April 1, 1998: Provided, That the

 

 

amended provisions of Articles 69-5 and 192-2 shall enter into force on January 1, 1998.
<Amended by Act No. 5498, Jan. 8, 1998>

(2) (Applicable Cases concerning Interim Dividends) The amended provisions of Article 192-3 shall
apply from the business year commencing for the first time after January 1, 1998.

(3) (Transitional Measures on Penal Provisions) The application of penal provisions to acts
committed prior to the entry into force of this Act shall be governed by the previous provisions.

ADDENDA <Act No. 5498, Jan. 8, 1998>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 1998: Provided, That the provisions among the amended
provisions of Articles 69-6 and 200-2 which pertain to KOSDAQ registered corporations, the amended
provisions of Article 1 of the Addenda of Act No. 5254, and the amended provisions of paragraph (1)
of the Addenda of Act No. 5423 shall enter into force on the date of its promulgation, the amended
provisions of Article 206-10 shall enter into force on January 1, 1998, and the amended provisions
of Article 69-6 shall remain in force until March 31, 1998.

Article 2 (General Transitional Measures pursuant to Repeal of Securities and Exchange Commission
and Securities Supervisory Board)

(1) Any approval, authorization, order, disposition, measures, consent, proposition,
recommendation, direction, request, adjustment, etc. and inspection or investigation conducted by
the Securities and Exchange Commission or the Securities Supervisory Board pursuant to the previous
provisions prior to the entry into force of this Act shall be deemed to have been conducted by the
Financial Supervisory Commission, the Securities Futures Commission or the FSB Director under this
Act.

(2) Any declaration and report, etc. received or accepted by the Securities and Exchange

 

 

Commission or the Financial Supervisory Board prior to the entry into force of this Act shall be
deemed to have been received or accepted by the Financial Supervisory Commission, the Securities
Futures Commission or the FSB Director under this Act.

(3) Any corporation registered with the Securities and Exchange Commission at the time when this
Act enters into force shall be deemed to have been registered with the Financial Supervisory
Commission under this Act.

Article 3 (Transitional Measures on License for Securities Business in Foreign Countries)

Any securities company which has obtained a license on operating a securities business in a foreign
country from the Minister of Finance and Economy at the time when this Act enters into force shall
be deemed to have made a report to the Financial Supervisory Commission pursuant to the amended
provisions of Article 28 (7).

Article 4 (Transitional Measures on Protection Fund)

The fund management company referred to in the previous provisions of Article 69-2 (1) shall return
the reserve accumulated by a securities company bound to set aside the fund referred to in
paragraph (3) of the same Article (including the right of indemnification referred to in Article
69-3 (4) where the real balance of the protection fund falls short of the reserve due to the
payment, etc. referred to in Article 69-3 (1)) to the securities company bound to set aside the
fund not later than one month from the date of entry into force of this Act.

Article 5 (Transitional Measures on License for Investment Advisory Business and Discretionary
Investment Business in Foreign Countries)

Any investment advisory company which has obtained a license on operating investment advisory
business or discretionary investment business in a foreign country from the Minister of Finance and
Economy at the time when this Act enters into force shall be deemed to have made a report to the
Financial Supervisory Commission pursuant to the amended provisions of Article 70-2 (3).

 

 

Article 6 (Transitional Measures on Authorization, etc. of Business of Korea Exchange, etc.)

Any business which has obtained authorization or approval from the Minister of Finance and Economy
pursuant to the previous provisions of Article 73 (1) 8, subparagraph 7 of Article 162-2 and
Article 173-2 (2) at the time when this Act enters into force shall be deemed to be a business
authorized or approved by the Financial Supervisory Commission under this Act.

Article 7 (Transitional Measures on Approval of Change of Articles of Association of Securities
Finance Company, etc.)

Any securities finance company, the Korea Securities Dealers Association, any order matching
company, any transfer agency and other organizations relating to securities which have obtained
approval from the Minister of Finance and Economy on the change of articles of association at the
time this Act enters into force shall be deemed to have obtained approval from the Financial
Supervisory Commission pursuant to the amended provisions of Article 151 (1) (including cases
applied mutatis mutandis under Articles 169, 179, 180 and 181).

Article 8 (Transitional Measures on Exchange of Information with Foreign Securities Supervisory
Agencies)

Any exchange of information with a foreign securities supervisory agency by the Stock and Exchange
Commission under the previous provisions of Article 129-2 shall be deemed to have been effected by
the Financial Supervisory Commission under this Act.

Article 9 (Transitional Measures on Report of Mass Holding of Stocks of Corporations Registered
with Association)

Any person who has to make a report referred to in the amended provisions of Article 200-2 at the
time when this Act enters into force shall make a report to the Stock and Exchange Commission and
the Korea Securities Dealers Association not later than one month from the date of entry into force
of this Act.

 

 

Article 10 (Transitional Measures on Contributions)

Contribution paid to the Securities Supervisory Board at the time when this Act enters into force
shall be deemed to be contributions paid to the Financial Supervisory Board pursuant to the amended
provisions of Article 206-8.

Article 11 (Continuance in Existence of Securities Supervisory Board and Succession to Its
Property, Rights and Duties)

(1) Notwithstanding the amended provisions of this Act, the Securities Supervisory Board shall
continue in existence until the date on which the Financial Supervisory Board is established
pursuant to the Act on the Establishment, etc. of Financial Supervisory Organizations.

(2) All the rights and duties which belong to the Securities Supervisory Board shall be succeeded
to by universal title by the Financial Supervisory Board on the date on which the Financial
Supervisory Board is established, and the titles of the Securities Supervisory Board indicated in
its register or other public books on property and rights and duties shall be deemed to be the
titles of the Financial Supervisory Board.

(3) The value of property to which the Financial Supervisory Board succeeds pursuant to paragraph
(2) shall be the book value at the time of its succession.

Article 11-2 (Transitional Measures pursuant to Abolition of Stock and Exchange Commission)

(1) The Securities Supervisory Board shall be deemed the Financial Supervisory Board in the
application of the provisions of Articles 18, 23, 39 and Chapters IV and V of the Act on the
Establishment, etc. of Financial Supervisory Organizations until the date on which the Financial
Supervisory Board is established.

(2) The Director of the Securities Supervisory Board shall be appointed by the President on the
recommendation of the Financial Supervisory Commission until the Financial Supervisory Board

 

 

is established, and the person who has been appointed as Chairman of the Stock and
Exchange Commission prior to the entry into force of this Act shall be deemed to have been
appointed as the Director of the Securities Supervisory Board.

(3) The provisions of Article 29 (3) of the Act on the Establishment, etc. of Financial Supervisory
Organizations shall apply mutatis mutandis to the appointment of the Vice-Director and assistant
vice-director of the Securities Supervisory Board until the date on which the Financial Supervisory
Board is established: Provided, That any person who has been appointed under the previous Act at
the time when this Act enters into force shall be deemed to have been appointed under the Act on
the Establishment, etc. of Financial Supervisory Organizations until the date on which the
Financial Supervisory Board is established.

(4) Where the Director of the Securities Supervisory Board is unable to perform his duties due to
an accident from the date on which the Securities and Exchange Commission is abolished to the date
on which the Financial Supervisory Board is established, the Vice-Director shall act as chairman on
his behalf.

[This Article Newly Inserted by Act No. 5521, Feb. 24, 1998]

Article 12 (Transitional Measures on Penal Provisions)

The application of penal provisions to acts committed prior to the entry into force of this Act
shall be governed by the previous provisions.

Article 13 (Transitional Measures on Fine for Negligence)

(1) The application of the provisions of a fine for negligence to acts committed prior to the entry
into force of this Act shall be governed by the previous provisions.

(2) A fine for negligence imposed by the Minister of Finance and Economy at the time when this Act
enters into force shall be deemed to have been imposed by the Financial Supervisory Commission
pursuant to the amended provisions of Article 213 (3).

 

 

Article 14

Omitted.

Article 15 (Relation to Other Acts and Subordinate Statutes)

Where other Acts and subordinate statutes cite the previous provisions at the time when this Act
enters into force, if this Act includes the provisions corresponding to them, the provisions
corresponding to this Act shall be deemed to have been cited in lieu of the previous provisions.

ADDENDA <Act No. 5521, Feb. 24, 1998>

(1) (Enforcement Date) This Act shall enter into force on April 1, 1998: Provided, That the amended
provisions of Articles 21, 21-3, 25-2 (2), 188-2 (1), and 189-2 (1) and subparagraph 4 of Article
209 shall enter into force on the date of its promulgation.

(2) (Applicable Cases concerning Tender Offer of Securities) The amended provisions of Articles 21
(2), 21-3, and 25-2 (2) and subparagraph 4 of Article 209 shall not apply to cases where tender
offer statements have been submitted pursuant to the previous provisions prior to the entry into
force of this Act.

ADDENDUM <Act No. 5539, May 25, 1998>

This Act shall enter into force on the date of its promulgation.

ADDENDA <Act No. 5559, Sep. 16, 1998>

Article 1 (Enforcement Date)

This Act shall enter into force two months after the date of its promulgation.

Articles 2 through 9

 

 

Omitted.

ADDENDA <Act No. 5591, Dec. 28, 1998>

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)

Articles 2 through 5

Omitted.

ADDENDA <Act No. 5736, Feb. 1, 1999>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 1999: Provided, That the amended provisions of Articles
186-3, 186-5 (limited to where Article 186-5 is applicable quarterly business reports), 191-12 (1)
and (3) (limited to where Article 191-12 (1) and (3) is applicable to KOSDAQ registered
corporations), and 191-13 shall enter into force on January 1, 2000, and the amended provisions of
Articles 3, 23, 29, 30, 33 (1), 35, 45, 48, and 65 through 69, Section 3 (Article 69-6), Articles
70-2 (3) and (4), 73, 78, 81, 85, 86, 94, 104, 109 through 111, 115, 117, 159, 162-2, 164, 173-2,
173-6, 173-7, 175, 176, 178, 179, 181, 186 (1), 189, 190, 191 (1) and (5), and 191-12 (2) shall
enter into force on the date of its promulgation.

Article 2 (Applicable Cases concerning Immunity from Compensation Liability Due to False Entry,
etc.)

The amended provisions of Article 14 shall apply to a registration statement of securities or a
prospectus (including a preliminary prospectus) submitted after this Act enters into force.

 

 

Article 3 (Applicable Cases concerning Disgorgement of Short-Term Sales Margin of Insiders)

With respect to officers, employees or major stockholders of a KOSDAQ registered corporation at the
time when this Act enters into force, the amended provisions of Article 188 (1) and (2) shall apply
to the portion of purchase or sale effected on or after the date this Act enters into force. In
this case, in applying the amended provisions of Article 188 (2), the calculation of a six-month
period shall be reckoned from the point of purchase or sale effected initially after this Act
enters into force.

Article 4 (Applicable Cases concerning Appointment and Dismissal of Auditors of KOSDAQ registered
corporation)

The amended provisions of Article 191-11 (1) and (2) shall apply starting from a general meeting of
stockholders to which a bill for appointing, dismissing or determining remuneration for an auditor
is first proposed after this Act enters into force, and the amended provision of paragraph (3) of
the said Article shall apply starting from the audit report first submitted by the auditor to
directors after the entry into force of this Act.

Article 5 (Applicable Cases concerning Penalties)

The amended provisions of Article 206-11 shall apply starting from the portion submitted, stated,
announced, disclosed or reported after the entry into force of this Act.

Article 6 (Transitional Measures on Qualifications as Officers of Securities Companies)

Where an officer of a securities company who has been in office at the time when this Act enters
into force falls under the amended provisions of Article 33 (2) 4 due to a cause which occurred
before this Act enters into force, he shall, notwithstanding the said amended provisions, be
governed by the previous provisions until his term of office expires.

Article 7 (Transitional Measures on Custody and Management of Customer Deposit Money by

 

 

Securities Companies)

A securities company (including foreign securities company’s domestic branches) engaged only in
business listed in Article 28 (2) 2 at the time of the entry into force of this Act which has
received, had custody of, and managed customer deposit money, shall, notwithstanding the amended
provisions of Article 44-2, be governed by the amended provisions of Article 44-3 for two years
from the date of the entry into force of this Act.

Article 8 (Transitional Measures on Securities Companies’ Trade Names)

A trade name of a securities company engaged only in business listed in Article 28 (2) 2 at the
time of the entry into force of this Act shall, notwithstanding the amended provisions of the
latter part of Article 62 (1), be governed by the previous provisions.

Article 9 (Transitional Measures on Registration or Report of Investment Advisory Business, etc.)

A person who has registered investment advisory business with, obtained a license for discretionary
investment business from, and reported any similar investment advisory business to the Minister of
Finance and Economy pursuant to the previous provisions at the time of the entry into force of this
Act shall be deemed to have registered with, or reported to the Financial Supervisory Commission
under the amended provisions of Articles 70-2, 70-8 and 70-9.

Article 10 (Transitional Measures on Registration of Transfer Agents)

A transfer agent who has obtained a license from the Minister of Finance and Economy pursuant to
the previous provisions at the time of the entry into force of this Act shall be deemed to have
registered with the Minister of Finance and Economy under the amended provisions of Article 180
(1).

Article 11 (Transitional Measures on Submission of Conglomerate Combined Financial Statements)

 

 

In applying the amended provisions of Article 186-2 (5), conglomerate combined financial statements
of a business year commencing after January 1, 1999 shall be submitted within seven months after
the end of the business year.

Article 12 (Transitional Measures on Report of Status of Stockholdings)

The officers or major stockholders of a KOSDAQ registered corporation which has to report the
status of stockholdings pursuant to the amended provisions of Article 188 (6) at the time when this
Act enters into force shall, notwithstanding the amended provisions of the said Article and
paragraph, report the status of stockholdings to the Securities Futures Commission and the
Association within one month from the date when this Act enters into force.

Article 13 (Transitional Measures on Limit Excess of Acquisition of Treasury Stocks by KOSDAQ
registered corporations)

A KOSDAQ registered corporation which holds treasury stocks in excess of the acquisition limit
under the latter part of Article 189-2 (1) at the time when this Act enters into force shall
dispose of the excess by the time the money trust contract under paragraph (2) of the same Article
terminates.

Article 14 (Transitional Measures on Appointments of Standing Auditors of KOSDAQ registered
corporations)

A KOSDAQ registered corporation which has to appoint full-time auditors pursuant to the amended
provisions of Article 191-12 (1) shall appoint them by the first stockholders meeting after this
Act enters into force.

Article 15 (Transitional Measures on Qualifications for Standing Auditors)

Qualifications for full-time auditors who are in office at the time when this Act enters into force
shall, notwithstanding the amended provisions of Article 191-12 (3), be governed by the

 

 

previous provisions until their terms of office expire.

Article 16 (Transitional Measures on Penal Provisions)

The application of penal provisions to any act committed before this Act enters into force shall be
governed by the previous provisions.

ADDENDA <Act No. 5982, May 24, 1999>

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)

Articles 2 through 6

Omitted.

ADDENDA <Act No. 6176, Jan. 21, 2000>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 2000: Provided, That the amended provisions of Articles
2, 3, 54-5, 54-6, 58, 64, 160, 174-6 (5), 189-2, 189-4, 191-9, 191-11, 191-12, 191-14, 191-16 and
191-17 shall enter into force on the date of its promulgation.

Article 2 (Transitional Measures concerning Disqualifications)

Where any officer of a securities company, an investment advisory company, a securities finance
company or the Association falls under the disqualification due to the cause under the amended
provisions of Article 33 (2) (including the case in which the provisions apply mutatis

 

 

mutandis under the provisions of Articles 70-7, 149 (2) and 169) that has occurred prior to the
enforcement of this Act at the time of the entry into force of this Act, his case shall be dealt
with according to the previous provisions notwithstanding the amended provisions.

Article 3 (Transitional Measures concerning Equity Capital Regulation Rate)

The amended provisions of Article 54-2 shall not apply to any securities company falling under any
of the following subparagraphs until the day prescribed by the Presidential Decree:

1. A securities company that has been incorporated as a result of the conversion of a financial
institution or a securities company that has merged with a financial institution in accordance with
the Act on the Structural Improvement of the Financial Industry; and

2. A securities company that, after having been ordered to take timely and corrective measures under
the Act on the Structural Improvement of the Financial Industry, is presently implementing a plan
for such measures.

Article 4 (Transitional Measures concerning Internal Control Standards of Securities Company)

Any securities company shall set its internal control standards in accordance with the amended
provisions of Article 54-4 within six months after the enforcement of this Act.

Article 5 (Transitional Measures concerning Appointments of Outside Directors of Securities
Company)

Any securities company that has to appoint outside directors in accordance with the amended
provisions of Article 54-5 shall appoint such outside directors in accordance with such amended
provisions at a regular general meeting of stockholders that is called for the first time after the
enforcement of this Act. In this case, any outside director appointed at the regular general
meeting of stockholders shall be deemed to be recommended by the outside director candidate
recommendation committee in accordance with the provisions of Article 54-5 (2) and (3).

 

 

Article 6 (Transitional Measures concerning Establishment of Inspection Committee of
Securities Company)

Any securities company that has to establish an inspection committee in accordance with the amended
provisions of Article 54-6 shall establish such inspection committee at a regular general meeting
of stockholders that is called for the first time after the enforcement of this Act.

Article 7 (Transitional Measures concerning Stock Option Granting Corporation)

Any corporation that grants its officers and employees the stock option under the previous
provisions at the time of the entry into force of this Act shall be deemed to grant them such stock
option in accordance with the amended provisions of Article 189-4.

Article 8 (Transitional Measures concerning Appointments of Outside Directors of Stock-Listed
Corporation)

(1) Any stock-listed corporation that has to appoint outside directors in accordance with the
amended provisions of Article 191-16 shall appoint such outside directors in accordance with such
amended provisions at a regular general meeting of stockholders that is called for the first time
after the enforcement of this Act. In this case, any person appointed as an outside director at the
regular general meeting of stockholders shall be deemed to be recommended by the outside director
candidate recommendation committee in accordance with the provisions of Article 54-5 (2) and (3)
that are applied mutatis mutandis by the amended provisions of Article 191-16 (3).

(2) Any stock-listed corporation under the provisions of the proviso of Article 191-16 (1) shall,
notwithstanding the amended provisions of the same Article, increase the number of outside
directors to 3 or more prior to a regular general meeting of stockholders that is called for the
first time after the end of the 2000 business year, but may make the number of outside directors
less than half of the total number of directors on the board of directors.

(3) Any outside director who holds office at a stock-listed corporation at the time that this Act
is enforced shall be deemed to be an outside director appointed under this Act until his term of

 

 

office expires.

Article 9 (Transitional Measures concerning Establishment of Inspection Committee of Stock-Listed
Corporation)

Any stock-listed corporation that has to establish an inspection committee in accordance with the
amended provisions of Article 191-17 shall establish such inspection committee in accordance with
the amended provisions at a regular general meeting of stockholders that is called for the first
time after the enforcement of this Act.

Article 10 (Transitional Measures concerning Standing Auditor following Establishment of Inspection
Committee of Stock-Listed Corporation)

With respect to any standing auditor (in case that there are not less than two standing auditors,
one standing auditor designated by the board of directors of a stock-listed corporation out of such
not less than two standing auditors) who holds office at a stock-listed corporation that has to
establish an inspection committee in accordance with the amended provisions of Article 191-17 at
the time of the entry into force of this Act, where his term of office does not expire by the date
on which a regular general meeting of stockholders is called to establish an inspection committee
in accordance with the provisions of Article 9 of the Addenda and he is not dismissed at such
regular general meeting of stockholders, he shall be deemed not an outside director but a member of
the inspection committee until his term of office expires. In this case, such standing auditor
shall be deemed a director appointed at a general meeting of stockholders in accordance with the
provisions of Article 382 (1) of the Commercial Act until his term of office expires.

ADDENDA <Act No. 6423, Mar. 28, 2001>

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 2001: Provided, That the amended provisions of Articles
2 (19), 54-5 (3), 54-6 (2) and (6), 64, 172-4, 186 (1), 189-4, 191-13, 191-17 (2), 191-18,

 

 

and 192 (2) shall enter into force on the date of its promulgation and the amended provisions of
Article 2 (18) shall enter into force on the date prescribed by the Presidential Decree.

Article 2 (Applicable Cases for Disposition Right of Financial Supervisory Commission)

The amended provisions of subparagraph 1 of Article 20 shall apply starting with the portion of any
registration statement or any after-report submitted first after the enforcement of this Act.

Article 3 (Applicable Cases for Qualifications for Compliance Officer of Securities Company)

The amended provisions of Article 54-4 (4) shall apply starting with the portion of the compliance
officer selected and appointed first after the enforcement of this Act.

Article 4 (Applicable Cases for Selection of Chairman of Inspection Committee of Major Stock-Listed
Corporation)

In the event that the chairman of the inspection committee of any stock-listed corporation or any
KOSDAQ registered corporation that is required to set up an inspection committee at the time that
this Act enters into force is not an outside director, such stock-listed corporation or such KOSDAQ
registered corporation shall select and appoint a chairman who is an outside director in compliance
with the amended provisions of Article 54-6 (2) (including a case where the provisions are applied
mutatis mutandis in Article 191-17 (2)) not later than three months after this Act takes effect.

Article 5 (Applicable Cases for Recommendation of Candidates for Public Interest Director of Korea
Exchange)

The amended provisions of Article 78 (4) shall apply starting with the portion of a director
representing the public interest selected and appointed first after the enforcement of this Act.

Article 6 (Applicable Cases for Granting of Stock Option)

 

 

The amended provisions of Article 189-4 (3) and (4) shall apply starting with the portion of the
stock option granted first after the enforcement of this Act.

Article 7 (Applicable Cases for Appraisal Rights of Stockholders of KOSDAQ registered corporation)

The amended provisions of Article 191 shall apply starting with the portion of a resolution adopted
first by the board of directors after the enforcement of this Act.

Article 8 (Applicable Cases for Imposition of Penalties)

The amended provisions of Article 206-11 shall apply starting with the portion of the submission,
statement, public notice, disclosure, or report made first after the enforcement of this Act.

Article 9 (Transitional Measure concerning License of Securities Business)

Any person who is licensed with his securities business under the previous provisions of Article 2
(8) 3 at the time that this Act enters into force shall be deemed licensed with his securities
business under the amended provisions of Article 2 (8) 3.

Article 10 (Transitional Measure concerning Tender Offer of Securities)

(1) In the event that a tender offer statement is filed under the previous provisions of Article
21-2 prior to the enforcement of this Act, notwithstanding the amended provisions of Articles 21,
21-2, 21-3, 22, 23 and 23-2, such tender offer statement shall be governed by the previous
provisions.

(2) With respect to a registration statement, etc. filed with the Financial Supervisory Commission,
etc. under the previous provisions of Article 26 prior to the enforcement of this Act,
notwithstanding the amended provisions of Article 26, such registration statement, etc. shall be
governed by the previous provisions.

 

 

Article 11 (Transitional Measure concerning Restrictions on Directors Holding Concurrent Offices)

With respect to prohibiting any standing officer of a securities company, who is engaged in the
regular business of a corporation that is not a company from holding any concurrent office under
the previous provisions at the time that this Act enters into force, notwithstanding the amended
provisions of Article 48, he shall be governed by the previous provisions until his term of office
expires.

Article 12 (Transitional Measure concerning Trade Name of Securities Company)

With respect to any securities company that uses a trade name under the previous provisions at the
time that this Act enters into force, notwithstanding the amended provisions of Article 62 (1), the
use of such trade name by such securities company shall be governed by the previous provisions.

Article 13 (Transitional Measure concerning Managing Director and Standing Director of Korea
Exchange)

(1) Any person who works for the Korea Exchange as a managing director at the time that this Act
enters into force shall be deemed appointed as vice chief director of the Korea Exchange under the
amended provisions of Article 78 (1) 2 and (3) until his term of office expires.

(2) Any person who works for the Korea Exchange as a standing director at the time that this Act
enters into force shall be deemed an executive officer under the amended provisions of Article 74
(1) 5 until his term of office expires.

Article 14 (Transitional Measure concerning KOSDAQ Operation Committee and Its Members)

 

 

(1) The Committee on the Operation of KOSDAQ, which is established in accordance with the
regulations on the operation of the previous KOSDAQ at the time that this Act enters into force,
shall be deemed the KOSDAQ Operation Committee established pursuant to the amended provisions of
Article 172-2 (2).

(2) Members of the committee that is deemed the KOSDAQ Operation Committee under paragraph (1)
shall be deemed members of the KOSDAQ Operation Committee established under the amended provisions
of Article 172-2 (2) until their terms of office expire.

Article 15 (Transitional Measure concerning Regulations on Operation of KOSDAQ)

The regulations made on the operation of KOSDAQ at the time that this Act enters into force shall
be deemed to be in conformity with the amended provisions of Article 172-3 within the limit of 6
months from the date on which this Act enters into force, until new regulations are made under the
amended provisions of Article 172-3.

Article 16 (Transitional Measures concerning Retirement of Stocks)

Any treasury stocks held by any stock-listed corporation or any KOSDAQ registered corporation after
having acquired them under Article 189-2 at the time that this Act enters into force may be retired
under the amended provisions of Article 189 (1). In this case, the requirements falling under each
of the following subparagraphs shall be satisfied and Article 189 (4) and (5) shall be applied
thereto:

1. It is required to file a report thereon with the Financial Supervisory Commission, the Korea
Exchange or the Association under Article 189-2 (3). In this case, in the application of the same
paragraph of the same Article, the Financial Supervisory Commission may set separate standards;

2. It is required to go through a resolution of the board of directors with respect to kinds and
total numbers of stocks to be retired, the total value of stocks to be retired and the date on
which it is intended to retire such stocks;

3. The total value of the stocks to be retired is required to be within the limit provided for in
Article

 

 

189 (3) 2; and

4. The stocks to be retired are required to be in the lapse of 6 months from the date on which they
are acquired.

Article 17 (Transitional Measures concerning Selection and Appointment of Outside Directors of
KOSDAQ registered corporation)

(1) Any KOSDAQ registered corporation that is required to select and appoint outside directors
under the amended provisions of the main sentence of Article 191-16 (1) shall select and appoint
such outside directors under the amended provisions at a regular general meeting of stockholders
called for the first time after the enforcement of this Act. In this case, notwithstanding the
amended provisions of the main sentence of the same paragraph of the same Article, the relevant
KOSDAQ registered corporation shall increase the number of outside directors to not less than one
prior to a regular general meeting of stockholders called for the first time after the end of the
2001 business year, but the number of the outside directors may be less than a quarter of the total
number of directors on the board of directors.

(2) Any KOSDAQ registered corporation that is required to select and appoint outside directors
under the amended provisions of the proviso of Article 191-16 (1) shall select and appoint such
outside directors under the same amended provisions at a regular general meeting of stockholders
called for the first time after the enforcement of this Act. In this case, notwithstanding the
amended provisions, the relevant KOSDAQ registered corporation shall make the number of outside
directors not less than three prior to a regular general meeting of stockholders called for the
first time after the end of the 2001 business year, but may make the number of the outside
directors less than a half of the total number of directors on the board of directors. Any person
who is selected and appointed as an outside director at a regular general meeting of stockholders
called for the first time after the enforcement of this Act shall be deemed recommended by the
outside director candidate recommendation committee.

Article 18 (Transitional Measure concerning Establishment of Inspection Committee of
Association-Registration Corporation)

 

 

Any KOSDAQ registered corporation that is required to set up an inspection committee under
the amended provisions of Article 191-17 shall establish such inspection committee under the same
amended provisions by the date on which a regular general meeting of stockholders is called for the
first time after the enforcement of this Act.

Article 19 (Transitional Measure concerning Standing Auditor Following Establishment of Inspection
Committee of KOSDAQ registered corporation)

In the event the term of office of any standing auditor (referring to a standing auditor designated
by the board of directors of the relevant company in the event of not less than two standing
auditors) who serves in a KOSDAQ registered corporation that is required to set up an inspection
committee under the amended provisions of Article 191-17 at the time of entry into force of this
Act does not expire by the date on which a regular general meeting of stockholders is called to
discuss the question of establishing an inspection committee under the provisions of Article 16 of
the Addenda and he is not dismissed at such regular general meeting of stockholders, such standing
auditor shall be deemed a member, who is not an outside director, of the inspection committee of
the relevant corporation until his term of office expires. In this case, the standing auditor shall
be deemed a director selected and appointed at a general meeting of stockholders under Article 382
(1) of the Commercial Act until the time that his term of office expires.

Article 20 (Transitional Measure concerning Penal Provisions)

The application of the penal provisions to any act committed prior to the enforcement of this Act
shall be governed by the previous provisions.

ADDENDA <Act No. 6623, Jan. 26, 2002>

(1) (Enforcement Date) This Act shall enter into force on February 1, 2002.

(2) (Applicable Cases concerning Appraisal Rights of Stockholders) The amended provisions of
Article 191 shall apply with respect to the public notice or notification which is made for the
convocation of the general meeting of stockholders or which is made under Article 360-9 (2) or

 

 

527-2 (2) of the Commercial Act on or after the date this Act takes effect.

(3) (Transitional Measures concerning Reserve for Securities Transaction) The reserve for
securities transaction set aside by a securities company in accordance with the previous provisions
of Article 40 at the time of the entry into force of this Act shall be distributed proportionally
over a fixed period as set and publicly announced by the Financial Supervisory Commission.

(4) (Transitional Measures concerning Fine for Negligence) The application of a fine for negligence
to any act committed prior to the enforcement of this Act shall be governed by the previous
provisions.

ADDENDA <Act No. 6695, Apr. 27, 2002>

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(2) (Transitional Measures concerning Application of Penal Provisions) The imposition of a penalty
on any act committed prior to the enforcement of this Act shall be governed by the previous
provisions.

ADDENDA <Act No. 6987, Oct. 4, 2003>

Article 1 (Enforcement Date)

This Act shall enter into force three months after the date of its promulgation.

Articles 2 through 20

Omitted.

ADDENDA <Act No. 7025, Dec. 31, 2003>

 

 

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 2004: Provided, That the amended provisions of Article
191-16 (1) shall enter into force on July 1, 2004.

Article 2 (Application Example concerning Confirmation of Registration Statement, etc.)

The amended provisions of Article 8 (4) (including a case where the amended provisions are applied
mutatis mutandis under Article 186-5) and Article 14 (1) (including a case where the amended
provisions are applied mutatis mutandis under Articles 25-3 (1), 186 (4), 186-5, 189-2 (5) and
190-2 (3)) shall apply, starting with any report on securities, any prospectus (including any
preliminary prospectus and any simplified prospectus), any business report, any semiannual report
and any quarterly report, etc, that are submitted first after the enforcement of this Act.

Article 3 (Application Example concerning Financial Specialists, etc. in Inspection Committee)

The amended provisions of Article 54-6 (2) 2 (including a case where the amended provisions are
applied mutatis mutandis under Article 191-17 (2)) shall apply, starting with a case where any new
member of the inspection committee is newly elected and appointed on the grounds that any member
faces the expiration of his term of office, resigns or is dismissed.

Article 4 (Application Example concerning Matters to be Entered in Business Report and Quarterly
Dividends)

The amended provisions of Articles 186-2 (2) and 192-3 shall apply, starting with the business year
that commences first after the enforcement of this Act.

Article 5 (Transitional Measure concerning Selections and Appointments of Outside Directors of
Stock-Listed Corporation and KOSDAQ registered corporation)

 

 

Any stock-listed corporation and any KOSDAQ registered corporation that are required to select
and appoint outside directors in accordance with the amended provisions of Article 191-16 (1) shall
select and appoint such outside directors in conformity with the amended provisions by the date on
which the regular general meeting of stockholders is convened first after July 1, 2004.

Article 6 (Transitional Measure concerning Prohibition on Lending of Money, etc. to Interested
Persons)

The amended provisions of Article 191-19 (1) shall not apply to the portion of transactions
executed prior to the enforcement of this Act: Provided, That the same shall not apply to a case
where the deadline of such transactions is extended or the terms of such transactions are changed
after the enforcement of this Act.

Article 7 (Transitional Measure concerning Penal Provisions and Fine for Negligence)

The application of the penal provisions and the fine for negligence to any act committed prior to
the enforcement of this Act shall be governed by the previous provisions.

ADDENDA <Act No. 7114, Jan. 29, 2004>

Article 1 (Enforcement Date)

This Act shall enter into force on the date on which the Korea Exchange is incorporated in
accordance with the Korea Exchange Act.

Article 2 (Transitional Measures concerning Settlement Safety Fund, etc.)

(1) The settlement safety fund accumulated or other funds or deposits accumulated for the similar
purposes in accordance with the existing operating rules of the Association brokerage market at the
time that this Act enters into force shall be deemed as having been accumulated in accordance with
Article 95 hereof.

 

 

(2) The Korea Exchange may return to the existing members of the Korea Stock Exchange or
the Association part of the compensation fund and any funds in Article 2(1) above in light of the
amount of their respective contributions.

Article 3 (Transitional Measures concerning Title of Association Brokerage Market, etc.

(1) Notwithstanding the existing provisions, any reference to the Korea Stock Exchange, the
Association brokerage market, the Association registered corporation, or the Association registered
securities in other acts or statutes at the time that this Act enters into force shall be deemed as
reference to the Korea Exchange, KOSDAQ, KOSDAQ registered corporation or KOSDAQ registered
securities, respectively.

(2) Any reference in other Acts or statutes to the Association in connection with the Association
brokerage market or Association registered corporation at the time that this Act enters into force
shall be deemed as reference to the Korea Exchange.

Article 4 (Transitional Measures on Penal Provisions)

The application of penal provisions to acts committed prior to the entry into force of this Act
shall be governed by the previous provisions.

ADDENDA <Act No. 7339, Jan. 17, 2005>

Article 1 (Enforcement Date)

This Act shall enter into force on the 70th day of the promulgation thereof.

Article 2 (Applicable Cases concerning Tender Offer of Securities)

The revised provisions of Articles 21(2), 23-2(3) and 24-2(1) shall begin to apply from the first
report of tender offer after this Act enters into force.

 

 

Article 3 (Applicable Cases concerning Report on Mass Holding, etc. of Stocks)

The revised provisions of Articles 200-2(1), (4) and (5) and 200-3(2) shall begin to apply from the
first report of mass holding after this Act enters into force.

Article 4 (Transitional Measures concerning Report on Mass Holding, etc. of Stocks)

(1) A person who has made a report pursuant to the existing provisions of Article 200-2(1) at the
time this Act enters into force, shall report a 1/100 or greater change, if any, in the total
number of stocks, etc. of the corporation in accordance with the revised provisions of Article
200-2(1).

(2) A person who has made a report pursuant to the existing provisions of Article 200-2(1), shall
be subject to the revised provisions of Article 200-2(1) if the holding purports to affect the
management of the issuer, provided that the base date for the calculation of the reporting period
shall be the date of enforcement of this Act or the person came to have such purpose.

ADDENDA (Act on Rehabilitation and Bankruptcy of Obligor) <Act No. 7428, March 31, 2005>

Article 1 (Date of Enforcement)

This Act shall enter into force on the first anniversary of the promulgation.

Articles 2 through 4

Omitted

Article 5 (Amendments to other Acts)

(1) through (109) omitted

(110) The relevant part of the Securities and Exchange Act shall be amended as follows:

The term “bankrupt” in Articles 33(2)-2 and 191-12(3)-2 shall be a “person declared bankrupt.”

(111) through (145) omitted

 

 

Article 6 omitted

ADDENDA <Act No. 7616, Jan. 29, 2005>

This Act shall enter into force 6 months after the promulgation.

ADDENDA <Act No. 7762, Dec. 29, 2005>

(1) (Date of Enforcement)

This Act shall enter into force 3 months after the promulgation

(2) (Applicable Cases concerning Acquisition of Treasury Stocks upon Termination or Expiration of
Trust Agreement)

The revised provisions of Article 189-2(1)-3 shall begin to apply from the first trust agreement to
be executed after this Act enters into force.

(3) (Applicable Cases concerning Shareholders’ After-The-Fact Approval of Stock Options Granted
with Board of Directors’ Resolution)

The revised provisions of Article 189-4(4) shall begin to apply from the first stock option to be
granted after this Act enters into force.

(4) (Transitional Measures concerning Changes in Qualifications for Officers)

Any officer who is an officer of a securities company at the time that this Act enters into force
and falls under the revised provisions of Article 33(2)-6 due to a cause occurring before this Act
enters into force, shall be subject to the existing provisions.<PAGE>

                                                                     Exhibit 4.4

                                                           [English translation]

                                MERGER AGREEMENT

                                 BY AND BETWEEN

                SHINHAN BANK CO., LTD. AND CHOHUNG BANK CO., LTD.

                                DECEMBER 30, 2005

                         AS AMENDED ON FEBRUARY 15, 2006

<PAGE>

                                MERGER AGREEMENT

This merger agreement (hereinafter referred to as the "Agreement") has been
entered into on December 30, 2005 by and between Shinhan Bank Co., Ltd.
(hereinafter referred to as "Shinhan Bank") whose principal place of business is
located in TaePyeng-Ro-2-Ga 120, Jung-Gu, Seoul, and Chohung Bank Co., Ltd.
(hereinafter referred to as "Chohung Bank") whose principal place of business is
located in NamDaeMoonRo-1-Ga 14, Jung-Gu, Seoul, each of which is a corporation
established under the laws of the Republic of Korea. An amendment to the
Agreement has been entered into between the same parties on February 15, 2006,
which is reflected below.

                                    RECITALS

WHEREAS, each of Shinhan Bank and Chohung Bank is a corporation established
under the laws of the Republic of Korea (hereinafter referred to as "Korea") and
engages in the banking business as provided under the Banking Act.

WHEREAS, as of the date hereof, the aggregate number of authorized shares of
Shinhan Bank is 800,000,000 shares of par value 5,000 Won, of which 214,205,935
shares (which is the number of shares after stock repurchase) of common stock
are issued and outstanding, and the aggregate number of authorized shares of
Chohung Bank is 2,000,000,000 shares of par value 5,000 Won, of which
719,118,429 shares (which is the number of shares before the Split Merger of
Shinhan Card and the Credit Card Business of Chohung Bank, with the number of
shares after the Split Merger being 677,109,966 shares) of common stock are
issued and outstanding.

WHEREAS, Chohung Bank and Shinhan Card Co., Ltd. (hereinafter referred to as
"Shinhan Card") will enter into a split merger agreement on the same date hereof
(hereinafter referred to as "Split Merger Agreement") pursuant to which the
Credit Card Business (as defined in the Split Merger Agreement) of Chohung Bank
shall be split off and merged into Shinhan Card.

WHEREAS, Shinhan Bank and Chohung Bank have agreed to be merged by way of merger
pursuant to this Agreement, excluding the Credit Card Business which is the
subject of the Split Merger Agreement.

NOW THEREFORE, Shinhan Bank and Chohung Bank hereby agree as follows:

ARTICLE 1 DEFINITIONS

Except as otherwise provided by this Agreement, the following terms shall have
the following meanings:

"Representatives" shall mean directors, employees, agencies, accountants,
consultants, or attorneys of the parties hereto who are authorized by the
parties hereto to engage in the matters pursuant to this Agreement.

"Merger" shall mean the merger between Shinhan Bank and Chohung Bank (excluding
the Credit Card Business of Chohung Bank which is being split off and merged
into

                                       1
<PAGE>

Shinhan Card) by way of merger pursuant to this Agreement and the Act on
Structural Improvement of Financial Industry and the Commercial Code.

"Split Merger" shall mean the split-off of the Credit Card Business of Chohung
Bank and the merger of such business into Shinhan Card.

"Split Merger Agreement" shall have the meaning as defined in the Recitals

"Disappearing Company" shall mean Shinhan Bank as the company that winds up
following the Merger.

"Surviving Company" shall mean Chohung Bank as the company that continues to
exist following the Merger.

"Credit Card Business" shall have the meaning as defined in the Recitals.

"Required Approvals of Supervisory Authorities" shall mean the approvals of
supervisory authorities that are required for the execution and performance of
this Agreement, including, but not limited to, the approval of the Merger by the
Financial Supervisory Commission.

"Merger Effective Date" shall have the meaning as defined in Article 2.2.

ARTICLE2 PRINCIPLES OF MERGER

2.1      Form of Merger

         2.1.1    Following the Merger, Chohung Bank (hereinafter referred to as
                  "Chohung Bank" or "Surviving Company") shall continue to
                  exist, and Shinhan Bank (hereinafter referred to as "Shinhan
                  Bank" or "Disappearing Company") shall wind up.

         2.1.2    The Surviving Company shall engage in the businesses permitted
                  by its Articles of Incorporation and applicable laws.

         2.1.3    The name of the Surviving Company shall be "Shinhan Bank Co.,
                  Ltd."

2.2      Merger Effective Date

         Provided that all the conditions to the Merger as provided under
         Article 8 hereof are satisfied, the Merger shall be effective as of
         0:00 A.M., April 1, 2006 ("Merger Effective Date") unless otherwise
         agreed by Shinhan Bank and Chohung Bank as necessary due to additional
         requirements related to the Required Approvals of Supervisory
         Authorities.

2.3      Merger Ratio

         2.3.1    The merger ratio between Chohung Bank and Shinhan Bank for the
                  Merger shall be 1 to 3.867799182.

                                       2
<PAGE>

         2.3.2    The Surviving Company shall assign its newly issued shares to
                  the shareholders listed in the shareholder registry of the
                  Disappearing Company as of the Merger Effective Date
                  (including shareholders who acquire the Disappearing Company's
                  shares after the date hereof pursuant to the proviso in
                  Article 7.2.6) in the ratio of 3.867799182 shares of the
                  Surviving Company's common stock, par value 5,000 Won, per one
                  share of the Disappearing Company's common stock, par value
                  5,000 Won.

         2.3.3    Notwithstanding Article 2.3.2, no fractional shares shall be
                  issued as a result of assigning the newly issued shares of the
                  Surviving Company according to the ratio of the Merger,
                  provided that the shareholders of the Disappearing Company so
                  consent; provided further, however, that applicable laws shall
                  apply where such consent is not obtained from the shareholders
                  of the Disappearing Company.

2.4      Capital Increase

         2.4.1    As part of the Merger, Chohung Bank shall issue 828,505,540
                  shares of Chohung Bank's common stock for 214,205,935 shares
                  of Shinhan Bank's common stock; provided, however, that if
                  Shinhan Bank issues shares after the date of this Agreement
                  and before the Merger Effective Date pursuant to the proviso
                  in Article 7.2.6, the number of shares that Chohung Bank shall
                  issue shall increase by the number of such issued shares of
                  Shinhan Bank multiplied by the ratio provided in Article
                  2.3.2.

         2.4.2    Following the increase in the paid-in capital of Chohung Bank
                  by 4,142,527,700,000 Won pursuant to Article 2.4.1, the
                  paid-in capital immediately following the Merger shall be
                  7,528,077,530,000 Won, and the aggregate number of issued
                  shares of Chohung Bank immediately following the Merger shall
                  be 1,505,615,506 shares of common stock; provided, however,
                  that if Shinhan Bank issues shares after the date of this
                  Agreement and before the Merger Effective Date pursuant to the
                  proviso in Article 7.2.6, the paid-in capital of Chohung Bank
                  immediately following the Merger shall increase by the number
                  of such issued shares multiplied by 5,000 Won.

         2.4.3    The reserve of the Surviving Company shall be the amount
                  calculated according to the generally accepted accounting
                  principles in Korea.

         2.4.4    The number of shares to be issued as provided in Article 2.4.1
                  and the amount of paid-in capital as provided in Article 2.4.2
                  may be adjusted if the Surviving Company and the Disappearing
                  Company purchase shares from the existing shareholders that
                  object to the Merger and exercise their appraisal rights;
                  provided, however, that such adjustment shall not affect the
                  merger ratio for the Merger provided in Article 2.3.1.

                                       3
<PAGE>

2.5      Board of Directors and General Meeting of Shareholders for Approval of
         Merger

         2.5.1    Each board of directors of the Surviving Company and the
                  Disappearing Company approved this Agreement on December 30,
                  2005.

         2.5.2    Each of the Surviving Company and the Disappearing Company
                  shall approve the Merger through an extraordinary general
                  meeting of shareholders to be held on February 15, 2006;
                  provided, however, that if the Required Approvals of
                  Supervisory Authorities are obtained after February 15, 2006,
                  the extraordinary general meeting of shareholders shall be
                  held as soon as possible to the extent permitted under
                  relevant laws after such Required Approvals of Supervisory
                  Authorities are obtained.

2.6      Articles of Incorporation of the Surviving Company

         As part of the Merger, the Articles of Incorporation of the Surviving
         Company shall be amended as set forth in Attachment 1.

ARTICLE 3 ACTIONS ON THE MERGER EFFECTIVE DATE

On the Merger Effective Date, the Surviving Company and the Disappearing Company
shall take the following actions:

3.1      Transfer of All Assets, Liabilities, and Relevant Documents

         The Disappearing Company shall transfer to the Surviving Company all of
         its assets, liabilities, and relevant documents, and the Remaining
         Company shall acquire them.

3.2      Transfer of Business Offices

         The Disappearing Company shall transfer to the Surviving Company all of
         its business offices and their businesses, and the Surviving Company
         shall acquire them. The Disappearing Company shall provide in sound
         form all the information required for the Surviving Company to succeed
         to its business operations, and shall cooperate as necessary.

ARTICLE 4 CONSUMMATION AND EFFECTIVENESS OF MERGER

4.1      Report of Matters Related to the Merger

         Promptly after the Merger Effective Date, the Surviving Company shall
         convene a general meeting of shareholders as provided in Article 526 of
         the Commercial Code and report the matters related to the Merger, or in
         lieu thereof, convene a meeting of the board of directors and publicly
         announce such matters related to the Merger.

                                       4
<PAGE>

4.2      Effectiveness of Merger

         The Merger shall take effect upon the filing of a merger registration
         (the "Merger Registration") by the Surviving Company in the district
         where its head office is located.

4.3      Issuance of Shares after the Merger

         After the Merger takes effect, in circumstances where Chohung Bank is
         required to issue new shares in lieu of Shinhan Bank's shares,
         including (A) where a holder of convertible bonds issued by Shinhan
         Bank before the date hereof requests conversion, (B) where a holder of
         bonds with warrants issued by Shinhan Bank before the date hereof
         exercises such warrants, or (C) where an employee or director of
         Shinhan Bank who has been granted stock options before the date hereof
         exercises such stock options, Chohung Bank shall adjust the number of
         shares that it shall issue by applying the merger ratio for the Merger
         provided in Article 2.3.1 to the number of shares requested to be
         converted pursuant to the terms of such convertible bonds, the number
         of shares for which warrants were exercised pursuant to the terms of
         such bonds with warrants, and the number of shares for which stock
         options were exercised pursuant to the terms of such stock options. The
         same shall apply where cash is paid out in lieu of issuance of new
         shares pursuant to the exercise of stock options.

ARTICLE 5 GOVERNANCE STRUCTURE OF THE SURVIVING COMPANY

5.1      The directors and audit committee members of the Surviving Company, and
         the initial president and standing audit committee members of the
         Surviving Company following the Merger, shall be elected as set forth
         Attachment 4.

5.2      The directors and audit committee members of the Disappearing Company
         shall be terminated as of the Merger.

5.3      The terms of office of the directors and audit committee members to be
         elected pursuant to Article 5.1 shall be determined pursuant to the
         Surviving Company's Articles of Incorporation (as amended as part of
         the Merger and to apply mutatis mutandis in the remainder of this
         Article) as set forth in Attachment 4. Such terms of office shall
         commence on the date of the Merger Registration, provided, however,
         that the Surviving Company may elect prior to the date of the Merger
         Registration all or part of the persons set forth in Attachment 4 as
         directors or audit committee members of the Surviving Company as
         necessary to facilitate matters arising in relation to the Merger, in
         which case the respective terms of office shall commence on the date
         determined by the general meeting of shareholders of the Surviving
         Company and expire on the date prescribed in Attachment 4.

5.4      The term of office of the president to be elected pursuant to Article
         5.1 shall

                                       5
<PAGE>

         be determined pursuant to the Surviving Company's Articles of
         Incorporation as set forth in Attachment 4. Such term of office shall
         commence on the date of the Merger Registration, provided, however,
         that the Surviving Company may elect prior to the date of the Merger
         Registration the person set forth in Attachment 4 as the president of
         the Surviving Company as necessary to facilitate matters arising in
         relation to the Merger, in which case the respective term of office
         shall commence on the date set forth in the resolution electing such
         president and expire on the date prescribed in Attachment 4.

5.5      The terms of office of standing audit committee members to be elected
         pursuant to Article 5.1 shall be determined pursuant to the Surviving
         Company's Articles of Incorporation as set forth in Attachment 4. Such
         terms of office shall commence on the date of the Merger Registration,
         provided, however, that the Surviving Company may elect prior to the
         date of the Merger Registration the persons set forth in Attachment 4
         as the standing audit committee members of the Surviving Company as
         necessary to facilitate matters arising in relation to the Merger, in
         which case the respective terms of office shall commence on the date
         set forth in the resolution electing such standing audit committee
         members and expire on the date prescribed in Attachment 4.

ARTICLE 6 REPRESENTATIONS AND WARRANTIES

6.1      Representations and Warranties of Chohung Bank

         In relation to this Merger, Chohung Bank hereby represents and warrants
         to Shinhan Bank the following, which shall be true and correct at and
         as of the date of this Agreement and at and as of the Merger Effective
         Date (except to the extent that a representation or warranty expressly
         speaks as of a specified date, which representation or warranty shall
         be true and correct at and as of such specified date):

         6.1.1    Establishment. Chohung Bank is a company duly organized and
                  validly existing under the laws of the Republic of Korea, with
                  all necessary authority and qualifications to own, lease and
                  operate its assets and businesses, and to conduct its
                  businesses as conducted as of the Merger Effective Date.

         6.1.2    Approval of Agreement; Enforceability. Chohung Bank has the
                  authority and qualifications to execute, enter into, and
                  deliver this Agreement, and to perform the obligations
                  hereunder. As of the date hereof, the execution and
                  performance of this Agreement has been duly authorized by all
                  necessary organizational action on the part of Chohung Bank,
                  other than the approval of the Merger at the general meeting
                  of shareholders provided in Article 2.5.2. This Agreement has
                  been duly executed by Chohung Bank, and subject to the
                  approval of the Merger at the general meeting of shareholders
                  provided in Article 2.5.2. constitutes a valid and binding
                  agreement of Chohung Bank, enforceable in accordance with its
                  terms.

                                       6
<PAGE>

         6.1.3    Capitalization. The aggregate number of shares that Chohung
                  Bank is authorized to issue is 2,000,000,000 shares. Of such
                  shares, 719,118,429 shares of common stock are issued and
                  outstanding, all of which have been duly issued and fully
                  paid, and 677,109,966 shares of common stock shall be issued
                  and outstanding after the Split Merger. Chohung Bank
                  represents and warrants that other than 719,118,429 shares of
                  common stock (or 677,109,966 shares of common stock after the
                  Split Merger) referred to above and except as described in
                  Attachment 2 hereto, there are no outstanding (i) shares,
                  certificates of stock deposit, convertible bonds, bonds with
                  warrants, or exchangeable bonds, (ii) stock options granted by
                  Chohung Bank to its employees or directors, (iii) options or
                  agreements pursuant to which Chohung Bank may be required to
                  issue, convert into, or exchange for shares, or (iv) treasury
                  shares acquired by Chohung Bank.

         6.1.4    Consents; Absence of Conflict of Interests. (1) The execution
                  and performance of this Agreement by Chohung Bank require no
                  approval of any supervisory authority other than the Required
                  Approvals of Supervisory Authorities, and (2) the execution
                  and performance of this Agreement do not and will not (A)
                  contravene or conflict with Chohung Bank's Articles of
                  Incorporation or its other organizational documents or (B)
                  result in a violation of laws or approvals of supervisory
                  authorities to which Chohung Bank is subject.

6.2      Representations and Warranties of Shinhan Bank

         In relation to this Merger, Shinhan Bank hereby represents and warrants
         to Chohung Bank the following, which shall be true and correct at and
         as of the date of this Agreement and at and as of the Merger Effective
         Date (except to the extent that a representation or warranty expressly
         speaks as of a specified date, which representation or warranty shall
         be true and correct at and as of such specified date):

         6.2.1    Establishment. Shinhan Bank is a company duly organized and
                  validly existing under the laws of the Republic of Korea, with
                  all necessary authority and qualifications to own, lease and
                  operate its assets and businesses, and to conduct its
                  businesses as conducted as of the Merger Effective Date.

         6.2.2    Approval of Agreement; Enforceability. Shinhan Bank has the
                  authority and qualifications to execute, enter into, and
                  deliver this Agreement, and to perform the obligations
                  hereunder. As of the date hereof, the execution and
                  performance of this Agreement has been duly authorized by all
                  necessary organizational action on the part of Shinhan Bank,
                  other than the approval of

                                       7
<PAGE>

                  the Merger at the general meeting of shareholders provided in
                  Article 2.5.2. This Agreement has been duly executed by
                  Shinhan Bank, and subject to the approval of the Merger at the
                  general meeting of shareholders provided in Article 2.5.2.
                  constitutes a valid and binding agreement of Shinhan Bank,
                  enforceable in accordance with its terms.

         6.2.3    Capitalization. The aggregate number of shares that Shinhan
                  Bank is authorized to issue is 800,000,000 shares. Of such
                  shares, 214,205,935 shares of common stock are issued and
                  outstanding, all of which have been duly issued and fully
                  paid. (Previously, 244,806,782 shares were issued and
                  outstanding, of which 30,600,847 shares have been repurchased
                  and retired). Shinhan Bank represents and warrants that other
                  than 244,806,782 shares referred to above and except as
                  described in Attachment 3 hereto, there are no outstanding (i)
                  shares, certificates of stock deposit, convertible bonds,
                  bonds with warrants, or exchangeable bonds, (ii) stock options
                  granted by Shinhan Bank to employees or directors, (iii)
                  options or agreements pursuant to which Shinhan Bank may be
                  required to issue, convert into, or exchange for shares, or
                  (iv) treasury shares acquired by Shinhan Bank.

         6.2.4    Consents; Absence of Conflict of Interests. (1) The execution
                  and performance of this Agreement by Shinhan Bank require no
                  approval of any supervisory authority other than the Required
                  Approvals of Supervisory Authorities, and (2) the execution
                  and performance of this Agreement do not and will not (A)
                  contravene or conflict with Shinhan Bank's Articles of
                  Incorporation or its other organizational documents or (B)
                  result in a violation of laws or approvals of supervisory
                  authorities to which Shinhan Bank is subject.

ARTICLE 7 COVENANTS

7.1      Covenants of Chohung Bank

         Chohung Bank covenants to Shinhan Bank that it shall perform the
         following from the date hereof until the Merger Effective Date.

         7.1.1    Taking Necessary Measures. Chohung Bank shall use its best
                  efforts to obtain the Required Approvals of Supervisory
                  Authorities, and to consummate the Merger as provided herein.

         7.1.2    Access to Information. Chohung Bank shall provide reasonable
                  access to data or information requested by Shinhan Bank or its
                  Representatives, provided that such access does not interfere
                  with Chohung Bank's ordinary business affairs. Chohung Bank
                  shall cause its Representatives to consult with Shinhan Bank
                  with regard to providing data and information as described
                  above.

         7.1.3    Notice. If conditions or circumstances arise (i) that may have
                  a material adverse effect on the Merger, (ii) that would cause
                  the representations and warranties provided in this Agreement
                  to be untrue or incorrect in material respects, or (iii) that
                  prevents the satisfaction of

                                       8
<PAGE>

                  the conditions to the obligations of Shinhan Bank provided in
                  Article 8.2, Chohung Bank shall promptly notify Shinhan Bank
                  in writing of such fact together with a description thereof.

         7.1.4    Third Party Consents. Chohung Bank shall use its best effort
                  to give third party notices and obtain third party consents
                  required in connection with the transactions contemplated by
                  this Agreement.

         7.1.5    Due Diligence. Shinhan Bank may conduct legal and accounting
                  due diligence on the business, properties and financial status
                  of Chohung Bank from the date hereof until the Merger
                  Effective Date, and Chohung Bank shall cooperate to the
                  maximum extent in response to requests for such due diligence
                  from Shinhan Bank, including by providing necessary data.

7.2      Covenants of Shinhan Bank

         Shinhan Bank covenants to Chohung Bank that it shall perform the
         following from the date hereof until the Merger Effective Date.

         7.2.1    Taking Necessary Measures. Shinhan Bank shall use its best
                  efforts to obtain the Required Approvals of Supervisory
                  Authorities, and to consummate the Merger as provided herein.

         7.2.2    Access to Information. Shinhan Bank shall provide reasonable
                  access to data or information requested by Chohung Bank or its
                  Representatives, provided that such access does not interfere
                  with Shinhan Bank's ordinary business affairs. Shinhan Bank
                  shall cause its Representatives to consult with Chohung Bank
                  with regard to providing data and information as described
                  above.

         7.2.3    Notice. If conditions or circumstances arise (i) that may have
                  a material adverse effect on the Merger, (ii) that would cause
                  the representations and warranties provided in this Agreement
                  to be untrue or incorrect in material respects, or (iii) that
                  prevents the satisfaction of the conditions to the obligations
                  of Chohung Bank provided in Article 8.1, Shinhan Bank shall
                  promptly notify Chohung Bank in writing of such fact together
                  with a description thereof.

         7.2.4    Third Party Consents. Shinhan Bank shall use its best effort
                  to give third party notices and obtain third party consents
                  required in connection with the transactions contemplated by
                  this Agreement.

         7.2.5    Due Diligence. Chohung Bank may conduct legal and accounting
                  due diligence on the business, properties and financial status
                  of Shinhan Bank from the date hereof until the Merger
                  Effective Date, and Shinhan Bank shall cooperate to the
                  maximum extent in response to requests for such due diligence
                  from Chohung Bank, including by providing necessary data.

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<PAGE>

         7.2.6    Restrictions of Issuance of New Shares. From the date hereof,
                  Shinhan Bank shall not issue new shares, convertible bonds, or
                  bonds with warrants, and shall not grant stock options, unless
                  (A) Shinhan Bank is required to issue new shares because a
                  holder of convertible bonds issued by Shinhan Bank before the
                  date hereof requests conversion, (B) Shinhan Bank is required
                  to issue new shares as a holder of bonds with warrants issued
                  by Shinhan Bank before the date hereof exercises such
                  warrants, (C) Shinhan Bank is required to issue new shares
                  because an employee or director of Shinhan Bank who has been
                  granted stock options before the date hereof exercises such
                  stock options, or (D) Shinhan Bank is required to issue new
                  shares under applicable law or otherwise.

ARTICLE 8 CONDITIONS TO THE MERGER

8.1      Conditions to the Obligations of Chohung Bank

         The obligations of Chohung Bank to consummate the Merger pursuant to
         this Agreement are subject to the following conditions being satisfied
         on or prior to the Merger Effective Date, provided, however, that
         Chohung Bank may in writing waive or exempt such conditions in whole or
         in part.

         8.1.1    Approval. The approval of the board of directors and the
                  general meeting of shareholders of both Chohung Bank and
                  Shinhan Bank and the Required Approvals of Supervisory
                  Authorities shall have been obtained, and all other
                  requirements under applicable laws of Korea shall have been
                  satisfied, as required for the execution of this Agreement and
                  the performance of the transactions contemplated hereby.

         8.1.2    Representations and Warranties. The representations and
                  warranties of Shinhan Bank under this Agreement shall be true
                  and correct in all material respects at and as of the date of
                  this Agreement and at and as of the Merger Effective Date.

         8.1.3    Covenants. Shinhan Bank shall have performed in all material
                  respects the covenants and all other obligations required to
                  be performed by it under this Agreement.

         8.1.4    Material Adverse Changes. A material adverse change shall not
                  have occurred to the properties or businesses of Shinhan Bank
                  between the date of this Agreement and the Merger Effective
                  Date.

8.2      Conditions to the Obligations of Shinhan Bank

         The obligations of Shinhan Bank to consummate the Merger pursuant to
         this Agreement are subject to the following conditions being satisfied
         on or prior to the Merger Effective Date, provided, however, that
         Shinhan Bank may in writing waive or exempt such conditions in whole or
         in part.

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<PAGE>

         8.2.1    Approval. The approval of the board of directors and the
                  general meeting of shareholders of both Chohung Bank and
                  Shinhan Bank and the Required Approvals of Supervisory
                  Authorities shall have been obtained, and all other
                  requirements under applicable laws of Korea shall have been
                  satisfied, as required for the execution of this Agreement and
                  the performance of the transactions contemplated hereby.

         8.2.2    Representations and Warranties. The representations and
                  warranties of Chohung Bank hereunder shall be true and correct
                  in all material respects at and as of the date of this
                  Agreement and at and as of the Merger Effective Date.

         8.2.3    Covenants. Chohung Bank shall have performed in all material
                  respects the covenants and all other obligations required to
                  be performed by it.

         8.2.4    Material Adverse Changes. A material adverse change shall not
                  have occurred to the properties or businesses of Chohung Bank
                  between the date hereof and the Merger Effective Date.

ARTICLE 9 TERMINATION OF THE AGREEMENT

9.1      Cause of Termination

         This Agreement may be terminated prior to the consummation of the
         Merger for the following causes upon written notice from either party
         to the other party, provided that only Chohung Bank may give such
         notice for the cause provided in Article 9.1.4 and only Shinhan Bank
         may give such notice for the cause provided in Article 9.1.5:

         9.1.1    if Shinhan Bank and Chohung Bank mutually agree in writing to
                  terminate this Agreement;

         9.1.2    if it becomes evident that the consummation of the Merger is
                  impossible or illegal due to the failure to obtain the
                  Required Approvals of Supervisory Authorities or changes in
                  applicable laws, and Shinhan Bank and Chohung Bank do not
                  agree otherwise within 30 days after such circumstances arise;

         9.1.3    if it becomes evident that the consummation of the Split
                  Merger is impossible due to causes such as the Split Merger
                  Agreement no longer having effect or the failure to obtain the
                  required approvals of supervisory authorities for the Split
                  Merger, and Shinhan Bank and Chohung Bank do not agree
                  otherwise within 30 days after such circumstances arise;

         9.1.4    if there has been a breach by Shinhan Bank of any
                  representation, warranty, covenant, or other agreement
                  contained herein resulting in a

                                       11
<PAGE>

                  material adverse effect, and such breach has not been cured
                  within 30 days after receipt of Chohung Bank's written request
                  for cure; or

         9.1.5    if there has been a breach by Chohung Bank of any
                  representation, warranty, covenant, or other agreement
                  contained herein resulting in a material adverse effect, and
                  such breach has not been cured within 30 days after receipt of
                  Shinhan Bank's written request for cure.

9.2      Effect of Termination

         9.2.1    If this Agreement is terminated, each party shall, at the
                  request of the other party, return or destroy the data or
                  information that the other party has provided within 14 days
                  after the date of termination.

         9.2.2    Notwithstanding any termination of this Agreement, any claim
                  for damages or other rights or remedies that one party has
                  against the other party arising from a breach or violation of
                  this Agreement shall remain in full force and effect and
                  survive such termination.

         9.2.3    Notwithstanding any termination of this Agreement, Articles
                  9.2, 10.1, 10.2, 10.3, 10.9, 10.10, and 10.11 of this
                  Agreement shall remain in full force and effect and survive
                  such termination.

ARTICLE 10 GENERAL PROVISIONS

10.1     Confidentiality

         Neither party may make public, disclose, or leak to a third party the
         contents of this Agreement or the data or information provided by the
         other party in the course of negotiations for, execution of, and
         performance of this Agreement without the prior written consent of the
         other party, provided, however, that such data or information may be
         disclosed if required by applicable law or court order.

10.2     Expenses

         Expenses incurred in connection with the execution or performance of
         this Agreement shall be paid by the party incurring such expenses.

10.3     Notice

         All notices, requests, demands, and other communications in connection
         with this Agreement shall be given by personal delivery, registered
         mail or facsimile transmission to the following addresses:

         (a)      Notice to Shinhan Bank

                  Address: TaePyeng-Ro-2-Ga 120, Jung-Gu, Seoul
                  Telephone: 02) 757 - 2766
                  Facsimile: 02) 776 - 8194

                                       12
<PAGE>
                  E-mail: yongbcho@shinhan.com
                  Attention: Yong-Byung Jo, Planning Manager

         (b)      Notice to Chohung Bank

                  Address: NamDaeMoonRo-1-Ga 14, Jung-Gu, Seoul
                  Telephone: 02) 2010 - 2296
                  Facsimile: 02) 2010 - 2062
                  E-mail: leokim@chb.co.kr
                  Attention: Yong-Kil Kim, Planning Manager

         A party may change its address provided above at any time with prior
         written notice to the other party.

10.4     Modification; Amendment

         This Agreement may be modified or amended by a written agreement
         between Shinhan Bank and Chohung Bank.

10.5     Waiver

         No failure on the part of a party to exercise, and no delay in
         exercising, any right hereunder shall operate as a waiver thereof, nor
         shall any single or partial exercise of such right by such party
         preclude further exercise thereof.

10.6     Entire Agreement

         This Agreement constitutes the entire agreement between the parties
         with respect to the subject matter of this Agreement as of the date
         hereof, and there are no agreements, conditions, or obligations with
         respect to the subject matter of this Agreement, whether oral or
         written, or express or implied, except as set forth in this Agreement.

10.7     Severability

         The illegality, invalidity or unenforceability in any respect of any
         provision of this Agreement, including sentences, phrases, or portions
         thereof, shall not affect the legality, validity or enforceability of
         any other provision of this Agreement, provided that such illegality,
         invalidity or unenforceability does not cause interference with the
         attainment of the objective of this Agreement.

10.8     Assignment

         Neither party may assign or delegate its rights or obligations under
         this Agreement without the prior written consent of the other party.
         This Agreement shall inure to the benefit of and be binding upon the
         parties hereto and their successors and assigns.

10.9     Governing Law

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<PAGE>

         All questions concerning the interpretation or performance of this
         Agreement and the resolution of disputes arising in connection with
         this Agreement shall be governed by the laws of Korea.

10.10    Governing Language

         This Agreement shall be executed in the Korean language, and the Korean
         version of this Agreement shall prevail in case of conflict with a
         translated version thereof, regardless of which party prepared such
         translation.

10.11    Resolution of Conflicts

         Both parties agree that the Seoul Central District Court shall have
         non-exclusive jurisdiction over any dispute related to the execution,
         performance, interpretation or violation of this Agreement.

                           [Signature page to follow]

                                       14
<PAGE>

IN WITNESS WHEREOF, the parties have caused the persons authorized to represent
such parties to print his or her name and affix seal to this Agreement.

Shinhan Bank Co., Ltd.                         Chohung Bank Co., Ltd.

/s/ Sang-Hun Shin                              /s/ Dong-Su Choi
--------------------------------               ---------------------------------
Name: Sang-Hun Shin                            Name: Dong-Su Choi
Title: Representative Director                 Title: Representative Director

                                       15

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