Until April 2011, a company may not acquire its own shares on its own account, except in the following cases: 1) in case of the redemption of shares; 2) in case of a merger of companies or an acquisition of the entire business of another company; 3) where it is necessary to do so for achieving the objective in the course of exercising the rights of the company; 4) where it is necessary to deal with the fractional shares; 5) where a shareholder exercises the right to request the company to purchase his shares(§341) under the Commercial Act. And a company may not take its own shares as an object of a pledge in excess of a twentieth of the total number of outstanding shares: provided, that such limit shall not apply in case of subparagraph 2 or 3 of Article 341(§341-3). In case of subparagraph 1 of Article 341, however, the company shall, without delay, cancel the shares, and in the cases of subparagraphs 2 through 5 of Article 341, and the proviso of Article 341-3, it shall dispose of the shares or the pledge within reasonable period(§342).
But any stock-listed corporation or any Association-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: 1) a manner in which the acquisition is made on the securities market or the Association brokerage market; 2) a manner in which the open purchase is made in accordance with the provisions of Chapter IV(§189-2 (1)) under the Securities and Exchange Act.
In 2010, the Ministry of Justice of Korea has made a Revised Bill of the Commercial Code to reform the corporate governance and to improve transparency in corporate management. In this process, the Commercial Code amended 2011 has alleviated the regulation on the operation of the corporate financing and liberalized the acquisition of company’"s own shares in order to enhance the autonomy of business operations. The obtainment of company’"s own shares has to be carried out by the Presidential Decree, and specifics regarding the method of obtainment is not stated in the Commercial Code amended 2011. There are, however, many legal problems of provisions relating to acquisition, disposition and cancellation of company’s own shares under the Commercial Code amended 2011. In this paper, thus, I have investigated the legal problems of provisions relating to acquisition, disposition and cancellation of company’"s own shares, and suggested the settlement methods of the problems.