Hostile M&A Lawyer | Understanding Attack and Defense Before the Battle Starts

Hostile M&A | Three Common Pathways in a Control Contest

Not every hostile M&A situation plays out the same way. The path a campaign takes depends on whether the attacker wants outright control, board seats, or simply a premium exit — and depends on how much cash and time the target has to respond.

Hostile M&A | The 5% Rule and Large Shareholding Disclosure

Almost every hostile M&A campaign in Korea begins to become visible through mandatory ownership disclosure filings. Understanding these filings is often the first thing both an attacker's counsel and a target's counsel look at.

When the reporting duty is triggered

Any person or group who comes to hold 5% or more of the voting shares of a listed company must report this to the Financial Services Commission and the exchange within 5 business days, and must also report thereafter whenever the holding ratio changes by 1% or more (자본시장법 제147조). This filing must disclose the stated purpose of the holding, distinguishing between a passive investment purpose and a purpose of influencing corporate management.

Cooling-off period after a management-purpose report

If the reporting purpose is disclosed as influencing management, the reporting person is restricted from exercising voting rights on the newly acquired shares and from acquiring additional shares for a short period following the report, giving the target company a limited window to prepare a response (자본시장법 제150조). Whether this cooling-off period applies, and its exact scope, is frequently a point of dispute and is worth reviewing carefully with counsel given the fact pattern.

Consequences of a false or delayed report

A shareholder who files late, omits required information, or misstates the purpose of holding can face sanctions and, in some circumstances, restrictions on voting the shares involved. Target companies sometimes challenge an attacker's disclosure filings as inaccurate as an early defensive tactic, which can delay the attacker's next move while the dispute is resolved.

Hostile M&A | Defensive Measures Available to a Target Company

Korean corporate law does not provide as broad a menu of defensive tools as some other jurisdictions (there is no general poison pill regime under the Commercial Act), so a target board's options are shaped by what the articles of incorporation already allow and by careful use of existing corporate structures.

Treasury shares and third-party allotment

A board may consider issuing new shares to a friendly third party (a so-called white squire) to dilute an attacker's stake, but this must be justified by a legitimate business purpose such as raising capital, because share issuances aimed purely at entrenching management can be enjoined by the court (상법 제418조 제2항). Courts scrutinize the timing and pricing of such issuances closely when they occur during an active takeover contest.

Staggered boards and supermajority provisions in the articles

Because these provisions must be built into the articles of incorporation before a contest begins, they function as preventive rather than reactive defenses. A target that has not adopted such provisions in advance generally cannot introduce them mid-contest without shareholder approval, which itself becomes a battleground if an attacker already holds meaningful voting power.

Litigation as a defensive tool

Filing for an injunction against a tender offer, a proxy solicitation, or a stake-building attacker's exercise of voting rights is often the fastest practical defense, since a share issuance or shareholder meeting resolution can be halted or nullified if procedural or substantive defects are shown. Timing is critical: an injunction petition filed after a shareholder meeting has already been held is far weaker than one filed before the meeting.

Hostile M&A | Building and Executing a Control Campaign

An attacker's strategy centers on accumulating a stake efficiently, timing disclosure to preserve optionality, and choosing the right vehicle — open market purchases, a tender offer, or a proxy contest — to convert that stake into actual influence over the board.

Structuring stake accumulation to avoid early exposure

An attacker will often coordinate with several affiliated investors to build a position, but the Capital Markets Act treats persons acting in concert as a single reporting group, so structuring around the 5% threshold through nominally separate purchasers carries real legal risk (자본시장법 제147조). Miscalculating who counts as part of the reporting group is one of the most common errors on the acquirer side.

Preparing for the target's litigation response

Because target companies frequently respond to a stake-building campaign with an injunction challenging the accuracy of the attacker's disclosure report, an attacker should prepare disclosure filings that can withstand scrutiny well before making any public move, rather than treating the filing as a formality.

Winning the shareholder meeting, not just the stake

Ultimately a proxy contest is decided by voting shares actually present at the meeting, not by total shares outstanding, so an attacker's campaign should focus heavily on record-date planning, communication with institutional and retail shareholders, and understanding quorum and voting thresholds under the company's articles.

Hostile M&A | Injunctions and Shareholder Meeting Disputes

Because hostile M&A situations move on a matter of weeks, most disputes are resolved through provisional injunctions rather than a full trial on the merits, and the outcome of that injunction petition often determines the outcome of the entire contest.

Injunctions against share issuance or defensive measures

A shareholder can petition the court to enjoin a new share issuance, arguing it was made for an improper purpose such as entrenching management rather than raising funds, and Korean courts will examine the timing, pricing, and allottee of the issuance in light of the surrounding takeover contest (상법 제418조 제2항). If granted, the injunction can block the issuance before it closes.

Challenging or defending a shareholder meeting resolution

After a shareholder meeting is held, either side may seek to have a resolution nullified or revoked on grounds such as defective notice, an improper record date, or errors in vote counting (상법 제376조, 제380조). Because these actions can be filed after the fact, they remain relevant even once the meeting itself has concluded.

Hostile M&A | From Initial Consultation to Resolution

Hostile M&A | How Fees Are Typically Calculated

※ Costs vary depending on case complexity and specific circumstances; exact fees will be provided during consultation. No specific outcome is guaranteed.

Hostile M&A | Self-Assessment Checklists

Frequently Asked Questions

Official References

• Korea Law Information Center — https://www.law.go.kr
• Easy-to-Find Everyday Legal Information — https://easylaw.go.kr
• Korea Legal Aid Corporation — https://www.klac.or.kr
• Ministry of Employment and Labor — https://www.moel.go.kr