Ruling Party Pushes Ahead With Anti-Stock-Price Suppression Bill, While Authorities Remain Cautious

[Financial News] The Democratic Party of Korea (DPK) appears to be accelerating its push for the so-called anti-stock-price suppression bill. The proposal includes measures to prevent stock-price suppression intended to reduce tax burdens in the inheritance and gift process for major shareholders, as well as mandatory disclosures on corporate value enhancement, or value-up, for companies with low price-to-book ratios.
On the 21st, DPK lawmakers Lee Hoon-gi and Soyoung Lee held a forum at the National Assembly on legislative tasks for the anti-stock-price suppression bill and agreed on the need to pass amendments to the Inheritance and Gift Tax Act and the Financial Investment Services and Capital Markets Act, which would make value-up disclosures mandatory.
An amendment to the Inheritance and Gift Tax Act, introduced by Lee in May last year, aims to prevent inheritance and gift tax burdens from being reduced even if stock prices are artificially lowered. Under the proposal, listed stocks with a price-to-book ratio below 0.8 times would be valued at 80 percent of net asset value, similar to unlisted shares, setting a floor for tax assessment.
Lawmakers Kim Hyun-jung and Ahn Do-geol also discussed an amendment to the Financial Investment Services and Capital Markets Act that would require listed companies with a price-to-book ratio below 1 times for two consecutive years to disclose value-up plans. Ahn's bill adds a condition that it would apply only to listed companies with a three-year average return on equity below 0.8, easing concerns about overinclusion.
Experts attending the forum said they supported the bill's purpose because it would hold management accountable for explaining low stock prices to minority shareholders and create a tracking system when stock-price distortions are caused by executives. They also said it could help normalize taxation by preventing artificial reductions in inheritance and gift taxes.
The Korea Exchange, the Financial Services Commission, and the Ministry of Economy and Finance also agreed with the bill's purpose and necessity. However, they said many issues still need to be resolved before a practical system can be established.
The Korea Exchange warned against applying value-up disclosure plans in a one-size-fits-all manner. The FSC added that rather than simply making value-up disclosures mandatory, the focus should be on improving the quality of the disclosures themselves. It also noted that if a system is designed around price-to-book ratios, it must be sufficiently refined, given the high volatility of the metric.
The Ministry of Economy and Finance expressed concern that an amendment to the Inheritance and Gift Tax Act, which would set a floor of 80 percent for valuing listed shares like unlisted ones, could instead violate the principle of market-price valuation and negatively affect external credibility. It also pointed out that valuing a company's net assets would be practically difficult if the number of invested entities, such as holding companies, subsidiaries and grand subsidiaries, becomes too large.

[email protected] Kim Hyung-gu Reporter