This article was published on July 21, 2025, at 4:52 p.m. on the ChosunBiz MoneyMove site.
In the future, if a publicly listed company enters into a contract to buy back its own shares (trust acquisition) through a securities firm, it will not be allowed to extend it. This is to prevent cases where trust acquisition contracts for buying back shares are extended for a long time while failing to provide accurate information to investors.
Unlike ‘direct acquisition’ where corporations directly buy their own shares, trust acquisition has drawn criticism as it is challenging for investors to immediately verify the acquisition or disposal records of treasury shares, leading to an issue termed 'opaque disclosure.'
According to financial authorities on the 21st, the Financial Supervisory Service has prohibited the extension of contract periods and duplicate contracts for treasury share trust acquisition contracts entered into since January 1 of this year.
A Financial Supervisory Service official noted, “There has been criticism that the regulatory differences between direct acquisition and trust acquisition are significant,” adding, “As a result of amending related regulations recently to address these regulatory differences and enhance the provision of necessary information to investors.”
The government emphasizes the shareholder return policy of publicly listed companies, and many public companies are announcing share buybacks. The buyback of a company's own shares is considered to be positive for the stock price. When a buyback occurs, the number of circulating shares decreases, resulting in an increase in the value of the shares held by shareholders.
Share buybacks are broadly divided into 'direct acquisition', where corporations directly buy shares, and 'trust acquisition', which involves delegation to external financial institutions. However, unlike direct acquisition, there is no way for investors to know how many treasury shares were actually bought or how they were disposed of until the contract ends in the case of 'treasury share buyback trust'. This essentially means there is weak binding force. This is why many publicly listed companies opt for contracts with securities firms through trust acquisition while paying commissions instead of directly buying back shares.
For direct acquisition, a report must be disclosed three months after the buyback, detailing how many shares were actually purchased and whether they were sold or canceled.
Trust acquisition also requires a report to be disclosed three months later, but typically there are no additional disclosure obligations until the trust contract period, which usually lasts between six months to one year, expires. Even if a corporation announces it will buy 1 million shares, after the three-month report is released, there is no way to know whether those shares were sold or canceled in the market. Moreover, trust acquisition contracts can be extended indefinitely, which has led to criticisms that the actual results of the contracts remain unknown.
Additionally, there have been issues raised about entering into duplicate contracts by signing trust acquisition contracts with multiple financial institutions at the same time. If a company's shares are scattered across various trust contracts, investors cannot gather accurate information.
An industry insider said, “Trust acquisition contracts have been treated as disclosures with virtually no significant meaning for investors because the ongoing progress cannot be determined over the long term,” adding that “in a situation where share buybacks and cancellations are an issue as seen recently, preventing the extension and duplicate contracts for trust agreements could assist in making investment decisions.”
With the prohibition of extending trust acquisition contracts and entering into duplicate agreements for treasury shares, investors are expected to be able to ascertain their companies' treasury share acquisition statuses more easily. However, as the Lee Jae-myung administration aggressively promotes policies to revitalize the stock market, including the mandatory cancellation of treasury shares, there are calls for additional institutional improvements regarding treasury share acquisitions.
Kang So-hyun, head of the Capital Market Division at the Capital Market Research Institute, said, “Changes in the system related to trust acquisition will be a strong tool in understanding where and how treasury share buybacks are conducted,” adding, “However, it is necessary to revise the disclosure items to convey detailed information on how many shares were acquired and disposed of during the trust contract period.”