Lawmakers push bill to eliminate incentives for major shareholders to suppress share prices

Rep. Lee Hun-gi of the Democratic Party of Korea, a member of the National Assembly's Science, Technology, Information, Broadcasting and Communications Committee and the Democratic Party's Korea Premium K-Capital Market Special Committee, representing Incheon's Namdong-eul district, announced Monday that he will co-host a forum with the Democratic Party's Korea Premium K-Capital Market Special Committee and Rep. Lee So-young on Tuesday at Seminar Room 1 of the National Assembly Members' Office Building. The forum is titled "Legislative Tasks for a Share-Price Suppression Prevention Act to Resolve the Korea Discount."

The forum was organized to address the practice known as "share-price suppression" — artificially keeping stock prices low to reduce the inheritance and gift tax burden on major shareholders — and to explore ways to normalize and revitalize the Kosdaq market.

Under the current Inheritance Tax and Gift Tax Act, the value of listed shares is assessed based on the average market price over the two months before and after the valuation date. This structure means the lower the share price, the smaller the inheritance and gift tax liability for major shareholders. Critics have long argued that some Kosdaq-listed companies — particularly those where founders hold large stakes and succession to their children is imminent — have an incentive to cut dividends and share buyback cancellations to keep share prices depressed.

While major shareholders benefit from lower succession costs, ordinary shareholders bear the losses from falling share prices and reduced shareholder returns. The dynamic has also prevented even companies with strong growth potential and technological capabilities from being properly valued, contributing to the chronic undervaluation of Kosdaq and driving away investors.

Rep. Lee So-young introduced a share-price suppression prevention bill in May last year that would set a valuation floor — based on net asset value and similar metrics — when assessing the inheritance and gift tax value of undervalued listed shares, ensuring that artificially suppressed prices do not translate into lower tax liabilities. The bill was referred to a standing committee but has gone without deliberation for more than a year.

The forum will bring together academics, financial and fiscal regulators, and minority shareholders to discuss the direction of effective legislation.

Jung Jun-hyeok, a professor at Seoul National University School of Law, will chair the session. Presentations will be delivered by Kim Jeong-yeon, a professor at Ewha Womans University School of Law, and Kim Min-guk, chief executive of VIP Asset Management. Panelists include Shim Hye-seop, managing attorney at Shim Hye-seop Law Office; Lee Sang-mok, chief executive of Conduit Co.; Jo Jin-woo, head of the Corporate Value-Up Support Division at Korea Exchange; Ko Young-ho, deputy director of the Capital Markets Division at the Financial Services Commission; and Kim Man-su, deputy director of the Property Tax Division at the Ministry of Economy and Finance.

"In a structure where keeping share prices low is advantageous for reducing inheritance taxes, it is difficult for companies to actively pursue shareholder returns and enhance corporate value," Rep. Lee said. "We must eliminate the incentive to suppress share prices while strengthening the incentive to expand dividends and share buybacks. Amending the law alone cannot guarantee a rise in the Kosdaq, but if corporate value is properly reflected in share prices and shareholder returns expand, it will create an opportunity to resolve Kosdaq's undervaluation and boost its appeal to investors."

Lee added that he plans to introduce an amendment to the Inheritance Tax and Gift Tax Act as the lead sponsor this month, incorporating remedies presented at the forum.