Minority shareholders, such as activist funds and minority shareholder associations, are increasingly exercising their right to make proposals at general meetings of shareholders – the statement of opinions by such shareholders at general meetings of shareholders pursuant to Article 363-2 of the Korean Commercial Code has become an important issue. Even where there are no shareholder proposals, shareholders are becoming more active during general meetings of shareholders, asking questions and presenting opinions on business performance and the prospects of the company or plans for maximizing shareholder value, likely due to the recent emphasis placed on maximizing shareholder value, as seen in the government’s shareholder return program. This trend of involvement by shareholders was even greater at ordinary general meetings of shareholders of Korean companies in 2024.
The Financial Supervisory Service received criticisms that investors are unable to make informed decisions regarding shareholder proposals due to insufficient information, as a result of there being no clear disclosure guidelines. It responded on April 12th by revising the disclosure form regarding general meetings of shareholders to ensure that a series of procedures are properly described in the regular reports that are submitted before and after general meetings of shareholders, including (i) the fact that shareholders have exercised their right to make proposals, (ii) the process of including issues proposed by shareholders as items on the agenda at the general meeting of shareholders, and (iii) details regarding the content of discussions on each item on the agenda during the meeting, as well as the outcome of such discussions. The revised disclosure form took effect immediately.
More specifically, the revised form requires disclosure, prior to the general meeting of shareholders, of the details regarding the exercise of minority shareholders’ rights up to the date of the applicable report (such as the business report issued one week prior to the general meeting of shareholders), including any exercise of the right to make proposals at such meeting. This information must be disclosed in detail in the form of a table identifying (i) the shareholder that exercised the shareholder proposal right, (ii) whether the proposal will be included as an item on the meeting agenda, (iii) if it will not be included on the agenda, the reason the company has determined not to include it, and (iv) other details regarding matters occurring prior to the meeting, such as the date of receipt of the proposal, any application to the court to compel the company to include specific items on the meeting agenda, etc. In addition, the quarterly report issued by the company after the ordinary general meeting of shareholders must include the results of the deliberation and resolutions of the shareholder at the general meeting with respect to every item on the agenda, including those items proposed by shareholders, and whether each item on the agenda was proposed by shareholders (also, key details of the discussion at the meeting regarding such items must also be disclosed). The key points of the Q&A session and pros/cons discussed regarding each item on the agenda should be summarized for disclosure, even if not included in the meeting minutes. For example, in a case where shareholders have made a proposal for the appointment of directors, stating that they “discussed a certain candidate’s expertise and suitability for the position, and the candidate was questioned regarding whether there was any reason he/she was not qualified to be an outside director, to which the response was that there was not” could be an appropriate disclosure addressing the requirement for specific details.
Previously, shareholder proposals were not disclosed unless a lawsuit such as a preliminary injunction on the meeting agenda was filed, and the details of actual questions asked or opinions stated by shareholders for each item on the agenda were not disclosed. However, in light of the significant changes to the disclosure requirements outlined above, affected parties should pay close attention to the exercise of minority shareholders’ rights, including the right to make proposals at the general meeting of shareholders, and the requirements with respect to conducting the meeting and recording and disclosing the content of discussions and deliberations regarding items on the agenda.
