As communicated in our previous newsletter, the first amendment to the Korean Commercial Code (the “KCC”), which includes provisions expanding the fiduciary duties of directors to include protection of shareholders’ interests, was passed by the plenary session of the National Assembly on July 3, 2025 and was promulgated and came into effect on July 22, 2025 (Link). Subsequently, the second proposed amendment to the KCC (the “Second Proposed Amendment”), which mandates cumulative voting and expands the separate election of audit committee members of large listed companies, was approved by the Legislation and Judiciary Committee of the National Assembly on August 1, 2025 (Link). Following submission of the agenda by the ruling party, the proposed amendment underwent considerable deliberation in the plenary session of the National Assembly, including a filibuster by the opposition party. The Second Proposed Amendment was passed by the National Assembly on August 25, 2025.

The Second Proposed Amendment includes the following key changes to the KCC: (i) Article 542-7 of the KCC is to be amended to mandate cumulative voting for large listed companies with total assets of KRW 2 trillion or more, with such companies no longer being permitted, notwithstanding Article 382-2(1) of the KCC, to exclude cumulative voting from their articles of incorporation and (ii) Article 542-12 of the KCC is to be amended to expand the separate election requirement for audit committee members subject to the 3% rule (i.e., the rule limiting the combined voting rights of the largest shareholder and its related parties to 3%), where under the provision as amended large listed companies with total assets of KRW 2 trillion or more (which are required to establish an audit committee) and listed companies with total assets of KRW 100 billion or more which have established an audit committee instead of appointing a standing auditor, would be required to elect two (the requirement under the current KCC is one) audit committee members subject to the 3% rule separately from other directors (the number of separately elected audit committee members may be adjusted upwards, as specified in the articles of incorporation). According to the addenda to the Second Proposed Amendment, the Second Proposed Amendment will take effect one year after its promulgation. However, the provision mandating cumulative voting will be applicable to a listed company from the first general meeting of its shareholders convened to elect directors following the Second Proposed Amendment taking effect. The main contents of the Second Proposed Amendment as passed by the National Assembly are summarized below.
 

The Second Proposed Amendment as passed by the National Assembly will now be forwarded to the government and, unless the President requests reconsideration, it will be promulgated within 15 days following deliberation by the State Council and the receipt of presidential approval.

In other updates (and as communicated in another of our recent newsletters), earlier this month, the National Policy Planning Committee, a presidential advisory body, announced the Lee administration’s draft Five-Year Governance Plan, which includes measures to improve corporate governance (Link). Subsequently, on August 22, 2025, the Ministry of Economy and Finance published its “New Government’s Economic Growth Strategy,” in which specific initiatives for amending the KCC to expand the fiduciary duties of directors, improve corporate governance, and establish fair market order were outlined, as follows (Link):
 

Notably, the issuance of guidelines for the previous round of amendments to the KCC, which introduced the directors’ duty to protect shareholders’ interests, is drawing significant attention from the market as a means to resolve uncertainty. The Ministry of Justice is the lead agency responsible for these matters, and the guidelines are listed as a policy task to be completed in the second half of 2025. Furthermore, improvements to the merger and spin-off system, introduction of the mandatory tender offer system, mandatory cancellation of treasury shares, and the introduction of advisory shareholder proposals are all identified as subjects for a possible third amendment to the KCC. Accordingly, it would be advisable to continue to carefully monitor these legislative developments.
 
With the Second Proposed Amendment taking effect, the establishment of government guidelines, and the potential pursuit of a third amendment to the KCC, substantial changes to corporate governance in Korea can be expected. Accordingly, there may be significant implications for listed companies’ investor relations activities, operation of general shareholder meetings, proxy solicitations for minority shareholder proposals and resolution procedures, and operation of and decision-making procedures of boards of directors and committees.

[Korean Version]