As communicated in our previous newsletter (Link), the second proposed amendment to the Korean Commercial Code (the “KCC”) – which mandates cumulative voting for large listed companies and increases the number of audit committee members subject to separate election requirements for listed companies – was passed by the National Assembly at its plenary session on August 25, 2025 (the “Second KCC Amendment”). Subsequently, the Second KCC Amendment was approved by the State Council on September 2, 2025, and promulgated in the official gazette on September 9, 2025, thus taking formal effect.
 
Key details of the Second KCC Amendment are as follows: (i) Article 542-7 of the KCC has been amended to require large listed companies with total assets of KRW 2 trillion or more to adopt cumulative voting, and to prohibit, notwithstanding Article 382-2(1) of the KCC, such large listed companies from excluding the cumulative voting system from their articles of incorporation, and (ii) Article 542-12 of the KCC has been amended to require the election of two audit committee members (instead of one, as was previously required) subject to the 3% voting cap separately from other directors (the number of such separately elected members may be increased through the articles of incorporation) for (a) large listed companies with total assets of KRW 2 trillion or more that are required to establish an audit committee and (b) listed companies with total assets of KRW 100 billion or more that have opted to establish an audit committee instead of appointing a standing auditor. The specific effective dates for each amended provision of the KCC are as set forth below:
 

In addition, if the proposed third amendment to the KCC that we discussed in another recent newsletter (Link) (concerning, in particular, mandatory cancellation of treasury shares, the introduction of advisory shareholder proposals, improvements to the merger and spin-off system, and the introduction of a mandatory tender offer system) moves forward, additional changes to corporate governance can be expected. Accordingly, we advise that you continue to pay close attention to these developments.
 
Furthermore, as a supplementary measure to the first amendment to the KCC, which strengthened directors’ duties and responsibilities to protect shareholders’ interests, several proposals have been discussed, including: (i) reduction or abolition of the crime of “occupational breach of trust” under the Korean Criminal Code and “special breach of trust” under the KCC; (ii) removal of enhanced punishment for occupational breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes; and (iii) explicit codification of the business judgment rule in the Korean Criminal Code. For more in-depth discussions on these matters, the Democratic Party of Korea launched the “Task Force to Rationalize Punishment for Economic Crimes and Civil Liabilities” on September 2, 2025. This task force has announced plans to consider not only reforms to the breach of trust framework, but also the need to rationalize civil liability claims, including class action lawsuits, punitive damages, and a Korean-style discovery system.

With the implementation of the Second KCC Amendment, the exercise of voting rights by major shareholders in the election of directors has been limited, thereby increasing the likelihood of minority shareholders’ proposals for director appointments being passed at general meetings of shareholders. Accordingly, it is necessary for listed companies to take these changes into consideration in their investor relations and communications, management of general shareholder meetings, proxy solicitation and voting procedures for minority shareholder proposals, and efforts to enhance the operation and decision-making processes of their boards of directors and their committees. We advise that you also continue to closely monitor developments related to the discussions on the third proposed amendment to the KCC and the ongoing review of potential reforms to the criminal and civil liability system for directors, including with respect to the breach of trust framework.

[Korean Version]