As covered in a series of our previous newsletters (Link), on January 31, 2023, the Financial Services Commission (the “FSC”) and the Ministry of Justice announced their “Initiative to Improve Dividend Distribution Procedures in Line with Global Standards” by allowing a company to separate the record date for the exercise of voting rights from the record date for dividend payment. Accordingly, the record date for dividend payment can come after shareholders’ approval of dividend distribution at the general meeting of shareholders. The initiative aims to enhance transparency and eliminate investor uncertainty around dividend payments and ex-dividend trading. In October 2023, the FSC and the Korea Exchange amended the Guidelines on Corporate Governance Disclosure to reflect the new standard (Link). In December 2023, the Financial Supervisory Service (the “FSS”) reported on the status of listed companies in updating their dividend distribution procedures and requested that the companies comply with the new standard (Link).

More recently, on December 19, 2024, the FSS announced amendments to business report forms to require companies to provide detailed information about their compliance with the new dividend distribution procedures, in consideration that a company’s efforts to ensure dividend predictability for investors is a key factor in investment decisions.

The “Dividends” section in the current business report largely requires the following three categories of information:
 

Regarding item (1) above on dividend policy, it was noted that many companies have only provided generic statements or copied terms directly from their articles of incorporation (“AOI”) in their business reports. In failing to explicitly report on implementation of new dividend distribution procedures, these inadequate disclosure practices had made it difficult to ascertain relevant dividend information from the business reports.

The amended business report form expands the disclosure requirements under item (1), requiring companies to detail their progress to ensuring dividend predictability by disclosing:
 

• Status of AOI Amendment: The body responsible for determining dividend amount under the current AOI, whether the company is able to comply with the new standard, and the company’s future plans with respect to dividend distribution procedures; and
   

• Implementation of Compliant Dividend Procedures: Whether dividend was paid during the period covered by the business report, the record date for exercise of voting rights, the record date for dividend payment, and whether dividend predictability was so ensured.
   

Comparative Table of Requirements in Old vs. New Business Report Form

Listed companies and their shareholders should closely monitor regulatory and industry developments regarding these dividend distribution procedures. Special attention should be paid when preparing agendas on dividend declarations and amendments to the AOI for 2024 ordinary general meetings of shareholders, as well as in making disclosures of the required information.

[Korean Version]