As explained in our previous newsletter (Link), proposed amendments to the Korean Commercial Code (the “KCC” and, as amended, the “Amended KCC”) were passed at the plenary session of the National Assembly on July 3, 2025. The Amended KCC is intended to (i) expand the fiduciary duties of directors to include protection of shareholders’ interests, (ii) allow companies in general, and obligate listed companies, to hold general meetings of shareholders virtually, (iii) adopt a system of independent directors, and (iv) expand application of the “3% rule” (i.e., the rule under the pre-amended KCC which aggregates and limits the voting rights of the largest shareholder and related parties to 3% in the appointment of statutory auditors and members of the audit committee who are not outside directors) to audit committee members who are outside directors.

Since the State Council’s approval on July 15, the market has continued to show a great deal of interest in the Amended KCC as it is soon to be promulgated in the official gazette and become effective shortly thereafter. Aside from the general effectiveness of the Amended KCC itself, the dates that each of the aforementioned provisions will go into effect are as follows:
 

Given the provisions of the Amended KCC that expand fiduciary duties of directors to include the protection of shareholders’ interests are receiving the most attention and are scheduled to take effect immediately upon the Amended KCC becoming effective, there is an urgent need for stock companies to take measures to address the risk of liability arising from their directors’ breach of such expanded duty, by improving the decision-making processes of their boards and other elements of corporate governance.

As explained in our previous newsletter, the Democratic Party of Korea is reportedly planning to propose further amendments to the KCC, with the aims to increase the number of directors subject to the requirements for separate election of audit committee members (i.e., the 3% rule) and mandate the implementation of cumulative voting for the appointment of directors. It is therefore critical that companies keep an eye on subsequent legislation that may affect corporate governance regulations.

Market participants should pay close attention to the Amended KCC and subsequent regulatory revisions because they may bring about significant changes to the ways boards of listed companies operate and general meetings of shareholders are conducted.

[Korean Version]