After his inauguration, President Lee Jae-myung formed the National Policy Planning Committee (the “NPCC”) as a presidential advisory body tasked with reviewing major national policy initiatives. Earlier this month, the NPCC held a public briefing to announce the Lee administration’s draft Five-Year Governance Plan. At this event, the committee presented a total of 123 national policy tasks based on five major policy goals: (i) politics that unite the people; (ii) a world-leading innovative economy; (iii) balanced growth that ensures that all prosper; (iv) a society with strong fundamentals; and (v) diplomacy and security focused on national interests. These include 23 key strategies, such as advancing to one of the world’s top three AI nations, financial innovation, and promotion of a fair economy (Link).
Although the official report on national policy tasks has not been released, various media sources have reported that the “KOSPI 5000 Era” has been included as a key strategic initiative under the goal of building a world-leading innovative economy. Major policy measures for raising the KOSPI to 5000 are said to include: (i) strengthening penalties for unfair trading and improving detection systems; (ii) introducing separate taxation for dividend income; and (iii) seeking inclusion of Korea in the MSCI Developed Markets Index. It is also likely that the follow-up amendments to the Korean Commercial Code (the “KCC”), which we have discussed in other recent legal updates (see, e.g., Link) including the mandatory cumulative voting system, were part of the recent discussions. During the NPCC’s review process, the Ministry of Justice reported to the NPCC that it would “actively support swift legislative discussions through close government-party cooperation on the proposed amendments to the KCC, including measures to expand directors’ fiduciary duties and implement the cumulative voting system.” In addition, several measures previously considered by the government will likely continue to be promoted. These include: (i) the mandatory cancellation of treasury stock; (ii) improvements to corporate restructuring regulations such as fair value-based merger ratio determination for mergers involving listed companies and their affiliates; (iii) new regulations requiring pro-rata share allocation to parent company shareholders in spin-off listings; and (iv) the introduction of mandatory tender offers.
As previously mentioned (Link), if the second round of amendments to the KCC—which include expanding the number of audit committee members subject to separate election and introducing mandatory cumulative voting—is passed by the full National Assembly and if progress continues on policies aimed at improving corporate governance and the capital market and designed to help KOSPI reach 5000 (such as changes to investment-related tax schemes including the taxation of dividend income), companies will need to pay close attention to a broad range of corporate governance and legal issues. These developments will affect board operations and decision-making, restructuring transactions such as mergers and spin-offs, shareholder return measures such as the repurchasing of treasury stock, corporate finance transactions, M&A transactions involving listed companies and IPOs of unlisted affiliates, investor relations and the operation of shareholder meetings, proxy solicitations regarding proposals from minority shareholders, and director appointments.
