The National Assembly passed the first amendment to the Korean Commercial Code (the “KCC”), expanding the fiduciary duties of directors to include the protection of shareholders’ interests (the “First KCC Amendment”) on July 3, 2025. The First KCC Amendment was thereafter promulgated and came into effect on July 22, 2025, following deliberation by the State Council and receipt of presidential approval. Subsequently, the National Assembly passed the second proposed amendment to the KCC, which mandates cumulative voting and expands the separate election of audit committee members of large listed companies (the “Second KCC Amendment”), on August 25, 2025, and it was approved by the State Council on September 2, 2025 and promulgated on September 9, 2025.

Since the new government came into power, the market has shown considerable interest in the new administration’s policies aimed at enhancing corporate governance and systems related to corporate law, as well as amendments to the KCC, including the introduction of directors’ duties to protect shareholders’ interests as a starting point to implement such policies. The Democratic Party of Korea (the “DPK”) engaged in extensive discussions regarding its plans to (i) expand the fiduciary duties of directors to include the protection of shareholders’ interests, (ii) obligate listed companies to hold general meetings of shareholders virtually, (iii) adopt a system of independent directors, (iv) expand the separate election of audit committee members, and (v) mandate cumulative voting. Shortly after the start of the new administration, the DPK submitted the First KCC Amendment to address points (i), (ii) and (iii) mentioned above. Following the submission of the agenda by the ruling party, the Second KCC Amendment, which mandates cumulative voting and expands the separate election of audit committee members of large listed companies, underwent considerable deliberation in the plenary session of the National Assembly, including a filibuster by the opposition party, before it was finally passed on August 25, 2025. It was approved by the State Council on September 2, 2025 and promulgated on September 9, 2025.

Below is a summary of the key provisions of the First KCC Amendment, along with the date each respective provision will become effective.
 

The main provisions of the Second KCC Amendment and their enforcement dates are as follows:
 

• Mandatory Cumulative Voting: 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. According to the addenda to the Second KCC Amendment, 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 KCC Amendment taking effect.
   

• Expansion of Separate Election of Audit Committee Members: Large listed companies, as well as listed companies with total assets of KRW 100 billion or more that have established an audit committee instead of appointing a standing auditor, will be required to elect two audit committee members (instead of one, as is currently required) subject to the 3% rule separately from other directors (the number of separately elected audit committee members may be adjusted upwards through the articles of incorporation). According to the addenda to the Second KCC Amendment, this provision will take effect one year after promulgation.
   

The amendments to the KCC may significantly impact companies’ corporate restructuring, investments, strategic planning, financial capabilities and investor relations (“IR”) decisions. In particular, considering the introduction of the duty of directors to protect shareholders’ interests, which is in addition to their existing duty to protect the company’s interests and is scheduled to take effect without a grace period, it is essential for companies to place a greater emphasis on establishing fairness and transparency in the decision-making process of their directors and management, thereby mitigating the risk of liability due to the breach of directors’ duties. From a legal perspective, in order to comply with the directors’ duty to protect shareholders’ interests for each type of transaction and decision-making, it may be important to identify and review the substance of shareholders’ interests under various circumstances, along with the matters requiring deliberation and consideration in relation to directors’ decision-making. As listed companies are now required to hold general meetings of shareholders virtually, minority shareholders’ participation in general meetings is likely to increase. Further, through the introduction of the system of independent directors, the requirements for independence in the composition of boards of directors will be strengthened. As a result, the amendments to the KCC have placed greater importance on the operation of general meetings of shareholders, execution of IR activities for shareholders and solicitation of proxy voting. Companies should therefore consider improving their corporate governance structures to ensure compliance with these requirements.

In addition, in August 2025, 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. 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 summarized below:
 

• When listing the subsidiary created in a vertical spin-off, a certain percentage of newly-issued public offering shares will be preferentially allotted to the general shareholders of the parent company; and
   

• A mandatory tender offer system will be introduced to ensure that minority shareholders have an opportunity to share in and recover management control premiums when companies are acquired.
   

Notably, the issuance of guidelines for the First KCC Amendment, 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, the 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 follow these legislative developments.

With the Second KCC 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 are expected. Accordingly, there may be significant implications for listed companies’ shareholder communication and IR activities, the operation of general shareholder meetings, proxy solicitations for minority shareholder proposals and resolution procedures, and the operation of and decision-making procedures of boards of directors and committees within board of directors.

[Korean Version]