1.

Key Provisions of the Proposed Amendment to the KCC
 

(1)

The proposed amendment introduces a variable statutory interest rate system by stipulating that the current 6% per annum statutory interest rate for commercial matters shall be prescribed by Presidential Decree in consideration of changes in economic conditions such as market interest rates and prices (Article 54 of the bill). The statutory commercial interest rate applies to default interest and similar charges when performance of statutory claims, including appraisal rights of dissenting shareholders, is delayed.
 

(2)

The proposed amendment revises the Korean terms for “apparent manager” (pyohyeonjibaein) and “apparent representative director” (pyohyeondaepyoisa) in the KCC, with terms (oegwanjibaein/oegwandaepyoisa) more aligned with their legal meanings (i.e., no change to their English translations) (Articles 14 and 395 of the bill).
 

2.

Key Provisions of the Proposed Amendment to the Civil Act
 

(1)

The proposed amendment introduces new provisions establishing standards for interpreting legal acts and stipulates legal principles generally presented by court precedents and theories such as “subjective interpretation (natural interpretation)” and “objective interpretation (normative interpretation)” (Article 106 of the bill). In this regard, if the terms of a company’s material contracts are unclear, the standard for interpretation will be set forth in written law.
 

(2)

The proposed amendment introduces a variable statutory interest rate system by stipulating that the current 5% per annum statutory interest rate for civil matters shall be prescribed by Presidential Decree in consideration of changes in economic conditions such as market interest rates and prices (Article 379 of the bill).
 

(3)

The current provision states that the amount of damages for nonperformance of a monetary obligation shall, in principle, be based on the statutory interest rate, but if there is an agreed interest rate, that rate applies. The proposed amendment (i) reflects the legal principle of precedents and provides that if the agreed interest rate is lower than the statutory interest rate, the amount of damages for nonperformance of a monetary obligation shall be based on the statutory interest rate , and (ii) allows a claim for damages exceeding the statutory interest rate when nonperformance of a monetary obligation is caused by the obligor’s intention or gross negligence (Article 397 of the bill).
 

(4)

The proposed amendment transforms the current Civil Act provision on liquidated damages under Article 398 into a comprehensive rule on payment for breach of contract that covers both penalty and liquidated damages. Accordingly, the amendment permits the court to explicitly reduce penalties under the Civil Act (Currently, there is no provision on reduction of penalties under the Civil Act, but in exceptional cases contrary to social order and good morals, the court may reduce penalties.). The amendment also provides that an agreement on payment for breach of contract shall be presumed to be liquidated damages and enables the creditor to claim the scheduled payment regardless of actual damages while barring claims for additional damages (Article 398 of the bill). As a result, legal principles on payment for breach of contract in areas such as M&A agreements, investment agreements or shareholders agreements are expected to become clearer.
 

(5)

The proposed amendment introduces rights to rescind, terminate, or seek modification of long-term contracts when circumstances change (Article 538-2 of the bill). It allows one party to request that the other party modify the contract if the circumstances forming its basis have changed significantly in a way that could not reasonably have been foreseen at the time of execution and that creates a material imbalance in the parties’ interests if the contract is maintained as is. If modification is impossible or it is unreasonable to expect the other party to modify the contract, the contract may be rescinded or terminated. Accordingly, it could become possible to exercise rights to rescind, terminate, or seek modification of long-term contracts such as the shareholders agreement or the joint venture agreement. In particular, note that a request for modification may be filed with the court in addition to requesting rescission or termination of the contract.
 

(6)

Reflecting the legal principles established by court precedents regarding the termination of continuing contracts, the proposed amendment (i) permits immediate termination when nonperformance has destroyed trust so that the contract cannot be expected to continue, and (ii) provides that if the term of a continuing contract is not specified, either party may terminate the contract at any time, in which case the termination takes effect after a considerable period of time has elapsed (Article 546 of the bill). Accordingly, the right to rescind or terminate long-term supply agreements may be exercised.