Regulatory Trends in Corporate Governance

With the third amendment to the Korean Commercial Code (the “KCC”), promulgated on March 6, 2026 following its passage at the plenary session of the National Assembly on February 25, 2026, companies are now, in principle, mandated to cancel any acquired treasury shares within one year from the date of acquisition. In addition, starting from 2026, (i) the scope of mandatory corporate governance report disclosure will be expanded to cover all KOSPI-listed companies, (ii) disclosure requirements regarding shareholders’ meeting voting results and executive compensation will be further detailed, and (iii) the range of companies subject to English-language disclosure obligations will also be broadened. Furthermore, in line with the government’s “Corporate Value-Up” policy, the Korea Exchange (the “KRX”) is expected to issue dual-listing guidelines within the first quarter of 2026, which are anticipated to apply not only to vertical spin-offs but also to listings of newly incorporated subsidiaries created through M&A or capital contributions. Against this backdrop of a tightening disclosure regime and enhanced regulations on treasury shares and dual listings, listed companies are expected to face significant shifts in their disclosure management and overall corporate governance restructuring strategies.

Promulgation and Enforcement of Third Amendment to KCC

The third amendment to the KCC, which primarily mandates the cancellation of treasury shares and tightens regulations on their disposal, was promulgated and became effective on March 6, 2026, after the National Assembly passed the bill at its plenary session on February 25, 2026. The Legislation and Judiciary Committee prepared the amendment through the consolidation and coordination of several previously proposed bills. In addition to introducing a general obligation to cancel treasury shares and requiring shareholder approval of a treasury stock holding and disposal plan at the general meeting of shareholders in cases of exceptional retention or disposal, the finalized amendment also includes the following key features: (i) it explicitly stipulates that treasury shares acquired for specific purposes under Article 341-2 of the KCC (without using distributable profits as a source) may also be cancelled by a resolution of the board of directors, and (ii) for companies subject to foreign ownership restrictions under the Telecommunications Business Act or similar laws, it introduces a separate three-year grace period and specific disposal rules to prevent situations in which the reflexive increase in foreign ownership resulting from treasury share cancellation would lead to a regulatory violation. The key details are as follows:

Expressly stipulates that no rights, including voting rights or rights to receive dividends, will be granted in respect of treasury shares.
Prohibits the issuance of bonds for which treasury shares are used as the underlying object of exchange or redemption.
Prohibits treasury shares from being used as the object of a pledge.
Requires a company, in principle, to cancel its treasury shares within one year from the date of acquisition.
Permits the exceptional retention or disposal of treasury shares in accordance with a treasury stock holding and disposal plan prepared by the company and approved annually at the general meeting of shareholders, provided that there is a justifiable reason such as officer/employee compensation.
Requires that, when a company disposes of treasury shares, it must do so on equal terms to each shareholder in proportion to their shareholding. However, disposal to persons other than shareholders is permitted for specific reasons, such as officer/employee compensation or the implementation of an employee stock ownership plan.
Applies the procedures for issuing new shares mutatis mutandis to the disposal of treasury shares, to the extent not inconsistent with their nature.
Explicitly stipulates that all treasury shares acquired by a company may be cancelled by a resolution of the board of directors.
Prohibits the allocation of new shares in respect of treasury shares in the event of a merger or spin-off.
Imposes an administrative fine of up to KRW 50 million on individual directors if they fail to cancel treasury shares within one year without an approved treasury stock holding and disposal plan, or if they hold/dispose of treasury shares in violation of the approved plan.
Imposes the same mandatory cancellation obligation (within one year from the reference date) on existing treasury shares acquired and held prior to the enforcement of the amended KCC. For treasury shares directly acquired, the reference date is set at six months after the enforcement date, while exceptions are provided for companies subject to foreign ownership restrictions.

As the amended act took effect immediately upon its promulgation on March 6, 2026, companies planning to hold or dispose of treasury shares during 2026 should prepare their response with due consideration of the timing of their general meetings of shareholders. Furthermore, it will be important to take into account future developments regarding the prescribed forms for the treasury stock holding and disposal plan, as well as the release of related interpretations and official guidelines.

2.	Strengthening of Disclosure Obligations for Listed Companies

Expansion of Mandatory Corporate Governance Report Disclosures

Starting in 2026, the obligation to disclose corporate governance reports, which previously applied only to companies with total assets of KRW 500 billion or more, will be expanded to all KOSPI-listed companies. Since non-compliance with key indicators may result in a request from the KRX for corrective disclosures and the risk of being designated as an “unfaithful disclosure” corporation, companies with total assets of less than KRW 500 billion that are newly becoming subject to this disclosure obligation should review and refine their articles of incorporation and internal regulations. Furthermore, such companies should preemptively review the following priority review items announced by the KRX on December 29, 2025.

2026 Corporate Governance Report: Priority Review Items

Classification	Priority Review Items
Key Indicators (Four Items)	(1) Issuing the convocation notice at least four weeks prior to the general meeting of shareholders
	(3) Holding the general meeting of shareholders on a date other than the concentrated dates of shareholders’ meetings
	(4) Providing predictability regarding cash dividends
	(14) Holding quarterly meetings between the internal audit body and the external auditor
Detailed Principles (Five Items)	1-(1) Issuing the convocation notice at least four weeks prior to the general meeting of shareholders
	1-(2) Conducting efforts to disperse the timing of general meetings of shareholders (e.g., holding general meetings on non-concentrated dates and amending articles of incorporation regarding the record date for voting rights)
	1-(4) Providing predictability regarding cash dividends
	2-(3) Establishing shareholder protection policies regarding changes in ownership and business structures
	10-(2) Holding quarterly meetings between the internal audit body and the external auditor

Expansion of Mandatory English-Language Disclosures

Starting in May 2026, all KOSPI-listed companies with total assets of KRW 2 trillion or more will be required to provide English-language disclosures for all key management matters (55 items), as well as the full range of KRX disclosure items, including fair disclosures and inquiry disclosures. The KRX plans to expand the scope of mandatory English-language disclosures to all KOSPI-listed companies by March 2027 approximately. Accordingly, KOSPI-listed companies will need to ensure consistency between their Korean and English disclosures and establish internal processes to meet disclosure deadlines.

Key Details of Expansion of Mandatory English-Language Disclosures

Subject Companies (KOSPI)	Criteria	Phase 1	Phase 2
Subject Companies (KOSPI)	Criteria	Current	From May 2026
Assets of over KRW 10 trillion (Foreign ownership of over 5%) + Assets of over KRW 2 trillion (Foreign ownership of over 30%)	Disclosure Items	Selected key management matters (26 items)	All key management matters (55 items)
	Deadline	Within three business days after Korean-language disclosure	On the same day as Korean-language disclosure
Other companies with assets of over KRW 2 trillion	Disclosure Items	No mandatory English-language disclosure	All key management matters (55 items)
Other companies with assets of over KRW 2 trillion	Deadline	No mandatory English-language disclosure	Within three business days after Korean-language disclosure

Mandatory Disclosure of Voting Results of Shareholders’ Meetings

Starting in March 2026, listed companies will be required to disclose, on the date of the shareholders’ meeting, not only whether each agenda item was approved or rejected but also the detailed voting results (including the percentages of votes in favor, against and abstaining for each item). These details must also be included in periodic reports, such as the annual business report. Since a low approval rate for a particular item—even if it is ultimately approved—may be interpreted by the market as a signal of diminished confidence in management, companies will need to adopt more proactive IR strategies, including strengthened engagement with institutional investors and proxy advisory firms ahead of shareholders’ meetings to secure supportive votes.

Strengthening of Disclosure Requirements for Officer Compensation

Starting in May 2026, a strengthened disclosure framework will be introduced to secure greater transparency in executive compensation. The Financial Supervisory Service is expected to revise the standard disclosure forms for periodic reports, such as business reports, to require companies to disclose the total amount of compensation paid to all executives together with figures such as the Total Shareholder Return (“TSR”) and operating profits for the past three years. Furthermore, companies will be required to provide specific details of the criteria used to calculate compensation and the reasons for payment.

Currently, equity-based compensation, such as Restricted Stock Units (“RSUs”), is disclosed separately from executive compensation, primarily focusing on the overall grant status at the company level. Under the new regulations, however, all forms of equity-based compensation must be disclosed together with (i) the aggregate compensation for all executives, and (ii) detailed individual compensation information. In addition, the cash-equivalent value of unvested (unrealized) equity-based compensation must also be presented. In light of these strengthened disclosure regulations, companies should ensure in advance that their compensation calculation criteria are objective and can be clearly explained. For companies planning to newly grant equity-based compensation, it is essential to establish clear grounds for such grants and ensure compliance with all relevant legal procedures.

3.	Regulatory Trends Regarding Dual Listings

Legislative Trends

In accordance with the “Measures to Enhance General Shareholders’ Rights and Interests Relating to the Listing of Vertically Split-Off Subsidiaries” announced by the Financial Services Commission (the “FSC”) in 2022, the relevant regulatory framework has been significantly strengthened as follows: (i) when filing a report on material facts in connection with a vertical spin-off, companies are now mandated to disclose specific details such as their corporate restructuring plans, (ii) shareholders of a listed company who dissent from a vertical spin-off are granted appraisal rights, and (iii) where a company newly incorporated through a vertical spin-off applies for a preliminary listing examination within five years of its incorporation, the listing review will include an assessment of whether the parent company has faithfully implemented measures to protect general shareholders.

Despite these strengthened regulations, controversy persists as minority shareholders have reportedly continued to suffer losses due to stock price declines following the disclosure of vertical spin-offs. In response, a bill to amend the Financial Investment Services and Capital Markets Act (the “FSCMA”) has been proposed at the National Assembly, which would require the parent company’s shareholders (excluding major shareholders) to be granted preferential pre-emptive rights for new shares issued by the newly incorporated subsidiary. According to the proposed bill, an obligation would be imposed to preferentially allocate at least 30% to 70% of the total number of new shares being offered to the parent company’s shareholders in the form of pre-emptive rights. As discussions regarding amendments to the FSCMA concerning dual listings are expected to accelerate in 2026, companies should closely follow whether these bills regarding preferential allotment and other dual-listing issues will be passed and enacted.

Future Regulatory Trends, Including Plans for Guidelines on Dual Listings

On December 19, 2025, the FSC announced the “Measures to Enhance Trust and Innovation in the KOSDAQ Market” and revealed its plan to codify detailed examination criteria for dual listings. In particular, the FSC signaled its intention to formalize examination standards for types of dual listings other than those involving vertical spin-offs—such as the listing of subsidiaries acquired through M&As or the listing of subsidiaries newly incorporated through capital contributions. This indicates an expected overall strengthening of regulations governing dual listings. The KRX, for its part, plans to further refine its existing internal examination guidelines as detailed below and to incorporate these refined standards into the Detailed Enforcement Rules of the Listing Regulation.

Existing Internal Examination Guidelines

Classification		Details
Operational Independence		Whether the subsidiary’s core operations (or, in the case of tech companies, its technology development and commercialization capabilities) are independent of, and not reliant on, the parent company, taking into account factors such as operational similarity and dependency
Management Independence		Whether the subsidiary’s decision-making structure, including its management organization and executive officers, operates independently
Investor Protection	History of Formation	The background and type of the parent-subsidiary relationship formation, and the time elapsed leading up to the listing application
	Necessity of Listing	The necessity for listing the subsidiary independently from the parent company
	Transfer of Wealth	Whether there has been any usurpation of the parent company’s business opportunities, including the transfer of the parent’s sales to the subsidiary
	Need for Protection of Parent Shareholders	The relative significance of the subsidiary within the parent company (in terms of assets, revenue, etc.) and the impact of the subsidiary’s listing on the parent company’s general shareholders
	Shareholder Protection	The parent company’s efforts regarding shareholder communication and protection in connection with the subsidiary’s listing

In particular, as the need to protect the parent company’s shareholders is expected to be explicitly reflected as a qualitative examination requirement in the Detailed Enforcement Rules of the Listing Regulation, companies planning a subsidiary listing should (i) formulate their corporate restructuring plans to address not only the subsidiary’s growth potential but also concrete protection measures for the parent company’s general shareholders, and (ii) strengthen shareholder communication in this regard.

The expansion of mandatory disclosure requirements and the strengthened regulations on dual listings and treasury shares, effective starting from the first half of 2026, demand a shift in overall management strategy beyond mere practical compliance. The enhanced disclosure regime signals even stricter market scrutiny. In particular, the regulations on dual listings—which now extend beyond vertical spin-offs to include subsidiaries acquired through M&As or established via capital contributions—and the third amendment to the KCC mandating the cancellation of treasury shares within one year are expected to impose significant constraints on future capital raising and corporate governance restructuring. Therefore, listed companies should not only pre-emptively reorganize their internal disclosure systems but also establish restructuring strategies that are aligned with the evolving regulatory environment.

[Korean Version]

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