Ministry of Justice Issues Legislative Notice of Proposed Amendment to Enforcement Decree of Korean Commercial Code regarding Virtual Shareholders Meetings

As we previously noted, regulatory changes aimed at enhancing corporate governance and strengthening minority shareholder rights are being implemented on an accelerated basis through: (i) the first-phase amendment to the Korean Commercial Code (the “KCC”), which addresses, among other matters, directors’ fiduciary duty to protect shareholders’ interests, the independent director regime, aggregation of voting rights of a controlling shareholder and its related parties in application of the 3% voting cap in the election of audit committee members who are outside directors, and the introduction of virtual shareholders’ meetings; (ii) the second-phase amendment to the KCC, which mandates cumulative voting and the expansion of separate elections for audit committee members; and (iii) the third-phase amendment to the KCC, which addresses, among other matters, the mandatory cancellation of treasury shares (Link). In addition to these amendments, the government has announced further policy measures, including a ban on dual listings, improvements to the M&A framework for listed companies, and additional initiatives to enhance the value of companies whose shares are trading at undervalued levels (Link).

Consistent with these KCC amendments and the government’s broader corporate governance and capital markets reform agenda, the 2026 annual general meetings of shareholders saw active shareholder proposals and various exercises of shareholder rights by activist shareholders and institutional investors. Furthermore, the proactive countermeasures taken by listed companies to reflect and prepare for the amended KCC have also drawn significant attention. Additionally, effective January 1, 2027, pursuant to the first-phase amendment to the KCC, large listed companies will be required to hold virtual shareholders’ meetings alongside traditional in-person meetings, while smaller listed companies will have the option to hold shareholders’ meetings virtually. As this is expected to increase shareholder participation in general meetings, listed companies should prepare carefully and respond accordingly.

In this regard, on May 28, 2026, the Ministry of Justice issued a legislative notice for the proposed amendment to the Enforcement Decree of the KCC (the “Proposed Amendment”) to stipulate specific details regarding the operation of virtual shareholders’ meetings (Link). The key details are as follows:

Specification of Companies Subject to Mandatory Virtual Shareholders’ Meetings (Proposed Amendment, Article 42-2)

Unless otherwise provided in its articles of incorporation, any listed company may convene a virtual shareholders’ meeting alongside its in-person meeting, while a listed company meeting the size threshold prescribed by Presidential Decree is required to convene a virtual shareholders’ meeting alongside its in-person meeting (KCC, Article 542-14(1) and (2)). The Proposed Amendment defines a “large listed company” as a listed company with total assets of KRW 2 trillion or more as of the end of the most recent fiscal year.

Regulations on Holding Virtual Shareholders’ Meetings, Notice Requirements, etc. (Proposed Amendment, Articles 42-3 to 42-5 and 42-7)

When a listed company holds a virtual shareholders’ meeting, each shareholder may attend the meeting by choosing either (but not both) of two methods: (i) attending in person at the physical meeting place; or (ii) attending via a means of electronic communication. A shareholder (or other attendee) participating virtually is deemed to have attended in person at the physical meeting place (KCC, Article 542-14(3) and (4)).

When holding a virtual shareholders’ meeting, the company must include in the notice of convocation a statement that a virtual meeting will be held, specify the method of attendance, and include any other matters prescribed by Presidential Decree (id. at Article 542-14(5)).

To ensure the efficient and fair operation of virtual shareholders’ meetings, a listed company may designate a virtual shareholders’ meeting administration agency to entrust the administration of procedures for participation in the meeting’s proceedings and voting, as prescribed by Presidential Decree, (id. at Article 542-15(2)).

In this regard, the Proposed Amendment defines “means of electronic communication” as means capable of instantly transmitting mutual intentions electronically. It further sets requirements for holding a virtual shareholders’ meeting as follows: (i) establishment of standards and procedures governing the performance of meeting-related duties (such as convening the meeting), and (ii) securing of personnel and physical infrastructure necessary for holding and operating the meeting. However, if the company entrusts the administration of a virtual shareholders’ meeting to an administration agency that meets the personnel and physical facilities requirements under the Proposed Amendment, item (ii) need not be separately applied to the company.

The items to be included in the convocation notice for a virtual shareholders’ meeting are specified below. In particular, care should be taken with respect to disclosure of matters relating to restrictions on shareholders’ speaking rights or participation in proceedings. The Proposed Amendment also appears to contemplate proxy attendance at virtual shareholders’ meetings, which had previously been the subject of debate.

The methods for attending and participating in the virtual shareholders’ meeting
If pre-registration is required, the method and procedures for completing such pre-registration
A statement that virtual attendance is restricted if a shareholder attends in person at the physical meeting venue
If a proxy seeks to attend and participate, the method for proxy participation, including the manner of submitting proof of proxy authority
If limits apply to the number and/or duration of shareholders’ questions or statements, the applicable standards and details of such limits
The technical requirements for attending and participating in the meeting proceedings

Regulations on the Operation of Virtual Shareholders’ Meetings (Proposed Amendment, Articles 42-6 and 42-8)

When a listed company holds a virtual shareholders’ meeting, it must operate the meeting in a manner that enables shareholders to participate in the proceedings and vote on resolutions in real time (KCC, Article 542-15(1)). The Proposed Amendment allows a company to restrict attendance at a virtual meeting to shareholders who have applied in advance and, to ensure the orderly operation of such meetings, to limit the number of opportunities for, and duration and volume of, shareholder questions and statements. In addition, when a general meeting is conducted virtually, the meeting minutes must state the method of holding the meeting, the substance of the course of the proceedings, and the results thereof, and the chairperson and attending directors must affix their names and seals or signatures. The basic approach with respect to the identity verification procedures required for attendance is to require an electronic signature or identity verification authentication; however, for non-Korean shareholders and others who may experience difficulty with respect to such methods, alternative methods, such as entering a company-issued shareholder identification number and password, are also permitted.

In addition, the Proposed Amendment reorganizes terminology and establishes a basis for registration following the introduction of the independent director regime under the first-phase amendment to the KCC. It also refines regulations pursuant to the prohibition on issuing exchangeable and redeemable bonds involving treasury shares under the third-phase amendment to the KCC, and permits dormant companies to file business resumption reports electronically.

The addenda to the Proposed Amendment provide that the provisions relating to virtual general meetings of shareholders will take effect on January 1, 2027, the provisions relating to independent directors will take effect on July 23, 2026, and the provisions prohibiting the issuance of exchangeable or redeemable bonds involving treasury shares and the expanded methods for filing a dormant company’s business resumption report will take effect immediately upon promulgation. In addition, the Proposed Amendment mandates that the Minister of Justice determine and publicly announce additional matters necessary for holding and operating virtual shareholders’ meetings.

The legislative notice period for the Proposed Amendment runs from May 28, 2026 to June 29, 2026, and the amendment is expected to take effect following subsequent procedures, including review by the Regulatory Reform Committee and the Ministry of Government Legislation, followed by review by the Vice-Ministers’ Council and resolution by the State Council.

Notably, in the case of large listed companies for which virtual shareholders’ meetings will become mandatory, many are already initiating procedures to review internal regulations and consult on the selection of entrusted administrative agencies in anticipation of 2027 implementation, and concrete operational preparations are expected to commence in earnest in the second half of 2026. Even when proceeding by selecting an entrusted agency, meticulous preparation is required because conflicts may arise during the virtual meeting regarding: (i) the internal standards and procedures each company must establish to perform duties such as convening the virtual meeting; (ii) the reasonableness of specific criteria and details if the frequency and time of shareholder questions and statements are limited; and (iii) the adequacy of technical measures for identity verification required for attendance and participation in the virtual meeting.

[Korean Version]

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