The proposed amendment to the Korean Commercial Code (the "Proposed Amendment") to reinforce regulations on corporate governance announced by the Ministry of Justice (the "MOJ") on June 11, 2020 was resolved by the Cabinet Council on August 25, 2020, following the announcement of the proposed amendment and the review by the Ministry of Government Legislation (the "MOGL").  As addressed in our last newsletter issued back in June 2020, the Proposed Amendment focuses mainly on strengthening minority shareholder rights and expanding the scope of measures to check and balance the largest shareholder's exercise of management control, including a multi-level derivative suit and separate election of a director who is an audit committee member.  No amendments have been made to the main text of the Korean Commercial Code after the announcement of the Proposed Amendment, while Addenda have been added.

The Addenda stipulate that (i) the Proposed Amendment shall enter into force from the date of promulgation; (ii) the provision on the separate election of a director who is an audit committee member shall be applied starting from when a new audit committee member is elected after the Proposed Amendment enters into force; (iii) the 3% cap rule of restricting the exercise of voting rights to dismiss an auditor or an audit committee member shall also apply to the dismissal of an auditor or an audit committee member who was elected under the previous provision and is currently in office at the time after the enforcement of the Proposed Amendment.

The Proposed Amendment resolved by the Cabinet Council is to be signed by the President and countersigned by the Prime Minister and the competent members of the Cabinet Council, after which is to be submitted to the National Assembly.  Legislation procedures after the submission of the Proposed Amendment to the National Assembly include the examination and resolution by the Legislation and Judiciary Committee, a competent standing committee, the presentation of the Proposed Amendment to the plenary session for resolution, and the promulgation of the Proposed Amendment by the Government. 

It is necessary to pay attention to progresses going forward such as the proceeding of legislation procedures for the Proposed Amendment and whether any changes will be made to the Proposed Amendment during the review process by the National Assembly.