On March 7, 2022, the Financial Services Commission (the "FSC") announced an amendment to the Disclosure Guidelines for Corporate Governance Reports (the "Guidelines").  The announcement came in light of the heightened public attention on shareholder protection issues surrounding the listing of newly created subsidiaries following a split-off and also the expansion of mandatory corporate governance disclosure starting this year to KOSPI-listed companies with total assets of KRW 1 trillion or more (approximately 265 companies in total).  The threshold had previously been KRW 2 trillion or more.

The FSC announced in its press release (link) that the Guidelines have been amended as follows (in effect for disclosures to be made in 2022):

• A detailed principle has been newly established for corporate governance reports, requiring companies to describe corporate policies for shareholder protection in relation to changes in the ownership structure of the company, such as a split-off or merger. 
  -  The description should include a company's shareholder protection policy such as incorporation of the views of minority shareholders and protection of the rights of dissenting shareholders in connection with events such as merger, business transfer, spin-off (including split-off) and comprehensive exchange or transfer of shares.  If there is no such policy, the description should address the reasons therefor and the related plans for the future.

• In case there is a general approval from the board of directors for internal transactions with affiliates or self-dealings with the management or controlling shareholders, companies should provide a proactive explanation addressing the "details and reasons" involved.

• A CEO succession policy and a plan for establishing an audit committee should be included in the report. 
  -  The CEO succession policy will be deemed to be in compliance with the relevant principle only if the key details of such CEO succession policy are documented and clearly stated in the corporate governance report.

• Other amendments 
  -  The timing for providing information to shareholders in relation to general meeting of shareholders now clearly stipulated as four weeks prior to the meeting.
  -  With respect to evaluation of activities of outside directors, compliance with the relevant principle to be recognized only when the actual evaluation details are specified.
  -  Only face-to-face meetings or video conferences to be recognized as communications with external auditors.
  -  Age and gender ratio items added for purposes of evaluating diversity of the board composition.

The FSC also announced the following plans:

• Shareholder protection measures regarding the listing of newly split-off subsidiaries under further review.

• The Korea Exchange (the “KRX”) and the Korea Listed Companies Association to offer information and education programs on key changes to the Guidelines from March to April 2022.

• From June to September 2022, KRX and the Korea Corporate Governance Service to review corporate governance disclosure status of public companies in accordance with the amended Guidelines and to recognize and reward certain exemplary companies.

With the expansion of the scope of companies subject to mandatory corporate governance disclosure and the application of the amended Guidelines, it would be necessary for companies subject to the requirement to establish shareholder protection policies in connection with changes to the company’s ownership structure (e.g., split-off).  In addition, companies should also be prepared to provide more detailed disclosures on certain sensitive and important items such as the CEO succession policy.

[Korean version]