1.

Proposed Amendments to the KCC (Introduction of Virtual Shareholder Meetings and Improvement of Appraisal Rights Regime)
 

(1)

Introduction of Virtual Shareholder Meetings

(i)

Digitalize general shareholders’ meetings as a whole, including notices, the holding of meetings, attendance, and voting;

(ii)

In addition to physical shareholder meetings, allow fully virtual shareholder meetings (i.e., all shareholders are present via electronic means of communication) and parallel virtual shareholder meetings (i.e., shareholders choose between physical attendance at the place of convocation and attendance by electronic means of communication) pursuant to the company’s articles of incorporation, provided, however, that it is not permissible for the articles of incorporation to allow only fully virtual shareholder meetings and exclude physical shareholder meetings and parallel virtual shareholder meetings; and

(iii)

Stipulate that shareholders’ consent for sending meeting convocation notices by means of electronic documents may be obtained by electronic means.
 

(2)

Improvement of Appraisal Rights Regime

(i)

Appraisal rights to be granted to dissenting shareholders in the event of a vertical spin-off in excess of 10% of the total assets of the spun-off company;

(ii)

Dissenting shareholders to be converted to creditor status if the purchase price calculated by the company is fully paid or deposited by the effective date of the corporate restructuring event (such as a merger or spin-off);

(iii)

In the event of a dispute over the purchase price, there will be an option to make a deposit of an amount that is equal to or greater than the purchase price notified by the company to the shareholder in connection with appraisal rights (i.e., partial deposit to be allowed); and

(iv)

Requirement to provide shareholders with specific grounds for calculating the purchase price of appraisal rights and to guarantee the right to review and make copies of relevant records.
 

2.

Amendment to the Guidelines on Corporate Governance Disclosure for Listed Companies
 

(1)

Detailed Principles

(i)

Disclose whether the dividend procedures have been improved to enable investors to check dividend amounts and make investment decisions by improving the dividend record date system as a follow-up measure to the FSC’s plans to improve the dividend distribution procedures of listed companies (January 2023) (Link);

(ii)

Disclose (a) the records of communication between the management and minority shareholders/overseas investors, (b) whether communication channels for overseas shareholders are in place, and (c) the percentage of disclosures in English;

(iii)

Describe the status of capital raising, which may result in a conflict of interest between shareholders in the process of capital raising (such as bonds linked with equity (CB, BW, EB, etc.) and contingent capital securities), and disclose whether the board of directors considered the interests of minority shareholders when making the decisions on capital raising;

(iv)

Expand the standards for disclosure of diversity within the board of directors to include age, experience, as well as gender, and describe whether the board of directors is composed entirely of a single gender and the reasons for non-compliance with the requirements for diversity;

(v)

With respect to the adequacy of directors’ remuneration, disclose (a) whether it has established remuneration policies that are linked to the individual evaluation of directors, (b) whether it has disclosed remuneration-related policies, and (c) whether it has subscribed to directors and officers liability insurance, as well as the policies to prevent abuse thereof; and

(vi)

Expand the existing scope of disclosure of executives’ violations of laws to include undue benefits/unfair assistance and violation of accounting standards (previously, the scope of disclosure had been limited to embezzlement/malpractice and unfair transaction). However, the period of disclosure was changed from “indefinite disclosure from the point of final ruling” to “five years from the end of the execution (or exemption) of a sentence” starting from the Government’s judgment (including indictment and administrative dispositions).
 

(2)

Key Indicators

Reflecting the above amendment to the detailed principles, (i) “the company provides predictability regarding cash dividends” and (ii) “the board of directors is not composed entirely of members of a single gender” were newly added to the key indicators, and (a) “there is no outside director who has served for more than six years” and (b) “the company provides training to the internal audit organization at least once a year” were deleted.
 

(3)

Report Format

The report format was changed from a simple description of each item to a separate disclosure of (i) compliance with principles (by way of providing brief description) and (ii) implementation of relevant policies (by way of marking Y/N).
 

3.

Details of Discussions at the Round Table of the Financial Investment Industry
 

(1)

FSC

The Government’s capital market system reforms have been carried out as three pillars: (i) increasing accessibility for overseas investors, (ii) strengthening protection of general shareholders, and (iii) strengthening the role of the capital market. In the future, the FSC will work on measures to (a) strengthen the competitiveness of the Korean stock market, (b) improve systems related to new securities and STO, and (c) improve regulations governing convertible bonds and treasury stocks in support of fair trade.
 

(2)

KRX

The KRX is assessing ways to improve the KRX listing system by phase by referring to the example of the Japanese stock exchange that urged (i) listed companies to increase their corporate value (e.g., upscale their efforts to derive higher returns on equity and stock prices and make public disclosures in English) and (ii) companies listed on the prime/standard market with lower returns on equity to publicly announce their plans to achieve higher returns on equity in January 2023.
 

(3)

Korea Listed Companies Association

With respect to the FSC’s plans to improve the dividend distribution procedures of listed companies (Link) announced in January 2023, as of March 2024, approximately 26% (636 companies) of listed companies should be able to implement the new rules in time for their 2024 dividend distributions. The association will continue to encourage more listed companies to improve their dividend distribution procedures.
 

4.

SEC’s Amendments to the Beneficial Ownership Reporting Rules
 

(1)

Shortening of Initial/Amendment Filing Deadlines

The initial filing deadline will be shortened from “within ten calendar days from the date on which the filing obligation arises” to “within five business days,” and the amendment filing deadline will be clarified from “promptly filing” to “within two business days.”
 

(2)

Clarification of Schedule 13D Disclosure Requirements for Derivative Securities

Holders of cash-settled derivative securities have generally not been regarded as beneficial owners who are required to make disclosure. The Amended Rules specifically require derivative securities holders to publicly disclose any interest they beneficially hold through derivative securities (including cash-settled derivative securities) with an issuer’s equity securities as the underlying assets (including contracts, agreements, understandings, and relationships related to an issuer’s securities).