As we detailed in a previous newsletter (Link), on March 13, 2025, the National Assembly passed an amendment to the Korean Commercial Code (the “KCC”) to expand the scope of directors’ duty of care to encompass both the company and its shareholders and to provide for virtual shareholder meetings for listed companies. Enactment of the amendment, however, remains uncertain as the Acting President vetoed the amendment on April 1, 2025 and sent it back to the National Assembly for reconsideration. During the period between the passage of the amendment and its subsequent veto, however, financial regulators and other governmental authorities issued additional official statements and released related reference materials. This newsletter details these updates below, which companies may want to consider in revising their practices to reflect the amendment, assuming it is ultimately enacted following reconsideration by the National Assembly.

First, on March 19, 2025, the Financial Supervisory Service (the “FSS”) issued a press release discussing international cases related to directors’ fiduciary duties towards shareholders. The release suggested that principle-based fundamental improvements, such as the principle of protecting shareholders, are necessary to shift the corporate paradigm and enhance corporate value. On March 26, 2025, the Governor of the FSS appeared on a radio program for an interview, and the FSS reportedly distributed additional reference materials in a Q&A format.

In the Q&A, the FSS explained that directors’ fiduciary duties toward shareholders are grounded in comparative law, presenting provisions related to the protection of shareholders by directors under the laws of the US, the UK, and Japan. The FSS also noted that the Bank of Korea’s report, which states that capital expenditure (investment) has a larger impact on corporate value than shareholder returns in certain industries, such as semiconductors and IT, should not be interpreted to imply that greater protection of shareholders necessarily harms corporate value. The FSS further pointed out that it is unreasonable to argue that the amendment to the KCC is flawed in terms of legal principles. According to a related press report, the FSS explained in the Q&A that the duty of directors to protect shareholders as a whole and maximize their interests is a fundamental assumption of the corporate system, and that many scholars suggest that directors’ fiduciary duties toward shareholders should be included as an established rule in the KCC. While the proposed amendment has been criticized as being abstract and declaratory, lacking specific means and involving problems such as the ambiguity of the concept of and requirements for “all shareholders,” and the unpredictability of related consequences, the FSS explained that the fiduciary duty toward shareholders applies only to conflicts of interest between controlling shareholders and general shareholders, not to all actions of directors. In the short term, establishing guidelines and other supplementary measures can enhance companies’ predictability, while over the long term, legal interpretations and court precedents can create more concrete parameters of what the fiduciary duty toward shareholders entails.

In this regard, the Chairman of the Financial Services Commission (the “FSC”) commented on March 26, 2025 that his position remains unchanged, asserting that “amending the Capital Markets Act should be prioritized [over the KCC].” To minimize the adverse impact of the amendment of the KCC on many unlisted small and medium-sized enterprises, the government suggested an alternative at a press conference held by the FSC in December 2024. They proposed amending the Capital Markets Act to limit the scope of application of the fiduciary duty of directors toward shareholders to listed enterprises only. For further details about the proposed amendment to the Capital Markets Act, please refer to the related newsletter we published in December 2024 (Link).

Please note that the official statements from governmental and financial regulatory authorities, as well as related materials that have been distributed, may affect companies’ practices if the proposed amendment to the KCC is ultimately enacted after reconsideration by the National Assembly.

[Korean Version]