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Acting President Vetoes Proposed KCC Amendment to Expand Directors’ Duty to Protect Interests of All Shareholders 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. The deliberation and decision-making process of the government regarding its decision to veto the amendment has attracted attention, and we provide you with a summary of the latest developments below. As mentioned in our last newsletter (Link), at a Cabinet Meeting of the government held on April 1, 2025, Acting President Duck-Soo Han vetoed the proposed amendment to the KCC and sent it back to the National Assembly for reconsideration. The following is a translation of the opening remarks made by the Acting President at the Cabinet Meeting. On March 13, the National Assembly passed and submitted to the government a proposed amendment to the KCC, aiming to impose “fiduciary duties toward shareholders” on directors of joint stock companies. The government has consistently demonstrated a firm commitment to improving corporate governance and enhancing shareholder returns to protect general shareholders. We strongly agree with the fundamental intent of the proposed amendment. Still, the proposed amendment may significantly affect the managerial environment and competitiveness of most companies, including small, medium-sized, and large ones. We found it necessary to seek alternatives to minimize adverse impacts through more in-depth discussions. After extensive deliberation, we would like to ask for the National Assembly’s reconsideration of the proposed amendment. The government understands that the proposed amendment aims to ensure that directors fairly consider the interests of all shareholders in the corporate decision-making process, not just those of certain groups such as controlling shareholders. However, it can in reality be difficult to determine, based solely on the language of the proposed amendment, which decisions fairly consider the interests of all shareholders. As a result, there is concern about unexpected confusion that may arise in various decision-making processes within companies. Due to this lack of clarity, the proposed amendment is likely to extend beyond its original purpose of preventing unfair infringement on the interests of general shareholders. It may rather undermine companies’ active management activities, as directors could face uncertainty regarding civil and criminal liabilities in the overall decision-making process. The proposed amendment would not only counteract the protection of general shareholders’ interests but also adversely affect the entire national economy. Despite these concerns, the National Assembly did not hold sufficient discussion about the bill to clarify its legislative intent and minimize adverse effects. In consideration of all of the foregoing, the government proposed an alternative of amending the Financial Investment Services and Capital Markets Act (“FSCMA”), which can more effectively protect general shareholders in capital transactions that are highly likely to infringe on their interests, such as a merger or spin-off of a listed company. We believe that amending the FSCMA will help establish practices for protecting general shareholders and enhancing corporate governance, with a focus on listed companies. Additionally, as relevant court precedents are established, a gradual expansion of the scope of application will better align with practices in the country. We would like to emphasize that this veto does not reflect a disagreement with the fundamental intent of the proposed amendment to the KCC, as passed by the National Assembly. We are suggesting exploring alternative approaches to achieving investor protection and enhancing corporate governance, while also preventing the restriction of companies’ management activities amid highly uncertain economic conditions both inside and outside of Korea. A bill vetoed by the government becomes law if the National Assembly passes it again with a majority of the total members in attendance and an affirmative vote of at least two-thirds (2/3) of the members present (Article 53(4) of the Constitution). The bill is abandoned if the National Assembly does not reconsider it or fails to meet the stricter quorum and voting requirements during the reconsideration. Following the government’s veto of the proposed amendment to the KCC, its enactment now depends on whether the National Assembly will reconsider the bill, and, if so, the outcome of that reconsideration. Also, as the above opening remarks introduce the government’s suggestion to amend the FSCMA to strengthen directors’ duties, it is crucial to continue to monitor developments regarding the possible amendment to the FSCMA. Please note that upon enactment of either the proposed KCC amendment or an FSCMA amendment as proposed by the government, directors may be liable for breaching their duties if controversies arise over any controlling shareholder or affiliate potentially gaining profits to the detriment of minority shareholders in a number of material transaction types, including a merger involving a listed company, transfer of a significant business or significant assets, comprehensive share swap or transfer, spin-off, spin-off merger, listing of a subsidiary following a vertical spin-off of a major business division, or establishment or listing of a subsidiary involving the transfer of a major business division through in-kind contribution. Please also be aware that either of these amendments may significantly impact regulations on determining, and required public disclosure of, the structure and conditions of such material transactions. [Korean Version]
2025.04.09

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Amendment to Enforcement Decree of the TBA to Enhance User Notification Obligations for Value-Added Telecom Service Failures This newsletter introduces an important change to the Enforcement Decree of the Telecommunications Business Act (“TBA”) that will impact primarily value-added telecom services (e.g., online service providers). These changes came into effect on March 28, 2025, following approval at a Cabinet-level meeting held on March 25, 2025. Key amendments include: 1. Notification Obligation for Suspension of Free Telecom Services: The requirement for service providers to notify users of service failures now extends to include free telecom services. 2. Notification Obligation for Suspension of Value-Added Telecom Services: The suspension time for value-added telecom services that requires a notification has been reduced from four hours to two hours. Under the TBA, telecom service providers must notify users of service suspension, including the standards and procedures for compensation for any damages incurred (Article 33(2) of the TBA). Non-compliance with such procedures can result in the issuance of a corrective order and/or issuance of an administrative fine of up to KRW 10 million (Articles 92(1)1 and 104(5)5 of the TBA). The details of the notification obligation are as follows: Obligation When Details of Notification Obligation to Notify of Suspension Notification must be sent immediately upon service suspension of telecom services. Facts and cause of service suspension Status of response measures Contact information for consultation Obligation to Notify of Damages Notification must be sent within 30 days from when the telecom service is resumed or the issue is resolved. Eligible party to make claims Criteria for damages Procedures and methods for compensation Although certain exemptions from these notification obligations exist, the scope of these exemptions has been reduced to expand the obligations on telecom service providers (Article 37-13(1) of the Enforcement Decree of the TBA). The revised exemptions are highlighted below: Grounds for Exemption Obligation to Notify Suspension Obligation to Notify Damages Pre-notified service suspensions for facility replacements or service improvements. Exempted Exempted Suspension of value-added telecom services due to failure of line facilities from facilities-based telecom service providers (e.g., mobile carrier). Exempted Exempted Value-added telecom services provided by entities with telecom revenue under KRW 10 billion or fewer than one million users daily. Exempted Exempted Suspension of free services, where there are no monthly or recurring fees. Before amendment: Exempted After amendment: Required Exempted Service suspensions lasting up to two hours due to high demand, facility issues, or equivalent events such as software abnormalities. Before amendment: Value-added telecom services, among other telecom services, shall be exempt from the duty to notify if the service is suspended for up to four hours. Post-Amendment: The exception for value-added telecom services has been removed, requiring notification if the service is suspended for more than two hours. Grounds related to software abnormalities have been added to the notification requirements Cloud computing service suspensions. Exempted Required In addition, electronic notifications using social networking services have been added to the list of acceptable notification methods (Article 37-13(3) of the Enforcement Decree of the TBA). The notification methods now include: Before Amendment After Amendment Email Text messages Posting on website or mobile application Email Text messages Posting on website or mobile application Newly implemented Use of electronic notification methods capable of individually alerting users, such as social networking services. The Amendment expands notification obligations to “free telecom services” and “value-added telecom services.” Service providers should review whether there are any new notification obligations imposed under the amended regulations, if they provide relevant services. Given that notifications must be sent “without delay” following a failure, it is critical for service providers to establish procedures and policies in advance for prompt incident response to remain compliant with legal requirements. For free telecom services or value-added telecom services, notification duties may still be exempt if applicable conditions exist, such as when the revenue is under KRW 10 billion for the previous year. It is essential to individually evaluate whether a company’s sales, user base, or other factors qualify for such exemptions. [Korean Version]
2025.04.03

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Recent Supreme Court Decision on “Employee Status” under the Labor Standards Act The Supreme Court Ruled That a Hairstylist on a 100% Commission Contract with No Base Salary is an “Employee” under the Labor Standards Act (“LSA”) On February 20, 2025, the Supreme Court held that a hairstylist who worked under a service commission contract with the beauty salon owner was deemed an employee under the LSA. The Supreme Court also upheld the lower court’s decision that found the owner to be in violation of the LSA and the Employee Retirement Benefit Security Act due to its failure to provide the hairstylist with statutory severance pay and thus imposed a criminal fine on the owner (Supreme Court Decision 2023Do18735, February 20, 2025). In this case, the hairstylist was compensated under a 100% commission-based system without a base salary or fixed salary. However, taking into account various factors (e.g., set working hours, regular meetings for inquiries, obligation to perform cleaning tasks, imposition of late attendance penalties, etc.), it was difficult to assume that the hairstylist had substantial discretion over her work. Accordingly, the hairstylist was recognized as an employee under the LSA on the grounds that she was found to be subject to a subordinate labor relationship with the employer. Implications of Court Trends on Employee Status under the LSA As demonstrated by this Supreme Court decision, courts have recently relaxed the criteria for determining employee status under the LSA. The Court’s ruling in this case was significant as it reaffirmed the trend taken by the courts towards broadly recognizing employee status under the LSA not only for delegated debt collectors and freelance announcers but also for online platform workers, such as drivers for ride-hailing services. Even if the form of an employment contract is that of a service commission contract, under which compensation is based solely on commissions without a base salary, the individual may still be classified as an employee under the LSA if a subordinate relationship is found where the employer retains a significant degree of supervision and control. This determination depends on various factors, including (i) whether the working hours and place of work are prescribed in practice, and (ii) whether the individual suffers any disadvantage by not complying with the employer’s supervision and control. In light of the above, it is advisable for businesses to proactively consider strategies for mitigating and resolving potential risks arising from various types of agreements, including delegation and commission-based contracts. [Korean Version]
2025.03.24

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Korean Agency for Technology and Standards (“KATS”) Announces 2025 Product Safety Investigation Roadmap KATS released on January 15, 2025 its roadmap for product safety investigations in 2025, targeting the products and objectives listed below. 1. Priority Items Subject to Investigations in 2025 As part of KATS’ annual practice of selecting “priority products” having above average incidences of non-compliance with safety standards or high likelihood of causing fires or accidents, KATS has identified 58 priority products for regular investigations in 2025. Among the priority products from 2024, 35 items remain on this year’s list, such as strollers, children’s bicycles, walking aids for the elderly, secondary batteries, and electric seating cushions. Further, 23 priority items have been newly added for 2025, including infant chairs, children’s textile products, children’s sports equipment, oil heaters, protective hiking helmets, computer power supplies, and electric ranges. The 58 items are broken down by category in the table below. Category Priority Products in 2025 *Products that are newly added or have details changed in 2024 are bolded and underlined Electrical Products Cables (nominal area of 96 mm2 or less), power plugs and sockets, small-sized power converters for household use, electric seating cushions (DC), electric seating cushions (AC), electric mats, cable reels, steam thawing machines, electric heating pads (AC), range hoods, electric heating cabinets, money counting machines, batteries, electric blankets, LED lamps (modules), air conditioners, electric mattresses, dimmers, heaters for animal incubation and breeding, electric ovens, electric insect repellents, electric dryers, hair curlers, computer power supplies, electric ranges, electric rice cookers, electric portable grills (27 items) Daily Products Protective helmets for vehicles, protective eyewear for vehicles, furniture (limited to dressers for home and filing cabinets for the office with a height of 762 mm or higher), double eyelid tapes, eyelash thermoforming devices, portable laser devices, winter/fashion/sports masks, oil heaters, snowboards, hiking helmets, small step ladders, roller sports helmets, sports life jackets, buoyancy aids, general bicycles (15 items) Children’s Products Children’s products made of synthetic resin, children’s bicycles, children’s leather products, children’s eyeglass frames (including sunglasses), children’s accessories, children’s kick scooters, children’s furniture, children’s skateboards, toddlers’ tricycles, strollers, children’s inline skates, children’s play equipment, children’s umbrellas and parasols, children’s sports protection equipment (protective gear and safety helmets), infant chairs, children’s textile products (16 items) 2. Product Safety Management - Points of Emphasis KATS also announced that it will prioritize in 2025 a number of product safety policies related to overseas direct-purchase products, unsafe local products (such as those having caused fires or accidents in Korea), and increased cooperation among the relevant agencies to curb illegal products in the market. More specifically, KATS plans to implement: (i) more safety surveys on overseas direct purchase products and strengthened monitoring of harmful products; (ii) safety surveys on potential fire or accident risks of domestically distributed products; (iii) greater coordination between the National Police Agency and the local governments to conduct crackdowns on the distribution of illegal products, such as non-KC certified products; and (iv) tighter oversight of recalls to reduce the number of recalled products in the market. In particular, KATS plans to conduct a total of five safety surveys on 4,700 products in 2025. As to overseas direct-purchase products, it plans to survey more than 1,000 products, more than double the 450 products surveyed in 2024. Additionally, it plans to conduct routine safety investigations on products that pose risk of fires or accidents. Accordingly, we advise companies to conduct careful reviews of their products for compliance with safety certification requirements and for consumer safety risks, as well as closely monitor the products selected for KATS’ many investigations. [Korean Version]
2025.03.14

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KFTC Proposes Amendment to Guidelines on the Operation and Evaluation of Fair Trade Voluntary Compliance Programs (“CP”) On June 21, 2024, the Korea Fair Trade Commission (“KFTC”) had introduced the fair trade voluntary compliance program (“CP”) whereby companies could voluntarily bring themselves into compliance with fair trade regulations in exchange for various incentives such as reduction of administrative fines. Since the initial launch of the program, the KFTC has been closely monitoring and analyzing the market reactions and has gathered feedback through various channels including town hall discussions with industry stakeholders to identify areas of possible improvements. On March 11, 2025, the KFTC announced its proposed amendment to the “Guidelines on the Operation and Evaluation of Fair Trade Voluntary Compliance Program (CP)” (enacted on June 17, 2024 and became effective on June 21, 2024; the “Guidelines”) that purports to introduce a number of important changes to ways CPs will be rated and evaluated by the KFTC (“Proposed Amendment”) based on the feedback it received since the program’s initial launch. The public commenting period for the Proposed Amendment continues until March 31, 2025. The Proposed Amendment includes, among others, (i) raising the baseline for each CP rating, (ii) changes to how fair trade law violations affect companies’ CP ratings, and (iii) allowing the CP rating process to move forward (subject to possible downgrading) notwithstanding the pendency of formal inquiries against the relevant companies. We summarize below the key details of the Proposed Amendment for your further reference. 1. Fair Trade Law Violation to Result in Point Deductions Instead of Lower Ratings (Article 14) Previously, if a company seeking CP evaluation received administrative fines or penalties for violating fair trade laws or obstructing the KFTC’s investigation, its rating would have been automatically downgraded by up to two ranks. Under the Proposed Amendment, the KFTC would deduct points (three evaluation points) instead of directly downgrading the rating in such circumstances (i.e., administrative fine; administrative penalty for refusal, obstruction, or evasion of the KFTC’s investigation; and criminal referral). Also companies seeking CP evaluation for the first time will be exempted from point deductions even if they have been found to have committed fair trade law violations. 2. Increased Procedural Flexibility in Case of Fair Trade Law Violation by Companies Seeking CP Evaluation (Articles 9, 15, and 18) Previously, the Guidelines gave the KFTC the option to withhold a CP rating or reject a CP rating in case the relevant company was subject to a formal investigation by the KFTC for a potential fair trade law violation that was deemed serious enough to undermine the integrity of the CP regime. The Proposed Amendment gives the KFTC the option to continue the CP evaluation process as well as the option to lower the CP rating in such circumstances, instead of withholding or rejecting the rating altogether. 3. Higher Baseline for CP Rating (Article 13) To improve the effective operation of the CP ratings evaluation, the Proposed Amendment purports to raise the baseline for the “excellent” ratings (A, AA) to 80 points for A (previously 70) and 85 points for AA (previously 80), with the point gap between the ratings narrowing from ten to five points. As a result, the baseline required to be eligible for CP incentives has increased from 70 to 80 points. 4. New Evaluation Criteria and Procedures (Article 14) To minimize the number of on-site evaluations which are burdensome to companies, the Proposed Amendment aims to introduce a three-step evaluation process as follows. After the first step (document review; includes the granting of extra points) and the second step (face-to-face evaluation), the KFTC will only proceed with the third step (on-site evaluation) if (i) the KFTC finds it necessary to conduct an on-site verification based on the first and seconds steps or (ii) the KFTC expects to reduce the amount of an administrative fine on the relevant company (rated AA or higher). 5. Criteria for Granting Extra Points (Attached Table 2.5) The Proposed Amendment introduces a maximum of 1.5 extra points for companies that received outstanding results from the KFTC’s evaluation of the performance of their obligations under subcontracting, distribution, agency, and franchise agreements. The Proposed Amendment also grants extra points for the operation of a self-regulated dispute mediation organization (specifically, the organization’s dispute intake process and its dispute settlement performance). Since its introduction in 2024, the CP has become an integral part of the KFTC’s key policy initiatives. Undoubtedly, voluntary compliance with fair trade regulations is increasingly an essential element of sustainable corporate growth, particularly given the growing social demands for corporate transparency and fairness. In this context, we encourage companies to take proactive steps to establish internal controls, reinforce efforts to comply with fair trade laws, and regularly review and monitor CP-related issues. [Korean Version]
2025.03.14

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Ranked “Band 1” in All Nine Areas, 41 “Leading Individuals” Recognized

In the 2025 edition of Chambers Global, Kim & Chang was once again the only Korean law firm ranked “Band 1” in all nine practice areas that were surveyed for Korea. In the individual categories, 41 of our attorneys and patent attorneys were recognized as “Leading Individuals.”
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“Tier 1” in All 17 Practice Areas

In the 2025 edition of The Legal 500 Asia Pacific, Kim & Chang was the only Korean law firm to be recognized as “Tier 1” in all 17 areas surveyed for Korea. Moreover, 57 of our attorneys, patent attorneys, and tax attorneys/CPAs were recognized in the individual categories.
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Ranked “Band 1” in 18 Areas, 90 “Leading Individuals”

Kim & Chang obtained a “Band 1” ranking in 18 practice areas in the 2025 edition of Chambers Asia-Pacific, once again receiving the most “Band 1” rankings among Korean law firms.
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