Choi Sang-mok, Deputy Prime Minister and Minister of Strategy and Finance, announced that he would submit amendments to the Commercial Act and the Capital Markets Act, which are expected to include protection of minority shareholders, during this year’s regular National Assembly session. However, he avoided making specific comments about which laws would be revised and how.
On the 29th, during a comprehensive audit of the Planning and Finance Committee of the National Assembly, Deputy Prime Minister Choi Sang-mok was asked by Jin Seong-jun, a member of the Democratic Party of Korea, about the government’s position on including the obligation to protect shareholder interests in the amendment to the Commercial Act. ’s answer,” he said. He added, “Regarding the revision of the Commercial Act and the Capital Markets Act, we are discussing various proposals on which laws to revise and how to revise them.”
It was in March of this year that the government began considering revisions to the Commercial Act to ‘protect the interests of shareholders.’ The purpose is to expand the scope of faithful performance of duties from the commercial law stipulation that ‘directors must faithfully perform their duties for the company’ to include shareholders. President Yoon Seok-yeol visited the Korea Exchange at the beginning of the year and said, “We will push for a revision of the law so that the board of directors responsibly reflects the interests of minority shareholders,” and related ministries such as the Ministry of Strategy and Finance, the Financial Services Commission, the Financial Supervisory Service, and the Ministry of Justice began a review.
In June and August of this year, Lee Bok-hyun, the head of the Financial Supervisory Service, was involved in the controversy related to the amendment to the Commercial Act, arguing that the commercial law must be revised for the government’s ‘corporate value up program’ to succeed in resolving the ‘Korea discount’ (undervaluation of the Korean stock market). It even caught fire.
The business community objects, saying that expanding the scope of fiduciary duty to include shareholders could lead to threats of various lawsuits from some groups claiming short-term losses. There are also concerns that corporate value may be damaged by becoming an obstacle to large-scale investments or mergers and acquisitions.
In the face of such strong resistance, the government appears to have recently taken a step back. This change is evidenced by Deputy Prime Minister Choi Sang-mok’s announcement on this day that it has not been decided which law to revise, the Commercial Act or the Capital Markets Act. If the expansion of the scope of duty of loyalty is included in the Commercial Act, it will apply to all companies, but if it is amended through the Capital Markets Act, the scope will be reduced to listed companies.
Even President Lee Bok-hyeon, who was most active in the commercial law amendment, said at the Financial Supervisory Service’s audit of government affairs on the 17th of this month, “I am cautious about saying here (that we will push for commercial law revision) because we are considering several proposals within the government.” He added, “There are parts that need to look at the entire commercial law system. “In the reality of Korean business, there is a risk of being excessively punished for breach of trust, so we are considering how to strike a balance,” he said.
The final decision is expected to be made within this year. When asked whether amendments to the Commercial Act or the Capital Markets Act would be submitted during this year’s regular National Assembly session, Deputy Prime Minister Choi responded, “We are doing our best and trying to do so.”
Sejong = Reporter Soon-gu Jeong [email protected]
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