Recent Revision of the Korean Commercial Code

On July 22, 2025, the Korean government promulgated a significant revision of the Commercial Code, introducing a package of reforms designed to strengthen shareholder rights—especially those of minority shareholders—and to enhance transparency and accountability in corporate governance.

The key amendments and their implications are as follows:

- Directors’ fiduciary duty to shareholders

- Directors are now explicitly required to act in the best interests of both the company and its shareholders. This obligation includes treating all shareholders fairly, particularly in transactions involving potential conflicts of interest, such as mergers, spin-offs, and related-party deals.

- This revision provides a stronger legal foundation for protecting minority shareholders in such transactions.

- Effective Date: July 22, 2025 (immediate)

- Introduction of virtual general meetings of shareholders

- The revised code allows listed companies to hold virtual general meetings through a board resolution. Additionally, companies exceeding a specified asset threshold (to be determined by Presidential Decree) will be required to conduct meetings in both physical and virtual formats.

- This reform is expected to broaden shareholder participation, particularly among foreign and minority shareholders, by enhancing accessibility and eliminating logistical barriers.

- Effective Date: January 1, 2027

- Expansion of the 3% voting cap in audit committee member elections

- The 3% cap on voting rights—previously applicable only to the appointment of inside directors as audit committee members—now applies uniformly to all audit committee member appointments, including independent directors.

- This amendment aims to enhance the independence of audit committees and increase the likelihood that minority-backed candidates will be elected.

- Effective Date: July 22, 2026 (one year after promulgation)

- Introduction of the “Independent director” concept and increase in mandatory ratio

- The term “Outside Director” has been replaced with “Independent Director”, defined as one who operates free from executive influence. In addition, listed companies must now ensure that at least one-third of board members are independent directors, an increase from the previous requirement of one-quarter.

- This change aims to align Korean governance practices with international standards and to strengthen board oversight functions.

- Effective Date: July 22, 2026 (full compliance deadline: July 22, 2027, with a 12-month grace period)

Two widely debated proposals—(i) mandatory cumulative voting and (ii) expanding split election requirements for audit committee members—were excluded from the final version of the above amendment. However, both remain active topics of discussion and are expected to be revisited through public hearings and future legislative efforts.