The Financial Supervisory Service said that the criteria for exercising the right to request reconsideration (veto) regarding the proposed amendment to the Commercial Act is national interest, thus putting pressure on the government again. The core message is that the amendment expanding the duty of loyalty of directors to shareholders in existing corporations aligns with national interest, so the veto should not be exercised. It also emphasized that approaching conflicts such as 'corporations versus anti-corporations' and 'growth versus distribution' would not lead to rational solutions.
On the 28th, the FSS distributed an 'opinion related to the proposed amendment to the Commercial Act' containing this information. This follows the opposition party's forceful processing of the proposed amendment in the plenary session on the 13th, which led to increased calls from the ruling party for Acting President Han Duck-soo to propose exercising the right to request reconsideration.
The FSS stated that if the government rejects the proposed amendment to the Commercial Act, discussions on shareholder protection would revert to square one, making it difficult to gain momentum for further discussions. The FSS evaluated that 'the business community has also expressed opposition to alternatives to the Capital Markets Act' and 'there has been little progress in the National Assembly's discussions on amending the Capital Markets Act.'
It was noted that 'the market may question the government's willingness to enhance shareholder value' and that 'a skeptical perspective on the possibility of amending the Capital Markets Act may spread in the future.'
It was also stated that the side effects of the proposed amendment to the Commercial Act will not be significant when implemented. Although the amendment applies to unlisted companies, the equity structure of small and medium-sized domestic unlisted companies typically involves a very small number of major shareholders, such as representatives or family members, controlling the entire company equity. Therefore, the FSS judges that the likelihood of capital transactions, such as mergers and partitioning, occurring in these companies is low.
The FSS remarked that 'the actual impact on unlisted companies from the proposed amendment to the Commercial Act is not large' and added that 'if there are concerns about side effects, they can be minimized through institutional supplementation.'
The FSS proposed alternatives including ▲preventing excessive criminalization of management judgments (strengthening the requirements for breach of trust, abolishing special breach of trust crimes or excluding their application) ▲developing procedural regulations as safeguards such as exemption guidelines ▲overhauling litigation risk protection measures.
The FSS stated that when the government considers whether to exercise the right to request reconsideration, the criteria for judgment should be based on national interest, taking into full account the impact on the financial market. They believe that the proposed amendment to the Commercial Act will address the undervaluation phenomenon of the Korean stock market in terms of efficient resource allocation, promoting competition, and stimulating innovation in the long term. In the short term, there may be both pros and cons, but it was stated that negative impacts can be offset through institutional supplements.
The FSS emphasized that 'the issue of advancing corporate governance is in line with the principle of marketism, which aims to correct the distortion of competitive rules, establish a fair market order, promote efficient resource allocation, and secure growth momentum in the process.'
They further noted that 'the approach should be to address issues of consultation and coordination in harmony with the existing order, and if approached as a problem of conflict, rational solutions cannot be found,' adding that 'reverting to previous discussions through requesting reconsideration is unproductive.'