The government expressed its position that the revision of the Commercial Code would violate the protection of common shareholders and have a negative impact on the overall economy.
Minister of Justice Kim Seok-woo, who is serving in an acting capacity, stated on the 1st during a briefing held jointly by the Ministry of Justice, Ministry of Economy and Finance, and Financial Services Commission at the Government Seoul Complex in Gwanghwamun, "It was decided to demand the reconsideration due to the need for alternatives to minimize side effects through more in-depth discussions."
The main point of the revision of the Commercial Code is to expand the scope of those that directors must be faithful to from the company to "shareholders." It passed the National Assembly plenary session on March 13 under the leadership of the Democratic Party. The government and ruling party have argued for amendments to the Capital Markets Act rather than the Commercial Code. During the morning of that day, Acting Prime Minister Han Duck-soo stated, "After much deliberation, I would like to request reconsideration of the Commercial Code revision to the National Assembly," thereby exercising the veto.
Acting Prime Minister Kim noted, "I deeply sympathize with the basic intent of the bill (the Commercial Code revision)," while also stating, "There is a significant concern that this bill may cause side effects on the management environment and competitiveness of the majority of corporations, including large businesses and small and medium enterprises."
Acting Prime Minister Kim pointed out, "This bill has a structure that regulates all actions of directors for all corporations, making it difficult to clearly determine in practice what decision-making treats the interests of common shareholders or all shareholders fairly in wording."
He stated, "Due to this ambiguity, there is a high risk that the inherent purpose of preventing undue infringement on common shareholders' interests will be exceeded, leading to substantial uncertainty about directors' civil and criminal responsibilities in overall corporate decision-making, which could hinder proactive management activities."
Acting Prime Minister Kim remarked, "The government has previously suggested amendments to the Capital Markets Act that could more effectively protect common shareholders by specifically identifying capital transactions, such as mergers and divisions of listed companies, that pose a high risk of harming their interests," adding, "Expanding the scope of application gradually would be more suitable for our reality."
He reiterated, "I urge you to discuss the bill for reconsideration that was demanded today alongside the alternatives proposed by the government in-depth once again in the National Assembly to seek a desirable solution." He also urged, "Corporations must seriously accept the demands for improvements in market governance structures and actively participate in discussions to prepare reasonable alternatives, and I encourage them to improve corporate practices to protect shareholder value."