The KOSPI index topped 5,000 just 15 trading days into 2026, but some say shareholder rights remain trapped in a "box range." Since taking office, the Lee Jae-myung administration has been passing successive amendments to the Commercial Act as part of efforts to restore trust in the domestic stock market. The first set of Commercial Act amendments, centered on directors' fiduciary duty to shareholders, and the second set, focusing on mandatory cumulative voting and separate election of audit committee members, completed the legislative process and were promulgated last year.
Attention now turns to the third Commercial Act amendment, centered on mandatory cancellation of treasury shares. The government and the ruling party have pushed for passage of the third amendment since last year, but it has yet to clear the National Assembly's standing committee due to strong opposition from business circles and the prioritization of supplemental measures such as easing the crime of breach of trust.
According to the National Assembly and the financial investment industry on the 23rd, The National Assembly's Legislation and Judiciary Committee held a subcommittee on bill review on the 21st–22nd and was scheduled to review the third Commercial Act amendment that day. But the subcommittee was postponed, pushing back the review indefinitely. It was the fallout from the People Power Party, the opposition, boycotting all standing committees as Jang Dong-hyeok, the party leader, held a hunger strike.
Originally, the ruling bloc planned to handle the third Commercial Act amendment late last year, but it was pushed into this year amid contentious bills, and the goal of passage this month has effectively become unclear. Generally, a bill must pass a standing committee's subcommittee, then the full standing committee, and finally the plenary session.
The government and the ruling party view mandatory cancellation of treasury shares as essential to maintain market momentum after the KOSPI settled above 5,000. The third Commercial Act amendment, proposed by Oh Ki-hyeong, who chairs the Democratic Party's Special Committee on KOSPI 5000, would require corporations to cancel newly acquired treasury shares within one year and grant an 18-month grace period for existing holdings.
Plans to dispose of treasury shares must be approved at the annual shareholders meeting, and if this is violated, the board's accountability is strengthened by allowing fines of up to 50 million won to be imposed on individual directors.
Kim Jong-young, an analyst at NH Investment & Securities, said, "The Commercial Act amendment prevents, in advance, market concerns over the possibility of indirectly bolstering control using treasury shares or disposing of them under exceptional circumstances," adding, "At the same time, for corporations that delay cancellation or respond passively, it is expected to lead to expanded shareholder activism such as demands for cancellation via shareholders meetings and requests to amend articles of incorporation."
Although the National Assembly schedule is hard to gauge, the ruling party is expected to speed up efforts to push the third Commercial Act amendment.
The Democratic Party had planned to handle the third Commercial Act amendment before March, the usual "shareholders meeting season." As the government and the ruling party have emphasized that mandatory cancellation of treasury shares is necessary to rationalize the capital market, the aim was to enable active discussions starting with this year's corporations' shareholders meetings. But as the legislative schedule became tangled, investor disappointment is likely to grow after they had expected the bill's effects during this shareholders meeting season.
Han Byung-do, the Democratic Party's floor leader, said at a party policy coordination meeting that day, "The Democratic Party has supported the Lee Jae-myung administration's capital market advancement policy by presenting reasonable standards for two rounds of Commercial Act amendments, separate taxation of major shareholders' capital gains and dividends, and more," adding, "Going forward, we will open the KOSPI 6,000 and 7,000 era together with the public by imposing tough penalties for stock manipulation, mandating the cancellation of treasury shares, and creating shareholder-friendly systems."
Oh Ki-hyeong, a Democratic Party lawmaker, wrote on Facebook after a luncheon between the president and the KOSPI 5000 special committee, "There is no longer any reason to delay the third Commercial Act amendment as a pressing task, and we plan to move quickly." He continued, "We recognize there is a range of criticism over dual listings, and we will continue institutional improvements such as amending the Financial Investment Services and Capital Markets Act," adding, "We expect financial authorities and the exchange to deliberate dual-listing applications under stricter standards."
The securities industry is also expressing optimism. NH Investment & Securities projected that if treasury shares are canceled, the number of shares in the KOSPI market would also decrease by an average of 1% per year. Analyst Kim expected that if this occurs, "it could serve as a re-rating factor for KOSPI valuation," noting that when the number of shares in circulation falls, per-share value rises. As beneficiaries of treasury share cancellation, it cited stocks with a high proportion of treasury shares relative to listed shares, and from an industry perspective selected securities and holding companies as top picks.