Controversy is expected after the KOSDAQ Association issued guidelines telling listed companies to include in their articles of incorporation a provision to hold meetings only by in-person attendance, undermining the purpose of introducing electronic shareholders' meetings. Critics say many KOSDAQ-listed corporations could move to amend their articles to restrict shareholder participation by taking advantage of a mandate that applies only to corporations with total assets of at least 2 trillion won.
ChosunBiz confirmed that the standard articles of incorporation for KOSDAQ-listed companies obtained on the 2nd include this content. The KOSDAQ Association's standard articles serve as guidelines to help listed companies update their articles in line with revisions to statutes such as the Commercial Act. The association revised the standard articles twice, in Dec. last year and Mar. this year, following last year's amendment to the Commercial Act.
The revised standard articles include a new provision on electronic shareholders' meetings. This is a follow-up to the Commercial Act amendment in Jul. last year that mandated electronic shareholders' meetings for listed companies with assets of at least 2 trillion won. For the majority of KOSDAQ-listed companies with assets under 2 trillion won, the KOSDAQ Association presented two options depending on whether to allow electronic shareholders' meetings.
If allowed, it proposed an amendment enabling participation in resolutions by electronic means from remote locations through a board resolution.
By contrast, if a KOSDAQ-listed company does not allow electronic shareholders' meetings, it suggested specifying in the articles that "the company shall hold its general meeting only by the method of shareholders attending in person at the convening place on the meeting date." In effect, it offered an option that lets listed companies that do not want to hold electronic shareholders' meetings exclude them from the outset in their articles.
The KOSDAQ Association says it had no choice but to propose two options in the design of the standard articles. The Commercial Act amendment states that "a listed company may hold an electronic shareholders' meeting, except as otherwise provided in its articles of incorporation," meaning the standard articles had to fully reflect such provisions.
A KOSDAQ Association official said, "If a member company inquires about amending its articles regarding electronic shareholders' meetings, we recommend, as much as possible, adopting electronic shareholders' meetings."
The mandate for electronic shareholders' meetings included in this Commercial Act amendment was introduced to protect the rights and interests of small shareholders who had difficulty attending general meetings. It lets shareholders participate online when meeting dates overlap during the general meeting season or when the location is too far for physical attendance.
A KOSDAQ Association official said, "The intention of the Commercial Act amendment is good, but when actually conducting electronic shareholders' meetings, the expense could burden KOSDAQ-listed companies, and there is concern about how many will actually attend." The official also noted that even before electronic shareholders' meetings, electronic voting was conducted but participation was lower than expected.
However, even if there are no legal issues, criticism may arise that this runs counter to the purpose of the Commercial Act amendment. Because the criterion is total assets, few listed companies in the KOSDAQ market are required to hold electronic shareholders' meetings.
According to FnGuide on the 2nd, there are 20 KOSDAQ-listed companies whose total assets exceed 2 trillion won. With 1,820 KOSDAQ-listed companies in total, only 1.1% are required to hold electronic shareholders' meetings.