Controversy is expected after the Korea Securities Dealers Association for KOSDAQ reportedly offered guidance telling listed corporations to insert into their articles of incorporation a clause that general meetings will be held only by in-person attendance, undermining the purpose of introducing electronic general meetings of shareholders. Critics say many KOSDAQ-listed corporations could move to amend their articles to restrict shareholder participation by taking advantage of the mandate that applies only to corporations with total assets of 2 trillion won or more.
ChosunBiz obtained the standard articles of incorporation for KOSDAQ-listed corporations on the 2nd, confirming that they include this content. The KOSDAQ Association's standard articles serve as guidelines to help listed corporations update their articles in line with revisions to laws and regulations 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 general meetings of shareholders. This is a follow-up to the amendment to the Commercial Act in Jul. last year that mandated electronic shareholder meetings for listed corporations with assets of 2 trillion won or more. For the majority of KOSDAQ-listed corporations with assets under 2 trillion won, the KOSDAQ Association presented two options depending on whether to allow electronic shareholder meetings.
If allowed, it proposed a revision enabling participation in resolutions by electronic means from remote locations through a board resolution.
By contrast, if a KOSDAQ-listed corporation does not allow electronic shareholder meetings, it suggested specifying in the articles that "the company shall hold the general meeting only by the method in which shareholders attend the convocation place in person on the meeting date." In effect, it presented a plan that would allow listed corporations that do not want to hold electronic shareholder meetings to 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 amendment to the Commercial Act states that "a listed company may hold an electronic general meeting of shareholders, except as otherwise provided in the articles of incorporation," meaning the standard articles had to fully reflect this provision.
A KOSDAQ Association official said, "If a member company asks about amending its articles regarding electronic shareholder meetings, we recommend, as much as possible, introducing electronic shareholder meetings."
The mandate for electronic shareholder meetings included in this Commercial Act revision was introduced to protect the rights of small shareholders who have had difficulty attending general meetings. It allows shareholders to participate in meetings online if meeting dates of listed corporations overlap during the shareholder meeting season or if the location is too far for physical attendance.
A KOSDAQ Association official said, "The intent of the Commercial Act revision is good, but if we actually proceed with electronic shareholder meetings, the expense could burden KOSDAQ-listed corporations, and there is also the question of how many people would attend." The official added that even before electronic shareholder meetings, electronic voting was conducted but participation was lower than expected.
However, even if no legal issues arise, criticism could emerge that this runs counter to the intent of the Commercial Act revision. Because the criterion is total assets, few listed corporations in the KOSDAQ market are required to hold electronic shareholder meetings.
According to FnGuide on the 2nd, there are 20 KOSDAQ-listed corporations whose total assets exceed 2 trillion won. With 1,820 KOSDAQ-listed corporations, only 1.1% are required to hold electronic shareholder meetings.