The ruling and opposition parties reached a consensus on a bill to amend the Commercial Act at the Legislation and Judiciary Committee's Subcommittee on Bill Review. The key content includes expanding the fiduciary duty of directors from 'the company' to 'the company and shareholders', converting outside directors to independent directors, and mandating electronic shareholder meetings to enhance the rights of minority shareholders.
Notably, they also reached an agreement to supplement the contentious 3% rule. Under the current Commercial Act, the 'maximum shareholder related party aggregated 3% rule' is applied only to in-house director audit committee members for their selection, while outside director audit committee members are selected under a 'simple' 3% rule, which prohibits exercising voting rights over shares exceeding 3% for each shareholder. They decided to apply the 'aggregated 3% rule' to outside director audit committee members as well.
Kim Yong-min, a member of the Democratic Party of Korea and the ruling party's secretary of the Legislation and Judiciary Committee, met with reporters after the subcommittee bill review and noted, 'The amendment to the Commercial Act has passed the subcommittee of the Legislation and Judiciary Committee,' adding, 'It is significant that this is the first livelihoods bill passed under the Lee Jae-myung administration, and the collaboration between the ruling and opposition parties has great meaning.'
He continued, 'From today onward, we will gradually establish procedures to better protect shareholder interests and enhance the transparency of companies. We will work to ensure that the capital market stabilizes further and becomes fair and transparent,' while stating, 'We will hold a public hearing and process the two contentious issues that could not be agreed upon as quickly as possible.'
The amendment to the Commercial Act, which the ruling and opposition parties dramatically agreed upon, is expected to be processed at the main meeting of the National Assembly after the full meeting of the Legislation and Judiciary Committee on the 3rd.
Kim said, 'Since this bill is being processed with the agreement of both sides, it is expected to be handled swiftly in the main meeting tomorrow,' and expressed his expectation that 'the consensus bill will exert stronger influence during the implementation process and send a positive signal to the capital market.'
The Democratic Party has suggested that the legislative task for the amendment to the Commercial Act includes ▲ expanding the fiduciary duty of directors to 'the company and shareholders' ▲ mandating electronic shareholder meetings ▲ expanding the separation of audit committee elections ▲ introducing cumulative voting ▲ changing the independence of outside directors, and has indicated it will process them within the June extraordinary session, signaling a speed-up.
The ruling party's amendment to the Commercial Act has faced backlash from the business sector and opposition parties, which have argued that it could suppress management rights due to issues such as lawsuit overkill and expanding charges of breach of trust. However, the Democratic Party maintained that there would be no issue as the Supreme Court controls the principles of business judgment. They established a policy to review supplementary measures for the elimination of special breach of trust provisions or 'the buyback of treasury shares,' which were included in the presidential campaign promises, after the amendment is implemented in the second half of the year while insisting on proceeding with the amendment.
In this context, the opposition party noted, 'Considering the issues of shareholder rights violations arising from recent corporate capital increases, we have decided to proactively review the amendment to the Commercial Act,' and following discussions between the leadership of both parties and the secretary of the Legislation and Judiciary Committee, they reached an agreement on the amendment.