Choi Eun-seok, a member of the People Power Party (Daegu Dong-gu/ Gunwi-gun Gap), noted on the 22nd that she has proposed a bill to amend the Commercial Act to protect the legitimate management rights of corporations and prevent the impairment of corporate value.
As the ruling party has stated that it will process the amendment to the Commercial Act, which includes expanding the separate election system for audit committee members and introducing cumulative voting, it aims to establish a system that allows domestic corporations to defend their management rights against external threats such as hostile mergers and acquisitions.
The current amendment centers on ▲ the introduction of subscription rights for new shares ▲ allowing the issuance of shares with differential voting rights ▲ introducing shares with veto rights ▲ and codifying the principle of business judgment. All of these have been raised as defensive measures for corporate management rights.
Subscription rights for new shares refer to granting existing shareholders the right to purchase new shares at a low price, excluding the acquirer, when a hostile takeover or management rights infringement occurs.
Additionally, Korea currently allows the issuance of shares with differential voting rights only for unlisted venture corporations, and the position of Choi Eun-seok is to broadly permit this issuance like major countries such as the United States.
Furthermore, as the recently amended Commercial Act has expanded the duty of care of directors to include shareholders, it also addresses the need to clarify in law the principle of business judgment recognized by precedents to prepare for the possibility of an increase in damage lawsuits against directors. Along with her party colleague Ko Dong-jin and Kim Tae-nyeon from the Democratic Party of Korea, she has also proposed an amendment to the Commercial Act containing related content.
The current Commercial Act has faced criticism for inadequately providing defensive measures for management rights, which could undermine the autonomy and management stability of corporations. Particularly, as concerns have grown over the worsening of the management environment should the ruling party's anticipated amendment to the Commercial Act be passed within the July extraordinary session, there is an explanation from the office that legal supplements are necessary to achieve a balance between management rights attacks and defenses, ensuring fair competition for management rights, and protecting the business activities of directors.
Choi Eun-seok stated, "We need to more balance the Commercial Act system so that it can support the innovation and sustainability of corporations," and added, "This amendment will serve as a minimum bulwark to protect corporate strategic independence and the role of corporations as economic entities."