The Democratic Party of Korea has entered final talks on the third amendment to the Commercial Act, which centers on mandating the retirement of treasury shares. The KOSPI 5000 special committee (the committee) is consolidating a single bill that would, in principle, require retirement of treasury shares newly acquired after the law takes effect, while allowing exceptions for certain purposes such as employee compensation. A plan to include existing treasury shares in the retirement scope is also under serious review.
According to the Democratic Party on the 24th, the committee has drawn up the broad framework of the third amendment to the Commercial Act and has moved into the fine-tuning stage. A key committee official said in a phone call, "We are collecting various opinions and are organizing a substantial portion. The discussion has matured considerably," adding, "The level of the single bill will be determined by how much opinions converge."
The core of the third amendment to the Commercial Act being pushed by the committee—the mandated retirement of treasury shares—fundamentally restricts corporate holdings of treasury stock. The Democratic Party of Korea sees treasury shares as having been misused as tools for stock-price support or defense of management control. The view is that domestic companies have bought back treasury shares and then, when needed, resold them on the market or converted them into friendly stakes to help owner families maintain control. By mandating retirement of treasury shares, the number of a company's outstanding shares would decrease, lifting the price-to-book ratio (PBR) and generating shareholder-return effects.
The committee has reportedly formed a consensus to impose an obligation on listed companies to retire, in principle, treasury shares newly acquired, while recognizing exceptions—subject to shareholder meeting approval—for treasury shares used for "internal incentive purposes," such as employee compensation, grants to employee stock ownership associations, or contributions to in-house welfare funds.
The key point of contention is whether to include existing treasury shares in the retirement scope. The committee is moving toward the principle of "retiring existing treasury shares as well," while also reviewing a direction that would allow exceptions for holdings below a certain ratio.
One committee Commissioner said, "While the principle is to retire existing treasury shares as well, we are discussing a plan to allow exceptions in cases where they exceed 10% of capital (and limit it to such cases)."
As of June 2025, 68.7% of listed companies hold treasury shares, with 236 companies holding 10% or more and 533 companies holding 5% or more. If a full mandate to retire is implemented, business circles fear significant damage to governance structures and management strategies. To minimize abrupt market shocks while preserving the intent of "enhancing shareholder returns," the idea is to allow exceptions when the amount exceeds 10% of capital. Germany also allows holdings of treasury shares up to 10% of capital, but requires disposal of any excess within three years of acquisition.
Analysts say the LOTTE Corporation case also played a role in the current discussion. LOTTE Corporation's treasury shares account for 27.5% of total outstanding shares. In a disclosure last November, LOTTE Corporation announced a value-up plan that included reviewing retirement of treasury shares, but in June it only sold 5% (5,245,461 shares) to its affiliate LOTTE Property & Development. On the 13th, at the National Assembly Strategy and Finance Committee audit, Oh Ki-hyung, Chairperson of the Democratic Party of Korea's KOSPI 5000 special committee, took aim at Ko Jung-wook, president and head of LOTTE Corporation's Finance Innovation Office, saying, "Among nonfinancial companies, LOTTE Corporation has the highest proportion of treasury shares."
The committee plans to finalize a single bill soon and begin the full legislative process in November. However, the Democratic Party leadership may try to control the pace in light of resistance from business circles. There is talk of first handling the abolition of the breach-of-trust crime and then pushing the mandated retirement of treasury shares as a package.
Floor leader Kim Byung-kee said at a press briefing in September, "We will address the breach-of-trust issue first," adding, "It has not yet been decided whether to proceed in parallel with mandated retirement of treasury shares or to push it separately." A Democratic Party floor official also said that day, "Since corporations hold treasury shares in diverse forms, we need to examine them carefully. The issue of retiring treasury shares is more complicated than expected," adding, "The breach-of-trust crime should probably take precedence over the third Commercial Act amendment."
Because the business community is voicing opposition to the third Commercial Act amendment, the move is seen as a strategy to first handle the abolition of the breach-of-trust crime to ease resistance from business circles. As South Korea and the United States are in final coordination over a $350 billion investment plan in the U.S., the heavy treasury-share retirement expense burden on domestic corporations also appears to have been considered. Business circles worry that if even existing treasury shares must be retired within a set deadline, listed companies that would need large buyback funds will face significant financial strain.