The Democratic Party of Korea is moving quickly to pass a third amendment to the Commercial Act centered on mandating the retirement of newly acquired treasury shares, an issue that had been quiet for a while. With corporations' shareholder meeting season approaching, there is strong will within the party to push it through a plenary session of the National Assembly quickly.
According to the political sphere on the 15th, The National Assembly's Legislation and Judiciary Committee will open its first subcommittee on bill review on the 21st to examine the third amendment to the Commercial Act. The first subcommittee will merge and review a total of 10 bills, including those introduced by Democratic Party lawmaker Oh Ki-hyeong and People Power Party lawmaker Kim Jae-seop. If discussions between the ruling and opposition parties run long, the bill review could continue until the 22nd.
Led by the Democratic Party's KOSPI 5000 Special Committee, the third amendment to the Commercial Act requires corporations to retire newly acquired treasury shares within one year and grants a grace period of 18 months for treasury shares already held. Plans to dispose of treasury shares must be approved by the shareholders' meeting each year. If this is violated, the responsibility of the board was strengthened to allow fines of up to 50 million won to be imposed on individual directors.
Although the amendment was first introduced by lawmaker Oh Ki-hyeong in November last year, discussion was halted for a time. Because the Democratic Party has pushed the Commercial Act amendment several times, it argued it should proceed simultaneously with an easing of the "breach of duty" crime, which it had proposed to the business community as a conciliatory measure. There was also an aspect of being sidelined as the Legislation and Judiciary Committee, the relevant standing committee, prioritized handling "prosecution and judicial reform" bills.
The third Commercial Act amendment is gathering speed because the "shareholders' meeting season" is not far off. As of June last year, there were 236 corporations with a treasury share holding ratio of 10% or more, and 533 with 5% or more. Since the government and the ruling party have stressed that mandating treasury share retirement is essential to rationalize the capital market, the Democratic Party calculates that passing the third Commercial Act amendment before this year's shareholders' meeting season would maximize the effect of the legal change.
A Democratic Party official said, "From the outset, the target deadline for handling the third Commercial Act amendment was the end of last year. It should pass before the shareholders' meeting season in March," adding, "If the third Commercial Act amendment is handled in the plenary session, discussions on corporate governance at corporations' shareholders' meetings will become more active."
The People Power Party has proposed a Commercial Act amendment that exempts treasury shares acquired through mergers and acquisitions (M&A). The bill submitted by People Power Party lawmaker Kim Jae-seop is effectively the party's official position on Commercial Act revisions. It is not yet certain whether the bill submitted by the ruling party will pass as is or to what extent Kim Jae-seop's bill will be reflected. In political circles, many see a high possibility of the ruling party passing it on its own.