The third amendment to the Commercial Act, centered on mandating the cancellation of treasury shares, passed the National Assembly's plenary session.
On the 25th, the National Assembly held a plenary session and passed an amendment to the Commercial Act whose main provision mandates the cancellation of treasury shares. It passed with 175 in favor and one abstention out of 176 lawmakers present.
The Commercial Act amendment is part of the government and ruling party's push to advance the capital market. Once the third Commercial Act amendment takes effect, corporations must cancel newly acquired treasury shares within one year. Existing treasury shares are given a six-month grace period. If the cancellation mandate is violated, a fine of 50 million won will be imposed on individual corporate directors.
There are some exceptions to the mandatory cancellation of treasury shares. In special cases such as managerial necessity and the implementation of the employee stock ownership plan, the company may draw up a plan to dispose of treasury shares and obtain approval at the general meeting of shareholders. In addition, if there is a statutory cap on foreign equity, an exception allows disposal within three years after the law takes effect.
The amendment also provides that if a company disposes of treasury shares instead of canceling them, it must acquire them equally in proportion to the number of shares held by each shareholder. If an involuntary treasury share cancellation requires a capital reduction procedure, it was simplified to allow a board resolution instead of a special resolution at the general meeting of shareholders.
Although some exceptions were allowed, the original plan of the "K Capital Market Special Committee" was passed largely as is. During deliberations at the Legislation and Judiciary Committee, there was an opinion to allow an exception for holding treasury shares for the purpose of defending management rights, limited to small and venture corporations, but lawmaker Oh Ki-hyeong held to the original plan and allowed almost no exceptions.
Oh Ki-hyeong, chairperson of the K Capital Market Special Committee, held a press conference immediately after the plenary passage and said, "The focus of this third Commercial Act amendment is to eliminate expedients involving treasury shares and strengthen shareholder returns," adding, "Now it is the market's time. Everyone must work together so that changes in systems, such as the reform of the treasury share system, can take root as honest practices in the market."
Following the third Commercial Act amendment, the Democratic Party submitted the offense of legal distortion (Criminal Act amendment) to the plenary session. The legal distortion offense placed on the agenda that day is a revised bill with some changes from the Legislation and Judiciary Committee's draft.
The original draft from the Legislation and Judiciary Committee centers on a provision that if judges, prosecutors and the like distort the law in relation to a case under trial or currently investigating, with the purpose of giving unlawful or unjust benefits to others or harming their rights and interests, they shall be subject to imprisonment of up to 10 years and disqualification of up to 10 years.
Acts of legal distortion are defined in three categories: intentionally misinterpreting statutes to advantage or disadvantage a party; destroying, concealing, forging, or altering evidence related to a case, or using evidence while knowing it was forged or altered; unlawfully collecting evidence by means such as violence, threats, or deception, recognizing criminal facts without evidence, or recognizing facts in a way that is markedly contrary to logic or rules of experience.
However, during coordination by the floor leadership, the legal distortion offense was revised to apply only to criminal cases, and parts with potential constitutional issues were removed. Floor spokesperson Baek Seung-a said, "It was revised to apply only to criminal cases and to minimize potential constitutional issues, and it was adopted as the party line at the general meeting of lawmakers."
Lawmaker Kim Yong-min, the ruling party secretary on the Legislation and Judiciary Committee, objected. After a closed-door general meeting of lawmakers, Kim met with reporters and said, "The problem is that it ignored the parts where countless people are being harmed in civil or administrative cases," adding, "The leadership and the floor leadership must take responsibility for having created a patchwork law."
The People Power Party filed for a filibuster (a lawful obstruction of proceedings through unlimited debate) against the legal distortion offense.