An amendment to the Commercial Act that, in principle, requires corporations to cancel treasury shares they hold passed the National Assembly's plenary session on the 25th, led by the Democratic Party of Korea. The Ministry of Justice prepared and announced guidelines for shareholder-protection management.
The National Assembly passed the so-called "third Commercial Act amendment" at the plenary session that day. The amendment includes a principle that if a company acquires treasury shares, it must cancel them within one year.
However, exceptions may apply if there are reasons such as employee compensation or the implementation of an employee stock ownership plan and if a disposition plan for holdings, signed and sealed by all directors, is approved at the shareholders meeting each year. It also simplified procedures by allowing treasury share cancellation by "board resolution."
Corporations subject to restrictions on foreign investment under the Telecommunications Business Act and other laws are, in principle, required to dispose of treasury shares within three years from the effective date to the extent necessary for compliance.
Since the launch of the Lee Jae-myung administration, the Commercial Act has been amended three times. The first amendment to the Commercial Act in Jul. 2025 created a duty of loyalty of directors to shareholders. The second amendment to the Commercial Act mandated cumulative voting.
The Ministry of Justice, responding to calls for concrete behavioral guidance to comply with the first amendment to the Commercial Act, announced the "guidelines for directors' conduct norms" that day.
Measures to fulfill the duty of loyalty include: ▲ a "special committee" composed of outside directors without conflicts of interest to advise the board's decision-making ▲ a plan for outside experts in law, finance, tax, environment, and other fields to conduct prior reviews of the fairness of a transaction ▲ a plan to fully provide shareholders with information such as the background and standards of directors' decisions on conflict-of-interest matters.
However, because the guidelines are not legal norms, failure to follow them does not, by itself, mean a director failed to fulfill duties. The guidelines also do not require courts to decide cases in accordance with them.
An official at the Ministry of Justice said, "We plan to continuously present guidelines for transaction types with a high likelihood of conflicts of interest," adding, "We will continue efforts to protect the rights and interests of ordinary shareholders and to enhance the transparency of the governance of corporations."
Minister Jung Sung-ho of the Ministry of Justice said of the Commercial Act amendment, "Treasury shares will be used for their original purpose of shareholder returns, helping to resolve the Korea discount and to support the sustained growth of corporations." Regarding the guidelines, Jung said, "We expect sustained growth of corporations as trust in directors' efforts to protect shareholders and in the fairness of transactions increases."