The Democratic Party of Korea will reintroduce a stronger amendment to the Commercial Act on the 5th. The amendment to the Commercial Act, which was shelved during the Yoon Suk Yeol administration, aimed to expand directors’ fiduciary duty to shareholders and introduce electronic general meetings of shareholders. The new amendment includes enhancing the cumulative voting system for large listed companies and gradually expanding the separate election of audit committee members. The implementation timing is adjusted to enact all provisions immediately except for the introduction of electronic general meetings of shareholders.
The Democratic Party of Korea’s task force for revitalizing the Korean stock market held a press conference at the National Assembly’s communication center in the morning and noted they are reintroducing the amendment to the Commercial Act to reflect the public sentiment confirmed through the election.
The reintroduced amendment to the Commercial Act includes ▲ fiduciary duty of directors to shareholders ▲ changing outside directors to independent directors ▲ strengthening the cumulative voting system for large listed companies ▲ expanding the separate election of audit committee members ▲ reinforcing the introduction of electronic general meetings of shareholders ▲ and limiting voting rights of major shareholders and special affiliates to 3% in the appointment of audit committee members, known as the '3% rule.'
The 3% rule included in this amendment is new and was not part of the previous amendment to the Commercial Act, nor is it officially a party platform of the Democratic Party of Korea. They explained, “Though it is not included in our party platform, it was incorporated for further discussion given criticisms that the current law is insufficient to achieve its purpose.”
Regarding strengthening the cumulative voting system, the content includes amending the related regulations so that the company's articles of association cannot exclude the introduction of the cumulative voting system. Currently, it is possible to exclude the cumulative voting system in accordance with the company's articles, thus the aim is to prevent this. This is also included in the president's election pledges.
Notably, there are changes to the implementation timing. The previous amendment to the Commercial Act set the implementation timing as ‘one year after promulgation,’ but this time, except for the electronic general meeting of shareholders, all the other contents are to be implemented from the day the president promulgates it.
Oh Ki-hyoung, the Director General of the Democratic Party of Korea, explained, “We aim to expedite the protection of shareholders, making everything effective from the date of the president’s promulgation, except for the electronic general meetings of shareholders which require system preparation.”
However, the content related to ‘burning treasury shares’ mentioned in the president's election pledge is not included. Representative Oh stated, “As there are matters to be discussed, we will consult with the secretary of the National Policy Committee and discuss it further.”
The Democratic Party of Korea is expected to expedite the process in line with the president's statement during the election campaign to “handle the amendment to the Commercial Act within three weeks.”
They stated, “Although there are many scheduled matters in the National Assembly, we will do our best to process it as quickly as possible, reflecting the purpose of this election.”
Representative Oh also mentioned to reporters after the briefing, “We must do it as quickly as possible,” and noted, “We need to discuss whether it will be completed under the current floor leadership or under the new one.”