The government and the ruling party have officially started promoting follow-up legislative tasks for the modernization of the capital market. On the 8th, the Democratic Party of Korea and the Financial Services Commission held a closed-door meeting to discuss the mandatory retirement of treasury stock, the expansion of the cumulative voting system, strengthening the separate election of audit committee members, and the preparation of regulations for inclusion in the MSCI developed market index.
This meeting, organized by the Democratic Party of Korea's "Special Committee on KOSPI 5000," largely served as a preliminary check to refine the medium- to long-term roadmap for structural reform of the capital market. The ruling party aims to realize the legislative and regulatory framework necessary for the fulfillment of President Lee Jae-myung's pledges and the achievement of the KOSPI 5000 era within the year.
One of the issues discussed at the meeting was the retirement of treasury stock. The retirement of treasury stock is a measure by which corporations buy back their own shares from the market and then eliminate them, serving as a means of returning value to shareholders by increasing shareholder equity. The Democratic Party of Korea and the Financial Services Commission exchanged views on strengthening disclosure standards to encourage listed companies to retire their treasury stock and the possibility of legalizing mandatory retirement.
The Financial Services Commission is currently reviewing a plan to expand the disclosure requirements for retirement plans of companies holding treasury stock from the existing 5% to more than 1% through amendments to the Capital Market Act enforcement decree. This aims to block practices where corporations accumulate treasury stock and either fail to utilize it or use it for defending management rights, thereby increasing the transparency of the capital market.
O Gi-hyeong, a commissioner of the Democratic Party of Korea and chairperson of the "Special Committee on KOSPI 5000," noted during a briefing, "There may be various debates about whether the retirement of treasury stock should be done under commercial law or capital market law. If various proposals emerge in July, I plan to gather them and review them in the regular session of the National Assembly."
Follow-up tasks for amending commercial law were also a key agenda item of this meeting. The amendment to the commercial law, which passed the National Assembly on the 3rd, expands the duty of loyalty for directors to include 'the company and shareholders' and formalizes this requirement. The Democratic Party of Korea plans to push forward with the mandatory cumulative voting system and the expansion of separate elections for audit committee members, which had been put on hold due to differences between the ruling and opposition parties, in the temporary session of the National Assembly in July.
O Gi-hyeong stated, "I urge the Legislation and Judiciary Committee to swiftly process the cumulative voting system and the expansion of separate elections for audit committee members that were not addressed last time." In this regard, the committee plans to hold a public hearing on the amendments to the commercial law on the 11th and gather opinions from various sectors.
Additionally, the Democratic Party of Korea is also reviewing ways to supplement the Capital Market Act related to improving the governance structure of listed companies. Discussions are underway regarding methods of mergers in the capital market, granting preemptive rights to protect the shareholders of the parent company during simultaneous listings of parent and subsidiary companies, and expanding mandatory public offerings.
O Gi-hyeong emphasized, "During the regular session of the National Assembly, we need to enrich and responsibly advance discussions related to the Capital Market Act," adding, "I would like to hear the opinions of stakeholders such as corporations, investors, overseas investment institutions, and investment advisory firms."
The meeting also included discussions regarding easing the criminal liability of corporate executives. Particularly, with growing calls from the business community for relaxation regarding the scope of breach of trust offenses, the government plans to seek points of agreement. O Gi-hyeong noted, "We are sharing many concerns internally about issues of criminal liability," and suggested that discussions with the Ministry of Justice, which has enforced the law, will need to be organized and that the perspectives of the judiciary should also be listened to. He concluded, "Once the discussions are sorted out, I expect a final alternative will emerge from within that context."
In addition, the ruling party is also considering measures for the long-term revitalization of the capital market, such as the capitalization of retirement pension funds and inclusion in the MSCI (Morgan Stanley Capital International) developed market index. The Democratic Party of Korea intends not only to pursue legislation in the second half of this year but also to ensure the effectiveness and legitimacy of the system through various public discussions and to closely cooperate with the government.