"'Abolish the 3% Rule'... Korea Listed Companies Association Submits 10 Major Requests to Government"

"Support for Detergent and Investment Measures Needed... Corporate Governance Regulations Should Be Strengthened for Transparent Structure"

[Asia Economy Reporter Minwoo Lee] To respond to the large-scale rejection incidents at shareholder meetings of listed companies and the economic slowdown caused by the novel coronavirus disease (COVID-19), the Korea Listed Companies Association proposed 10 major regulatory easing tasks, including the abolition of the '3% rule,' to the government.

On the 27th, the Listed Companies Association announced that it had submitted to the government the "10 Major Tasks for Devoting to Management Activities and Profit Generation of Listed Companies," which contains these proposals.

First, it urged the establishment of an efficient corporate management decision-making system. In particular, it pointed out the need to abolish the 3% rule. The '3% rule,' which limits the voting rights of the largest shareholder to 3% when appointing auditors in listed companies, makes it difficult to secure the quorum for resolutions, leading to mass rejections of auditor (committee member) appointments at shareholder meetings. The association emphasized the need to prevent such incidents.

The association stated, "Like major advanced countries, South Korea urgently needs to improve the system by easing quorum requirements and abolishing the 3% rule to restore corporate management functions, and to relax shareholder meeting resolution requirements so that social and economic costs incurred to secure voting rights and fill governance gaps can be focused on new business development and performance improvement."

It also stressed the need for flexible accounting operations and tax support. Due to COVID-19 spreading worldwide, delays in submitting various reports and issues in accounting treatments have occurred, so flexible responses are necessary. The association requested ▲extension and expansion of measures to resolve delays in financial closing caused by COVID-19 ▲temporary suspension of the auditor designation system based on financial requirements ▲flexible operation of policies related to internal accounting control systems ▲support for companies through activation of various investment tax credits.

It argued that steady fundraising and investment measures are urgently needed. To secure global competitiveness in the era of the 4th Industrial Revolution, it is necessary to diversify capital market fundraising methods while guaranteeing stable management rights and balancing management defense legislation. To this end, it requested ▲introduction of dual-class voting rights and new stock subscription option systems ▲codification of the 'business judgment rule' as an institutional device for active management activities.

Additionally, to establish transparent ownership structures, it emphasized the need to raise regulatory standards related to corporate governance of listed companies and to relax the minimum shareholding requirements for subsidiaries of holding companies.

This content was produced with the assistance of AI translation services.