"Repeal the 3% Rule"... Korea Listed Companies Association and KOSDAQ Association Propose to the National Assembly

Meeting with Joo Ho-young, Floor Leader of the United Future Party... Demanding Deregulation and Tax Support

[Asia Economy Reporter Minwoo Lee] The Korea Listed Companies Association and the KOSDAQ Association have requested Joo Ho-young, floor leader of the United Future Party, to abolish the so-called '3% rule,' which limits the voting rights of major shareholders to 3% when appointing auditors in listed companies, among other improvement measures.

On the 10th, the chairpersons of the Listed Companies Association and the KOSDAQ Association visited the National Assembly and handed over a proposal outlining key issues and improvement tasks to Floor Leader Joo, the associations announced that day. This was to actively respond to major issues faced by listed companies, such as the economic recession caused by the novel coronavirus disease (COVID-19) and large-scale rejections at shareholders' meetings, and to request legislative support in the 21st National Assembly.

Jung Gu-yong, chairman of the Listed Companies Association, said, "The domestic business environment is very difficult due to the minimum wage increase and economic democratization bills," and requested the National Assembly to actively create a business-friendly environment so that entrepreneurial spirit of risk-taking and challenge through innovation can seize the opportunities of the Fourth Industrial Revolution. He added, "In particular, as a fundamental solution to the increasing number of agenda rejections at shareholders' meetings following the abolition of the shadow voting system where the Korea Securities Depository exercises voting rights on behalf of absent shareholders, legislative measures at a global level related to companies must be enacted, including easing the quorum requirements for shareholders' meetings under the Commercial Act, abolishing the 3% rule, and introducing management rights defense measures to counter hostile M&As."

Jung Jae-song, chairman of the KOSDAQ Association, also said, "Although about 97% of the KOSDAQ market consists of small, venture, and mid-sized companies, it is unreasonable that the same regulations as large corporations apply simply because they are listed companies," and requested, "Tax support is especially urgent, including improvements in stock option taxation to secure excellent talent, relaxation of the scope of major shareholders to revitalize the KOSDAQ market, and introduction of tax benefits for long-term investors."

In response, Floor Leader Joo said, "We will actively cooperate so that listed companies can contribute to innovative growth and job creation in the national economy through regulatory improvement efforts at the National Assembly level," and added, "We will prepare related system improvements and supplementary measures through bipartisan consultations."

This is not the first time the Listed Companies Association has made such claims. In April, they also proposed to the government ten regulatory relaxation tasks, including the abolition of the '3% rule,' flexible accounting operations, and tax support.

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