Only the '3% Rule' Remains... Democratic Party Considers Supplementing 'Major Shareholder Voting Rights Restriction'

Lee Nak-yeon, leader of the Democratic Party of Korea, is attending the Supreme Council meeting held at the National Assembly on the 7th and delivering opening remarks. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Park Cheol-eung] Only the '3% rule' remains. The Democratic Party of Korea is steadfastly maintaining its plan to pass the 'Economic 3 Laws (Commercial Act, Fair Trade Act, and Financial Group Supervision Act)' during this regular session of the National Assembly. However, justification is needed to overcome opposition from the business community and conservative opposition parties. Among the amendments to the Commercial Act, the separate election of audit committee members has become the most sensitive issue, as it includes provisions further restricting the voting rights of major shareholders, leading to strong backlash. The Democratic Party plans to revisit the 3% voting rights restriction once again.

On the 7th, Democratic Party floor leader Kim Tae-nyeon emphasized at the Supreme Council meeting, "It is very regrettable that the People Power Party treats the Fair Economy 3 Laws and labor laws as bargaining chips," adding, "They must not be negotiated." He continued, "There is no substance. They are only now forming an internal task force (TF) and starting to review the bills. The fact that they had not uttered a word until now and suddenly claim to begin legislative review itself indicates that they are using labor-related laws as a political tool."

This made it clear that People Power Party emergency committee chairman Kim Jong-in's proposal to amend labor laws cannot be a precondition for passing the 'Economic 3 Laws.' Nevertheless, the Democratic Party is keeping the overall framework while leaving room for gathering opinions and partial supplementation.

The previous day, Democratic Party leader Lee Nak-yeon met with Sohn Kyung-shik, chairman of the Korea Employers Federation, and major company CEOs, stating, "For example, I think it is not wise to open gaps that allow foreign hedge funds to target Korean companies."

Regarding this, a key Democratic Party official said, "The party's Fair Economy 3 Laws task force (TF) is conducting simulations and reviews on the concerns raised by the business community, and regarding the separate election of audit committee members, how to handle the 3% voting rights restriction will inevitably be the main issue."

One of the core points of the government's proposed amendment to the Commercial Act is to require audit committee members to be appointed separately from other directors, and when appointing auditors or audit committee members, major shareholders are prohibited from exercising voting rights exceeding 3% by combining their shares with those of related parties. Under current law, major shareholders and related parties each hold 3% voting rights. Related parties include relatives within six degrees of kinship (parents, children, siblings, etc.) and relatives within four degrees by marriage (people related through marriage). For example, if there are currently two related parties, the major shareholder and related parties collectively hold 9% voting rights, but under the combined rule, they would be limited to 3%.

Yang Hyang-ja, a Supreme Council member of the Democratic Party, appeared on MBC Radio's 'Kim Jong-bae's Focus' that day and said, "I have heard from companies that there is no big problem when opinions are fairly and transparently managed. However, there seems to be room to discuss the concerns raised about the Commercial Act a bit more." She was referring to the 3% voting rights restriction.

She added, "The business community is not raising significant issues regarding the Fair Trade Act or the Financial Group Supervision Act. If we look more closely at the Commercial Act, we may find common ground."

Chairman Kim Jong-in recently stated in a media interview, "Limiting major shareholder voting rights to 3% can be discussed and amended during the legislative process, but the bill itself should not be opposed."

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