Former Presidents of the Commercial Law Association: "The Three Corporate Regulation Laws Are Populist Policies"

[Asia Economy Reporter Changhwan Lee] Scholars have criticized the three corporate regulatory bills (Commercial Act, Fair Trade Act, Financial Group Supervision Act) that the government and ruling party aim to pass within the year as populist policies that undermine corporate competitiveness.

The Federation of Korean Industries (FKI) announced on the afternoon of the 16th that it held an emergency roundtable on the three corporate regulatory bills by inviting former presidents of the Korean Commercial Law Association at the FKI Conference Center in Yeouido, Seoul.

At the meeting, former presidents of the Commercial Law Association expressed serious concerns about the government's plan to forcibly pass amendments to the Commercial Act and Fair Trade Act within the year and requested careful review of the bills.

Regarding the amendment to the Commercial Act, Professor Emeritus Junsun Choi of Sungkyunkwan University said, “Some argue that separately appointing one audit committee member is not a big issue, but this shows a lack of understanding of corporate realities.” He added, “Audit committee members not only perform audit roles but also serve as directors who make major corporate decisions and set business strategies. If even one member representing external speculative forces is appointed as an audit committee member, it could lead to technology leakage and delay or distort critical corporate management decisions.”

Professor Emeritus Wanjin Choi of Hankuk University of Foreign Studies pointed out that if the separate election of audit committee members is mandated under the government’s amendment, which limits the major shareholder’s voting rights to 3%, the major shareholder’s authority in board composition will be relatively weakened, ultimately causing issues of shareholder rights and property rights infringement.

Professor Choi stated, “Since the board of directors is the most important body where strategic corporate decisions and business execution take place, shareholders’ opinions must be equally reflected when appointing audit committee members to prevent infringement of shareholder rights.”

Regarding the introduction of derivative lawsuits, Professor Seonjeong Kim of Dongguk University criticized the bill for undermining the principle of corporate personality independence, saying, “Issues related to subsidiaries should be left to the subsidiary shareholders; it makes no sense for the parent company shareholders to intervene.” He added, “This bill destroys the fundamental principle of modern jurisprudence, the ‘principle of corporate personality independence.’”

Amendments to the Fair Trade Act and Financial Group Supervision Act Constitute Redundant and Excessive Regulation

Professor Junsun Choi criticized the amendment to the Fair Trade Act for sudden policy changes and excessive regulation. Since the introduction of the holding company system in 1999, the government has consistently eased regulations on holding companies, but now it is moving in the opposite direction by raising mandatory shareholding ratios.

Regarding the issue of unfair internal transactions, sufficient regulatory measures already exist under the Commercial Act, so adding regulations under the Fair Trade Act and imposing gift tax constitutes excessive regulation.

Claims were also made that the Financial Group Supervision Act represents redundant regulation. Professor Seonjeong Kim pointed out that sector-specific supervision is currently implemented for financial companies, and the Fair Trade Act is applied at the group level. In this context, additionally regulating financial affiliates within groups is excessive and redundant regulation.

Professor Choi expressed regret, saying, “In Korea, which pursues a free market economy, company law embodies the core values of capitalism as the fundamental corporate law. However, recently, a large number of populist provisions without any legitimacy or logic are scheduled to be introduced, causing company law to become very chaotic.”

Chairing the session, Kwon Taeshin, Executive Vice Chairman of the FKI, said, “Almost all economic organizations, led by the FKI, issued statements opposing the three corporate regulatory bills immediately after their proposal and visited the National Assembly to persuade lawmakers, but the desperate appeals of companies were ignored.”

He added, “The government and ruling party dismiss these economic appeals as corporate whining and are instead taking it for granted that the original bills will be passed during this year’s regular session of the National Assembly. The three corporate regulatory bills not only shake the basic framework of our Commercial Act but also fail to fulfill the stated purpose of strengthening shareholder rights.”

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