"Need for an Independent 'Model Company Act' to Expand Corporate Autonomy"

FKI Proposes Separating Company Law from Commercial Law to Meet Global Standards at 60th Anniversary Seminar
"Global Standards Require Separation of Company Law from Commercial Law"

At the 'Federation of Korean Industries Model Company Law Seminar' held at the FKI Conference Center on the 30th, participants are taking a commemorative photo. From the left: Professor Kwak Kwan-hoon of Sunmoon University, Professor Kang Young-ki of Korea University, Professor Emeritus Choi Jun-seon of Sungkyunkwan University, President Jeong Jun-woo of the Korean Corporate Law Association, Vice Chairman Kwon Tae-shin of the Federation of Korean Industries, Professor Kim Sun-jung of Dongguk University, Professor Han Seok-hoon of Sungkyunkwan University, and Professor Choi Byung-kyu of Konkuk University.

Photo by Federation of Korean Industries

[Asia Economy Reporter Kim Heung-soon] The Federation of Korean Industries (FKI) announced on the 30th that, marking the 60th anniversary of its founding this year, it has embarked on modernizing corporate legislation and, as part of this effort, proposes the 'Model Company Act,' which separates the company section from the Commercial Act into an independent law.

The Model Company Act reviews the corporate laws of major countries such as the United States, Japan, and Germany, and formally separates the company section of the current Commercial Act into an independent law called the Company Act. Substantively, it significantly improves the current system to align with global standards.

"The Commercial Act Enacted in 1962 Urgently Needs to Change to Meet Global Standards"

Kwon Tae-shin, FKI's standing vice chairman, said at the Model Company Act seminar held that day, "Our Commercial Act has not been fully revised for about 60 years since its enactment in 1962. Rather, the amendment to the Commercial Act at the end of last year strengthened corporate governance regulations, resulting in an infringement on corporate management autonomy." He added, "I hope the proposed Model Company Act will serve as an opportunity to improve the current Commercial Act to meet global standards and expand the autonomy of corporate management."

Jung Jun-woo, president of the Korean Corporate Law Association and professor at Inha University Law School, said in his congratulatory remarks, "In academia, there have been many opinions that the current Commercial Act mixes different sections such as companies, insurance, marine, and carriage by sea, resulting in a lack of systematic coherence, and that the company section should be enacted as a separate independent law aligned with global standards." He added, "Since the Model Company Act is proposed by the FKI, which represents the business community, it requires the attention and discussion of the National Assembly and academia."

FKI Focuses on Creating a Business-Friendly System through the Model Company Act
Proposes Abolishing Separate Appointment of Audit Committee Members and Introducing Management Defense Measures

Choi Jun-sun, honorary professor at Sungkyunkwan University Law School and leader of the FKI Model Company Act drafting team, pointed out, "Korean company law has gradually diverged from global standards and become Galapagos-like." He criticized that "ordinary and special resolutions for shareholders' meetings remain at the 1960s level when the Commercial Act was enacted, restrictions on voting rights for shares exceeding 3% when appointing auditors (committee members), and the legal requirement to separately appoint auditor directors are hardly found anywhere else in the world." He added, "Through the FKI Model Company Act, we focused on establishing a foundation that can assist corporate decision-making and management."

Professor Kwak Kwan-hoon of Sunmoon University proposed management defense measures to ensure stable corporate management activities. He argued that companies should be allowed to grant shareholders or third parties stock acquisition rights (poison pills) and issue various types of stocks as needed to support corporate financing and provide investors with diverse options.

Professor Choi Byung-kyu of Konkuk University proposed the 'business judgment rule,' which exempts directors from liability to the company and third parties if they make decisions and perform duties based on sufficient information and in the interest of the company. He also introduced cases from the United States and Germany where the business judgment rule is recognized in case law.

Professor Kang Young-gi of Korea University Law School suggested revising the multiple derivative suit introduced by last year's Commercial Act amendment, which has a high risk of being abused by speculative capital, to the level of Japan's multiple derivative suit. Currently, in Korea, a parent company shareholder (holding 1% for unlisted, 0.5% for listed stocks for six months) can file a derivative suit against a subsidiary director in a relationship where the parent owns more than 50% of the subsidiary. He proposed strengthening this to a 100% wholly-owned subsidiary relationship with the parent holding 1% of shares for more than six months.

"The Model Company Act Should Open the Way for Discussions on Enacting Business-Friendly Company Law"

Professor Kim Sun-jung of Dongguk University Law School emphasized in the discussion, "Last year, the Commercial Act was amended under the pretext of fair economy, but fair economy is an issue that should be targeted by laws other than company law." He stressed, "Presenting a balanced and rational legislative model to refine company law is an important task for commercial law academia."

Professor Han Seok-hoon of Sungkyunkwan University Law School also argued, "We must prevent 'capital leakage' such as Coupang's overseas stock market listing through the enactment of company law that provides operational efficiency for businesses." Based on the work done so far on the Model Company Act and seminar results, the FKI plans to publish the 'FKI Model Company Act' in August and submit it to the National Assembly and others for consideration.

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