Lee Bok-hyun, "The 'Business Judgment Rule' Should Be Legislated When Amending Commercial Law"

FSS Holds Policy Seminar on Commercial Act Amendment
"Commercial Act Amendment Should Include Discussion on Exemption from Breach of Trust Liability"

Lee Bok-hyun, Governor of the Financial Supervisory Service [Image source=Yonhap News]

Lee Bok-hyun, Governor of the Financial Supervisory Service, emphasized on the 12th regarding the amendment of the Commercial Act's provision on 'Directors' Duty of Loyalty (Article 382-3)' that "the 'business judgment rule' should be explicitly institutionalized so that directors can be exempted from civil and criminal liability if they make reasonable business judgments based on sufficient information."

Unlike advanced countries where violations of the 'duty of loyalty of directors' lead to civil lawsuits, South Korea allows criminal punishment (breach of trust). In response to ongoing criticism, this is interpreted as a call to legalize exemption from breach of trust charges as well.

Governor Lee attended a policy seminar on 'Corporate Governance for Capital Market Advancement' held at the Korea Financial Investment Association in Yeouido, Seoul, in the morning, stating, "It is necessary to fully consider the unique Korean circumstances where the expansion of the duty of loyalty of directors could excessively restrict the business environment due to criminal issues involving breach of trust."

He pointed out that cases pursuing the interests of the company or specific individuals rather than all shareholders, such as split listings, still frequently occur.

Governor Lee said, "It is now time for social discussion on expanding the duty of loyalty of directors under the Commercial Act to 'protect the interests of the company and shareholders' to address this issue."

He added, "The Delaware General Corporation Law and the Model Business Corporation Act in the United States explicitly stipulate the duty of loyalty to shareholders. Additionally, countries like the United Kingdom and Japan have been making efforts to protect shareholders' interests through precedents and soft norms (guidelines), which holds significant implications for us."

He continued, "In operating a large ship called a corporation, directors, who act as the captain and navigator, have the most important role of faithfully protecting the passengers, that is, all shareholders, until they reach their destination."

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