Another Amendment to the Commercial Act Protecting Common Shareholders' Rights Proposed Again

Rep. Park Jumin Proposes Amendment to Commercial Act Adding 'Major Shareholders' to Directors' Duty of Loyalty
Includes Clause Requiring Shareholder Approval for Director Compensation Policies

Park Jumin, member of the Democratic Party of Korea (center). Photo by Kim Hyunmin kimhyun81@

Since the opening of the 22nd National Assembly, legislation aimed at strengthening the protection of common shareholders' rights has been progressing.

On the 13th, Park Jumin, a member of the Democratic Party of Korea, announced the proposal of the "Common Shareholders' Rights Protection Act (Amendment to the Commercial Act)," which adds 'majority shareholders' to the directors' duty of loyalty, imposes a duty of protection towards shareholders on directors, and introduces a shareholder approval system for director remuneration policies.

This is because there are many cases where, during corporate governance restructuring such as the listing of spun-off subsidiaries, directors' actions do not affect the company but cause losses to common shareholders. Conflicts of interest between controlling shareholders and minority shareholders repeatedly occur.

Korean Commercial Act stipulates that "if the amount of directors' remuneration is not specified in the articles of incorporation, it shall be determined by a resolution of the shareholders' meeting," but in practice, only the total remuneration limit for all directors is approved, so shareholder control over director remuneration is not effectively exercised.

Park Jumin stated, "The so-called 'wealth transfer issue among shareholders,' where controlling shareholders benefit and common shareholders suffer losses through governance restructuring, repeatedly arises," adding, "I proposed related bills in the 21st National Assembly, but they were discarded due to the end of the term."

He further said, "Social discussions have matured, with the government and ruling party showing a progressive stance on the duty of loyalty towards shareholders," and emphasized, "We will ensure the passage of this bill in the 22nd National Assembly to prevent losses to common shareholders and protect their rights."

Additionally, he added, "Although the current law states that 'directors' remuneration shall be determined by a resolution of the shareholders' meeting,' in reality, only the total remuneration limit is approved, rendering the system ineffective. This bill contains provisions to make it substantive," and explained, "It will allow directors' remuneration to be paid according to the remuneration policy resolved at the shareholders' meeting and require disclosure of reports on director remuneration to strengthen common shareholders' control over director remuneration."

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