Will the Breach of Trust Crime Be Abolished This Time?

Published 22 Jul.2025 07:00(KST)

Overlap with Occupational Breach of Trust in Criminal Act
"Protecting Business Judgment... A Crime Not Found Overseas"
"Weakened Anti-Corruption Investigations... Could Grant Immunity"

With the Democratic Party of Korea signaling further amendments to the Commercial Act, discussions on abolishing or easing the crime of breach of trust are gaining momentum. On July 14, Kim Taenyeon, a member of the Democratic Party, introduced a bill to delete the special breach of trust provision under the Commercial Act and to explicitly codify the "business judgment rule" in the Criminal Act. The intention is to maintain strengthened shareholder rights and increased transparency, while preventing criminal punishment solely based on the occurrence of damages after the fact. On the same day, Oh Kihyung, another Democratic Party member, stated, "Since the business community has expressed concerns about the breach of trust issue in relation to the duty of loyalty to shareholders, I have proposed to the party leadership that we actively consider it." He also announced a goal to pass legislation reflecting the easing of the breach of trust crime during the regular National Assembly session in September.

Kim Taenyeon, member of the Democratic Party of Korea.

The current special breach of trust provision under Article 622 of the Commercial Act punishes those who, by violating their duties, seek personal gain or provide benefits to a third party, thereby causing damage to the company. However, because its elements and penalties overlap with the crime of occupational breach of trust under the Criminal Act, it has long been criticized as "duplicative legislation" and "double punishment." In introducing the amendment, Kim Taenyeon also proposed a clear definition of the "business judgment rule" to provide a standard for distinguishing between intentional self-dealing and legitimate business conduct.

There are conflicting opinions within the legal community regarding moves to abolish or ease the breach of trust crime. A judge at a district court commented, "There are not a few cases where individuals are punished for breach of trust simply because they did not make a better decision in retrospect." He added, "Ultimately, this holds people accountable for outcomes, and while accepting and overcoming this may be part of entrepreneurial spirit, there are cases where punishment is imposed based on hindsight." He continued, "Given the need to foster an environment that encourages entrepreneurship, rather than expanding the scope of the duty of loyalty, it is necessary to reflect the Supreme Court's trend of not punishing business decisions as breach of trust in legislation."

A lawyer at a major law firm also noted, "Breach of trust is a crime that does not exist overseas, and foreign investment firms have often raised questions about it." He added, "The problem has been that its application depends on whether or not something is considered a business judgment." He went on to say, "It may be more appropriate to prevent such conduct through other systems rather than criminal punishment."

There are also significant concerns. A chief prosecutor stated, "The prosecution has responded strictly to economic and corporate crimes, and breach of trust has been a key charge in many cases." He argued, "Abolishing breach of trust would be tantamount to taking away an investigative tool for corporate and public official corruption." He continued, "Rather than abolition, it would be more realistic to clarify the requirements for breach of trust or to legislate limits on investigation periods." Another senior prosecutor explained, "In simple terms, breach of trust applies when a company executive or employee causes damage to the company for personal gain." He warned, "If abolished, it would become difficult to criminally punish favorable contracts for controlling families or preferential treatment for affiliates." He also pointed out, "Civil liability or institutional checks alone have clear limitations in proving damages and holding people accountable."

A lawyer at a law firm in Seocho-dong, Seoul, also commented, "There are many cases where it is unclear whether a CEO or executive's actions are for themselves or for the company." He warned, "Abolishing breach of trust could give a free pass to those who run companies for their own benefit."

Separate from the debate on breach of trust, the ruling party plans to process a Commercial Act amendment bill during the July extraordinary session of the National Assembly, which includes the introduction of cumulative voting and the expansion of separate election of audit committee members. This is a follow-up to President Lee Jaemyung's (61, 18th class of the Judicial Research and Training Institute) campaign pledges, which included the phased expansion of separate election of audit committee members, activation of cumulative voting, and consideration of institutionalizing the cancellation of treasury shares by listed companies.