"Unclear and Vague"
"Ineffective"
Economic organizations and commercial law experts have pointed out that the proposed amendment to the Commercial Act, which focuses on the 'expansion of directors' duty of loyalty,' offers little practical benefit and could reduce management efficiency. Industry insiders have also expressed ongoing concerns that corporate directors could become targets of class-action lawsuits.
On the 15th, Yoo Jeong-ju, head of the Corporate System Team at the Korea Economic Association (Hankyunghyeop), said in a phone interview with Asia Economy, "(This proposed amendment to the Commercial Act) is too vague and ambiguous," adding, "The definitions regarding shareholders, interests, and efforts are unclear, leaving too much room for interpretation."
Currently, eight related bills focusing on expanding directors' duty of loyalty have been submitted to the National Assembly. This means that if a corporate director's management decisions are judged to conflict with shareholders' interests, they could face legal penalties.
Yoo said, "These unclear definitions will be established based on precedents, but waiting for that will take at least 10 years," adding, "In the meantime, companies will be plagued by lawsuits, which significantly undermines legal stability."
He emphasized, "There is also a possibility that swift management decisions, such as bold corporate investments, will be delayed, weakening corporate competitiveness," and added, "Instead of broadly imposing responsibilities and duties on directors by touching on fundamental principles, separate measures should be prepared."
The business community also voiced concerns that as corporate management decision-making becomes more difficult, corporate value could be damaged in the mid to long term.
An industry official said, "Minority shareholders may frequently file lawsuits opposing the board's management decisions, which could be abused by forces attacking management rights."
On the same day, eight economic organizations including the Korea Economic Association, the Korea Chamber of Commerce and Industry, the Korea International Trade Association, and the Korea Employers Federation, along with the Korean Corporate Law Association, jointly held a seminar titled 'Controversy over the Expansion of Directors' Duty of Loyalty and Protection of Shareholders' Interests' and engaged in discussions.
Professor Choi Jun-seon, emeritus professor at Sungkyunkwan University School of Law and chair of the seminar discussion, said, "Trying to resolve minority shareholder damages arising from corporate splits and mergers through the 'expansion of directors' duty of loyalty' is neither a proper solution nor an effective one."
Shin Sung-ho, president of the Corporate Law Association, criticized, "It not only shakes the theoretical foundation of corporate law but is also an excessive legislation pushing directors toward conservative management," calling it "a serious challenge to the guarantee of profit-seeking activities of private companies and legislative omnipotence."
Professor Jeong Jun-hyuk of Seoul National University School of Law pointed out that the proposed amendments to the Commercial Act pending in the National Assembly are unlikely to have the expected shareholder protection effect and do not fit the delegation system of corporate law. He proposed an alternative: amending Article 382-3 of the current Commercial Act to enumerate ▲ directors' duty of care toward the company ▲ directors' duty of loyalty (current) ▲ efforts to protect the legitimate interests of all shareholders and prohibition of unfair infringement on specific shareholders' interests and rights ▲ consideration of matters related to the company's sustainability, such as environment and society.
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