Democratic Party Agrees to 'Abolish Financial Investment Tax,' Pushes Ahead with 'Commercial Act Amendment'?

Obligation to Diligently Perform Moving Duties, Governance Improvement Regulations
Opposition Proposes 19 Bills... Ruling Party Calls It a "Logical Contradiction"

The Democratic Party of Korea is pushing for an amendment to the Commercial Act that guarantees the interests of minority shareholders. The party plans to handle the amendment together with a bill to abolish the financial investment income tax (Fintax).

On the 5th, the Democratic Party announced at the party floor strategy meeting that it will establish a task force (TF) within next week to promote the amendment to the Commercial Act. Lee Jung-moon, vice chairman of the Democratic Party Policy Committee, said at the meeting, "Cases continue to occur where controlling shareholders benefit while minority shareholders suffer during company splits and mergers," adding, "The Democratic Party will make sure to pass the amendment to the Commercial Act within this National Assembly as the first step to protect the interests of ordinary shareholders."

The Democratic Party expressed agreement on the 4th with the People Power Party's call to abolish the Fintax and argued that the Commercial Act must be amended as a follow-up measure. Currently, the 'duty of loyalty' stipulated in the Commercial Act applies only to the company, but the amendment requires directors to also fulfill their duty of loyalty to shareholders. The idea is to agree to the postponement or abolition of the Fintax in exchange for settling the Democratic Party’s proposed amendment to the Commercial Act, which has been advocated since the previous National Assembly.

On November 10, 2020, a forum on improving corporate governance and directions for amending the Commercial Act was held at the National Assembly. Participants, including Park Ju-min, a member of the Democratic Party of Korea, and Lee Sang-hoon, a committee member of the Economic and Financial Center at the People's Solidarity for Participatory Democracy, are taking a commemorative photo. Photo by Yoon Dong-ju

According to the National Assembly’s legislative information system, the Democratic Party has currently proposed 19 bills to amend the Commercial Act. All of them stipulate the duty of loyalty of directors to shareholders. However, the People Power Party opposes the amendment. Kim Sang-hoon, policy chief of the People Power Party, said, "Corporate shareholders include various stakeholders such as foreigners, institutions, and private equity funds, and imposing a duty of loyalty on them is a logical contradiction."

While maintaining the plan to handle the amendment to the Commercial Act together with budget-related bills, there is also a trend to push for amendments to the Capital Market Act in the Political Affairs Committee, chaired by Yoon Han-hong of the People Power Party. Kang Yoo-jung, the party floor spokesperson, said, "Since the standing committees are divided, it may be difficult to handle everything at once," adding, "More than three forums focusing on minority shareholder protection and governance improvement are scheduled."