Financial Authorities "Need to Consider Side Effects of Commercial Act Amendments"

Yonhap News

On the 18th, financial authorities reaffirmed their existing stance that amending the Capital Markets Act is preferable, citing significant side effects of the Commercial Act amendment being pushed by the opposition party.

Kim Byung-hwan, Chairman of the Financial Services Commission, stated during the morning plenary session of the National Assembly's Political Affairs Committee in response to a question from Lee Kang-il, a member of the Democratic Party of Korea, asking, "Is there any change in your position on the Commercial Act amendment?" that "While I fully agree with the intent to improve governance through the Commercial Act amendment, we cannot overlook the side effects that come with it."

The opposition party is promoting an amendment to the Commercial Act that expands directors' fiduciary duties to shareholders. In response, financial authorities proposed an amendment to the Capital Markets Act as an alternative, which provides shareholder protection measures limited to splits and mergers. This is because the Commercial Act amendment could have widespread market impacts and cause various side effects.

The Capital Markets Act amendment includes provisions such as explicitly stating that efforts must be made to protect shareholders' legitimate interests, completely abolishing the merger price calculation standard, and granting parent company general shareholders priority allocation of up to 20% of public offering new shares in the case of a split listing.

Lee Bok-hyun, Governor of the Financial Supervisory Service, also responded that there is no change in his position. Governor Lee said, "The view that governance improvements are necessary to protect general shareholders remains unchanged. However, considering the issues triggered by mergers of listed companies, and given that there are over one million unlisted companies, it is necessary to carefully consider whether additional regulations should be introduced through the Commercial Act amendment."