The Business Community Strongly Opposes the Passage of the Commercial Act Amendment... Calls for Reconsideration

The business community immediately voiced concerns on the 13th after the amendment to the Commercial Act, which introduces directors' fiduciary duties to shareholders, was passed in the National Assembly plenary session led by opposition parties including the Democratic Party.

The Korea Chamber of Commerce and Industry (KCCI) stated in a commentary on the 13th, "We deeply regret the passage of the amendment to the Commercial Act," adding, "Expanding directors' fiduciary duties not only to the company but also to shareholders is likely to impose a significant burden on our economy."

The KCCI particularly expressed concern that "our manufacturing-centered companies could face lawsuits even for normal business activities such as mid- to long-term facility investments," and that "directors may find it difficult to make bold decisions aimed at the company's future and enhancing shareholder value." They also added, "We worry that foreign companies might no longer consider Korea as an investment destination."

On the 13th, the partial amendment to the Commercial Act was passed at the plenary session of the National Assembly. The amendment expands the duty of directors from the existing "company" to "company and shareholders" and includes provisions mandating the introduction of electronic general meetings of shareholders for listed companies. March 13, 2025 Photo by Kim Hyun-min

Furthermore, they pointed out, "If small and medium-sized enterprises with technological capabilities become targets of external speculative capital and have to focus solely on defending management rights, it could negatively impact innovative growth activities such as technology development and market expansion."

The KCCI continued, "The issue of minority shareholders being excluded during mergers and acquisitions of listed companies, which was the starting point of the Commercial Act amendment discussions, has already been addressed by a separate improvement bill submitted to the National Assembly," emphasizing, "It is necessary to resume discussions focusing on this issue to wisely balance the two goals of corporate growth and shareholder protection."

Finally, the KCCI urged, "Considering the impact of the Commercial Act amendment on the national economy, we ask the National Assembly to provide another opportunity for careful deliberation."

The Korea Economic Association also stated in a commentary on the same day, "The passage of the Commercial Act amendment could lead to a sharp increase in reckless lawsuits by shareholders, seriously disrupting management decisions for long-term corporate development such as mergers and acquisitions and large-scale investments."

The association particularly warned, "Activist funds are likely to excessively interfere in management to pursue short-term gains such as dividend increases and management interventions," adding, "It will become practically impossible for companies to fully concentrate on management."

They further stated, "Ultimately, this amendment will drive our companies to become prey for speculative capital, lowering corporate competitiveness and causing a decline in national economic value," and criticized, "The expansion of directors' fiduciary duties does not align with our company law system and is likely to violate constitutional principles such as the prohibition of excessive restrictions and the principle of clarity."

The association expressed hope that "the business community hopes the president will exercise the right to request reconsideration regarding this Commercial Act amendment, which includes serious side effects and unconstitutional elements."

Meanwhile, the amendment to the Commercial Act, which was put to a vote in the plenary session that afternoon, was passed with 184 votes in favor, 91 against, and 4 abstentions out of 279 members present.

The amendment, proposed as party policy by the Democratic Party, broadens the scope of directors' fiduciary duties from the existing 'company' to 'company and shareholders' and mandates the introduction of electronic shareholder meetings for listed companies.

The amendment will take effect one year after its promulgation. Members of the People Power Party, who opposed the amendment, voted against or abstained. They plan to recommend that Choi Sang-mok, the Acting Prime Minister and Minister of Economy and Finance, exercise the presidential right to request reconsideration of the amendment passed by the plenary session.