"Driving Small and Medium-sized Enterprises
into the Hands of Speculative Capital"
On the 14th, the KOSDAQ Association expressed "deep regret" over the passage of the amendment to the Commercial Act, which expands the duty of loyalty of directors from companies to shareholders, and requested Choi Sang-mok, Acting President and Deputy Prime Minister as well as Minister of Strategy and Finance, to exercise his right to request reconsideration.
The KOSDAQ Association (hereinafter referred to as the Association) stated in a commentary on the same day, "We express deep regret over the passage of the amendment to the Commercial Act, which expands the duty of loyalty of directors, despite the earnest appeals of companies," and added, "We earnestly request the Acting President to exercise the right to request reconsideration regarding this amendment to the Commercial Act, which causes serious side effects on our economy and small and medium-sized enterprises."
On the 13th, the partial amendment to the Commercial Act was passed at the plenary session of the National Assembly. Photo by Yonhap News
The Association argued, "The KOSDAQ market is a market representing small and medium-sized enterprises, which account for 75% of the total," and "If the duty of loyalty of directors is expanded to shareholders in a market centered on individual investors, over 90% of whom are short-term small investors, decisions will be skewed toward short-sighted choices rather than long-term future investments."
Concerns were also raised about the potential surge in lawsuits following the amendment to the Commercial Act. The Association pointed out, "Small and medium-sized enterprises are structurally vulnerable to responding to lawsuits," and "If activist funds exploit this to intervene in management and pursue short-term profits, resulting in lawsuits, small and medium-sized enterprises will have no choice but to worry about the survival of the company rather than management."
The Association further criticized, "Amid worsening domestic and international environments due to sluggish domestic demand, low growth, and protectionist trends worldwide, this amendment to the Commercial Act will drive companies to become prey to speculative capital," and added, "By forcing companies to focus only on short-term performance, it will cause serious side effects on the speculative nature of the capital market and corporate management activities."
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