Business Community on Alert Over Veto of 'Commercial Act Amendment'

"Strong Opposition Due to Concerns Over Dampened Investment Sentiment"

The amendment to the Commercial Act, led by Geoya (巨野), which has passed the National Assembly, is causing the business community to keenly watch whether Acting President and Deputy Prime Minister Choi Sang-mok will exercise his right to request a reconsideration (veto) this week. The business sector strongly opposes the amendment, arguing that it excessively infringes on corporate management autonomy and could dampen investment sentiment. Especially with the Constitutional Court's decision on President Yoon Seok-yeol's impeachment imminent, there is speculation that Acting President Choi may send the controversial amendment back to the National Assembly, postponing the final decision to the current or next administration.

On the 13th, the partial amendment to the Commercial Act was passed at the plenary session of the National Assembly. Photo by Yonhap News

According to political and business circles on the 17th, Acting President Choi Sang-mok is deeply considering whether to exercise the veto on the Commercial Act amendment. The business community strongly opposes the amendment, which expands the duty of loyalty of directors from the company to include shareholders. They are particularly concerned that lawsuits aimed at short-term profits by external shareholders, such as activist funds, will surge, and that companies will be unable to make critical decisions on mergers and acquisitions or capital investments properly. The Korea Chamber of Commerce and Industry stated, "There is a high possibility that even normal decisions for mid- to long-term capital investments will become targets of lawsuits, making it difficult for our companies to make bold decisions to enhance future and shareholder value." The Federation of Korean Industries also warned, "Frequent lawsuits over every management decision will hinder the long-term development of companies, and activist funds' excessive dividend demands and management interventions will increase, pursuing short-term profits."

Acting President Choi has maintained a cautious stance regarding the handling of the Commercial Act amendment. In late November last year, he appeared on a radio broadcast and mentioned, "Including shareholders beyond the company as subjects of directors' duty of loyalty is a matter of significant debate among many legal scholars and experts due to concerns about side effects." The bill was passed by the National Assembly plenary session on the 13th, led by the opposition parties including the Democratic Party of Korea. According to the Constitution, Acting President Choi has 15 days to promulgate the approved law or request reconsideration. With the Constitutional Court's decision on President Yoon Seok-yeol's impeachment expected soon, there is growing weight to the possibility that Acting President Choi will send the highly contentious Commercial Act amendment back to the National Assembly, deferring the final decision to the current or next administration.