Han: "Negative Impact on National Economy" Over Commercial Act Amendment
Bipartisan Agreement on National Pension Reform Promulgated
No Comment on Ma Eun-hyuk Appointment... Opposition Accelerates Impeachment
Prime Minister and Acting President Han Duck-soo exercised his right to request reconsideration (veto) on the amendment to the Commercial Act, which was passed by the National Assembly plenary session led by the Democratic Party on the 1st. The rationale is that since this amendment could have a significant negative impact on the national economy, it is more appropriate to protect shareholders through amendments to the Capital Markets Act.
Acting President Han did not make any separate remarks regarding the appointment of Ma Eun-hyuk as a Constitutional Court Justice candidate, which was requested by the Democratic Party.
Acting President and Prime Minister Han Duck-soo is speaking at the Cabinet meeting held at the Government Seoul Office Building on the 1st. Photo by Yonhap News
In his opening remarks at the Cabinet meeting held at the Government Seoul Office that morning, Acting President Han stated, "Given that this bill could greatly affect the business environment and competitiveness of the majority of companies, it is necessary to find alternatives to minimize side effects through more in-depth discussions," adding, "After much deliberation, I have requested reconsideration from the National Assembly."
He pointed out, "While the purpose of the bill is understood to mean that directors should fairly treat the interests of all shareholders, not just those of controlling shareholders or certain groups, it is difficult in reality to clearly determine which decisions fairly treat the interests of all shareholders or the entire shareholder body," and added, "This raises concerns about unexpected confusion in various corporate decision-making processes."
He continued, "Due to this ambiguity, directors may face uncertainties related to civil and criminal liabilities in overall corporate decision-making, which could hinder proactive management activities," emphasizing, "Ultimately, this not only goes against the protection of ordinary shareholders but could also negatively impact the entire national economy." In particular, Acting President Han noted, "There was insufficient consultation during the legislative process to minimize side effects."
He added, "The government has proposed amendments to the Capital Markets Act as an alternative to more effectively protect ordinary shareholders in capital transactions," and said, "Through this, protection of ordinary shareholders and improvement of corporate governance practices centered on listed companies can be established, and related precedents can accumulate, allowing for a gradual expansion of the scope of application, which we believe is more suitable for our reality."
However, Acting President Han clarified, "This exercise of the right to request reconsideration is by no means a rejection of the basic intent of the Commercial Act amendment passed by the National Assembly," and explained, "In the current highly uncertain domestic and international economic conditions, the purpose is to seek ways to achieve investor protection and corporate governance improvement without stifling corporate management activities."
The deadline for exercising the veto on the Commercial Act amendment is the 5th, but considering that the Democratic Party announced it would initiate impeachment proceedings citing the non-appointment of candidate Ma, it appears the veto was exercised hastily. With Acting President Han exercising the veto, strong opposition is expected from opposition parties and small investors. The Democratic Party has expressed its intention to re-push the amendment if it is ultimately rejected. There is also speculation about the possible resignation of Lee Bok-hyun, the Financial Supervisory Service chief, who declared he would risk his position to block the veto.
The amendment to the Commercial Act adds shareholders as subjects of directors' fiduciary duties and requires directors to protect the interests of all shareholders when performing their duties. It also mandates listed companies designated by presidential decree to hold electronic shareholder meetings concurrently. While it is expected to protect shareholder rights and positively address the "Korea discount" (the undervaluation of the Korean stock market), the business community has opposed it, arguing that it could increase management uncertainty and suppress investment and innovation.
Acting President and Prime Minister Han Duck-soo salutes the national flag during the Cabinet meeting held at the Government Seoul Office on the 1st. From the right, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok, Acting President Han, Deputy Prime Minister and Minister of Education Lee Ju-ho. Photo by Yonhap News
At the Cabinet meeting that day, Acting President Han also reviewed and approved the amendment to the National Pension Act, which was passed by the National Assembly with bipartisan agreement.
He said, "The bill to be promulgated today is the fruit of 2 years and 7 months since the government presented the direction for parametric and structural reforms in August 2022," adding, "This pension reform, the first in 18 years since 2007, will strengthen old-age income security and allow the National Pension Fund to be managed more stably until 2071, extending its duration by up to 15 years."
The reform, passed in the plenary session on the 20th, raises the contribution rate (amount paid) from the current 9% to 13%, and increases the income replacement rate (amount received) to 43%.
Acting President Han emphasized, "With parametric reform completed, we must now actively pursue structural reforms to build sustainable pension finances while minimizing the burden on future generations," and added, "Last week, the National Assembly formed a Special Committee on Pension Reform to discuss structural reforms. The government will actively participate and cooperate," concluding, "The government will listen more closely to voices from all sectors, including the youth, and do its best to ensure the National Pension fulfills its role."
Meanwhile, Acting President Han did not make any separate remarks on candidate Ma's appointment issue that day. It is anticipated that if the Democratic Party remains silent until the deadline it set as a final ultimatum, it will initiate a second impeachment motion against Acting President Han. Previously, the Constitutional Court ruled that the quorum for impeachment motions against an acting president is based on the prime minister's standard (151 seats), not the president's (200 seats), allowing the Democratic Party to proceed with impeachment unilaterally without procedural controversy.
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