"Amendment to Commercial Act Causes Side Effects on Corporate Competitiveness... Facing Civil and Criminal Uncertainty"

Joint Briefing by Related Agencies: Background of the Request for Reconsideration of the Commercial Act
"Companies Must Take the Market's Demand for Corporate Governance Reform Seriously"

Amid the government's veto of the Commercial Act amendment passed under opposition party leadership, Kim Seok-woo, Deputy Minister of Justice (Acting Minister), stated on the 1st, "There is a significant concern that it could cause side effects on the management environment and competitiveness of the majority of companies, including not only large corporations but also small and medium-sized enterprises."

From the left, So-Young Kim, Deputy Chairperson of the Financial Services Commission, Seok-Woo Kim, Vice Minister of the Ministry of Justice (Acting Minister), and Beom-Seok Kim, First Vice Minister of the Ministry of Economy and Finance, are seen answering questions during a joint briefing of related agencies held at the Seoul Government Complex on the 1st. Photo by Hyun-Seok Yoo

At a joint briefing with related agencies held at the Government Seoul Office on the 1st, Deputy Minister Kim said, "It was judged necessary to pursue alternatives that minimize side effects through more in-depth discussions, which led to the request for reconsideration."

Deputy Minister Kim explained that the introduction of the Commercial Act amendment would cause directors to face uncertainties related to civil and criminal liabilities in overall corporate decision-making. He said, "The purpose of this bill is understood to mean that directors should fairly treat the interests of all shareholders, not just those of certain groups, in the management decision-making process. However, the wording regulates all actions of directors for all corporations."

He added, "In reality, it is difficult to clearly determine from the wording which decisions fairly treat the interests of the majority or all shareholders," and explained, "This has a high potential to hinder proactive management activities."

He emphasized, "The government has comprehensively considered the issues and proposed amendments to the Capital Market Act as an alternative that can more effectively protect general shareholders, specifically targeting capital transactions with a high possibility of infringing on the interests of general shareholders, such as mergers and splits of listed companies."

Deputy Minister Kim said, "It would be more suitable to our reality to gradually expand the scope of application as practices for protecting general shareholders and improving corporate governance become established around listed companies and related precedents accumulate," and added, "Companies must also seriously accept the market's demand for corporate governance improvement expressed during this discussion process."