"Commercial Act Amendment Will Not Be Delayed Indefinitely"... Democratic Party Holds Final Meeting on Commercial Act Amendment

Promise to Address Business Community's Concerns Through Legal Revisions
Considering System Improvements to Prevent Excessive Litigation
Possible Discussion on Codifying the Business Judgment Principle

On June 30, the Democratic Party of Korea reaffirmed its commitment to processing the proposed amendment to the Commercial Act, which centers on explicitly codifying directors' fiduciary duties to shareholders, stating, "We will not continue to delay the process indefinitely." Regarding concerns from the business community about the potential for excessive litigation, the party expressed its intention to address these issues through the wording of the law and through follow-up legislation.

At a meeting held on June 30 in the Democratic Party's representative conference room at the main building of the National Assembly in Yeouido, Park Iljun, Vice Chairman of the Korea Chamber of Commerce and Industry, and others conveyed their concerns about the amendment to the Commercial Act. After the meeting, the Democratic Party stated, "We expect that the Legislation and Judiciary Committee will be able to reach a swift agreement without a prolonged process. Delaying the process would undermine trust in the KOSPI market and the public. We will not allow unnecessary delays."

Democratic Party lawmaker Kim Namgeun explained after the meeting, "The business community expressed the desire for certain concerns to be addressed." He added, "We will discuss the business community's requests within the Legislation and Judiciary Committee, and any additional measures will be discussed by the KOSPI5000 Committee."

The business community expressed particular concern about the potential for excessive litigation and the expanded application of the crime of breach of trust. In response, Kim stated, "The courts generally control the unlimited expansion of directors' liability through the business judgment rule, and there is a substantial body of case law on this matter." However, he acknowledged, "Given the significant concerns of the business community, it is possible to discuss codifying principles such as the business judgment rule as a standard in the context of breach of trust or the Commercial Act." Regarding the criticism that criminal penalties are excessive, he said, "This can be discussed during the regular National Assembly session in the second half of the year." It was also reported that the Democratic Party is considering revising the wording of the directors' fiduciary duty to shareholders in the Commercial Act, such as changing "shareholder" to "all shareholders," taking into account opinions from the Ministry of Justice and other relevant bodies.

Jin Sungjun, Policy Committee Chairman of the Democratic Party of Korea, held a meeting with the vice chairmen of six economic organizations at the National Assembly on the 30th to gather opinions from the business community regarding the proposed amendment to the Commercial Act. Attendees included Park Iljun, Executive Vice Chairman of the Korea Chamber of Commerce and Industry; Kim Changbeom, Executive Vice Chairman of the Korea Economic Organization Association; Lee Donggeun, Executive Vice Chairman of the Korea Employers Federation; Jang Seokmin, Executive Director of the Korea International Trade Association; Oh Giwoong, Executive Vice Chairman of the Korea Federation of Small and Medium Business; Lee Hojun, Executive Vice Chairman of the Korea Association of Mid-sized Companies; and Jung Wooyoung, Vice Chairman of the Korea Listed Companies Association. 2025.6.30 Photo by Kim Hyunmin

The Democratic Party is reviewing a plan to process the Commercial Act amendment, which previously passed the National Assembly during the Yoon Suk-yeol administration but was blocked by a request for reconsideration (veto). The amendment includes explicit codification of directors' fiduciary duties to shareholders and the introduction of electronic general meetings of shareholders. In addition, the party is considering maintaining provisions such as expanding the number of directors for separately elected audit committee members and the introduction of electronic shareholder meetings, implementing the amendment immediately upon promulgation (excluding electronic shareholder meetings), and adding the "3% rule," which limits the voting rights of the largest shareholder and related parties to a combined 3% when electing audit committee members.

Oh Gihyung, Democratic Party lawmaker and chairman of the KOSPI5000 Special Committee, stated, "The special committee's position is to include all five items in the party platform," and added, "We intend to request that all of these be included during the detailed discussions in the Legislation and Judiciary Committee."

At the meeting, large corporations requested that the obligations of directors and the introduction of electronic shareholder meetings be implemented first, while allowing more time for the cumulative voting system and separate election of auditors. Small and mid-sized companies expressed the view that unlisted, smaller companies should be granted a grace period for implementation.

Prior to the meeting, Vice Chairman Park stated, "Some parts of the Commercial Act amendment have already passed the National Assembly, so it can be said that parliamentary discussion has taken place. However, now that the Democratic Party is the ruling party, there is a need to revisit the issue." Park also said, "The business community agrees on the need to revitalize the stock market and create a fair market, and recognizes that reflecting the fiduciary duty of directors to shareholders in the Commercial Act is one possible solution." However, he added, "There must be measures to minimize the side effects of amending the Commercial Act." He cited the need to prevent the risk of abuse of litigation, address concerns about the crime of breach of trust, incorporate the business judgment rule?which has been established through judicial decisions?into the law, and consider safeguards for management rights as representative examples.

In response, Jin Sungjun, Policy Committee Chairman of the Democratic Party, said, "If the Commercial Act is amended, I expect it will serve as an opportunity for our stock market to rise again. If any issues of concern arise during the process, we are fully prepared to supplement and revise the system as needed."

Jin also stated, "Since the amendment to the Commercial Act has long been raised as a necessary step for the advancement of our stock and capital markets, I hope that we can now work together to realize this goal while minimizing any side effects. As today may be the last policy meeting before the amendment, I encourage you to freely express your concerns, and the policy experts here will give them thorough consideration."