Commercial Act Amendment Referred to Judiciary Subcommittee... People Power Party Says "Opposition Bill Must Also Be Reviewed"

July 1 National Assembly Legislation and Judiciary Committee Plenary Session
37 Bills Including Commercial Act Amendment Referred to Subcommittee
People Power Party: "Amendments Must Address Identified Issues"

The amendment to the Commercial Act, which was submitted to the plenary session of the National Assembly Legislation and Judiciary Committee, has been referred to the committee's subcommittee. The People Power Party raised concerns about a potential increase in breach of trust lawsuits and possible infringement on management rights, insisting that the bill proposed by the opposition should be reviewed together with other related proposals.

Lee Chunseok, Chairman of the National Assembly Legislation and Judiciary Committee, is striking the gavel at the 1st plenary session of the 426th National Assembly (extraordinary session) held at the National Assembly on July 1, 2025. Photo by Kim Hyunmin

On July 1, the Legislation and Judiciary Committee referred a total of 37 bills, including the amendment to the Commercial Act submitted to the committee's plenary session at the National Assembly in Yeouido, to the First Subcommittee on Bill Review. Lee Chunseok, Chairman of the committee, stated, "I ask that the amendments to the Commercial Act submitted by both ruling and opposition party members be discussed more intensively in the first subcommittee."

The amendment to the Commercial Act, reintroduced under the leadership of the Democratic Party, includes the following provisions: explicit codification of directors' duty of loyalty to shareholders; expansion of the number of directors who serve as separately elected audit committee members; introduction of electronic general shareholders' meetings; strengthening of cumulative voting for large listed companies; and implementation of the "3% rule," which limits the voting rights of the largest shareholder and related parties to a combined 3% when electing audit committee members. The bill also stipulates that, with the exception of electronic general meetings, the law will take effect immediately upon promulgation by the President.

On this day, lawmakers from the People Power Party emphasized potential side effects of the amendment and argued that supplementary measures are necessary. Jang Donghyuk, the opposition secretary from the People Power Party, said, "Regarding the duty of loyalty to shareholders, there needs to be a mechanism to prevent excessive litigation. The mandatory cumulative voting system, expansion of separately elected audit committee members, and strengthening of the 3% rule will have significant impacts, and it is necessary to defend against hostile capital. Countries that have introduced such systems also have supplementary measures in place, so I hope the amendment will be discussed together with various proposals put forward by opposition lawmakers to address foreseeable issues."

He added, "We also need to consider whether small and medium-sized enterprises, which have weaker litigation defense capabilities, should be subject to these rules as they are. I hope the subcommittee's discussions will reflect various opinions and minimize negative side effects."

Cho Bae-sook, a lawmaker from the People Power Party, remarked, "Some shareholders may file lawsuits claiming that directors have not acted in the best interests of shareholders, and if such situations persist, companies may be discouraged from making future investments and become more risk-averse. In the US state of Delaware, shareholder interests are protected, but when court rulings favored minority shareholders, companies left the region."

When Representative Cho asked for the Ministry of Justice's position, Lee Jinsoo, Vice Minister and Acting Minister of Justice, responded, "We have reviewed potential issues that could arise if such a legal amendment is enacted, but we believe the need to protect the interests of all shareholders outweighs those concerns. If the law is revised to protect the interests of individual shareholders, it may impose a burden on companies, but if the law is amended with the interests of all shareholders as the requirement, the risks will be somewhat reduced." He added, "We will continue to review existing discussions regarding any possible side effects."