Commercial Act Amendment Faces Turmoil Over "3% Rule"... Possibility of Resolution After Afternoon Renegotiation

Duty of Directors to Protect Shareholders Agreed by Both Parties
Expansion of Audit Committee Emerges as Key Issue
Calls for Further Negotiations Between Party Leaderships

On July 2, the Legislation and Judiciary Committee of the National Assembly began deliberations on an amendment to the Commercial Act, which centers on strengthening directors' fiduciary duties to shareholders. However, negotiations are ongoing due to differences between the ruling and opposition parties regarding the "3% rule" and cumulative voting. The committee's subcommittee on legislation has reached an agreement on certain issues, such as the directors' duty to protect shareholders and the introduction of electronic general meetings of shareholders.

On the morning of July 2, Kim Yongmin, the Democratic Party's secretary on the committee and chairperson of the subcommittee, told reporters after the bill review, "Both parties have agreed without disagreement on introducing directors' duty to protect shareholders, implementing electronic general meetings of shareholders, and changing outside directors to independent directors." However, Kim added, "There are differences between the parties on expanding the number of audit committee members, supplementing the 3% rule, and the cumulative voting system." He also conveyed that "the plan is to address these issues in the afternoon, based on the premise of further discussions."

On July 2, at the Legislation and Judiciary Committee's First Subcommittee in the National Assembly, Kim Yongmin, chairperson from the Democratic Party of Korea, struck the gavel while presenting agenda items including the partial amendment bill of the Commercial Act. 2025.7.2 Photo by Kim Hyunmin

Jang Donghyuk, the secretary of the Legislation and Judiciary Committee from the People Power Party, stated, "The biggest issues are the application of the 3% rule to the appointment of auditors and directors, and the matter of cumulative voting." He explained, "There are concerns that hostile foreign capital could make corporate management difficult, so even if those two systems are introduced, it is necessary to gather various opinions on possible safeguards." Jang also said, "The Democratic Party proposed to expand the number of auditors elected separately from one to two if the 3% rule is not applied. Since the People Power Party has fundamentally opposed the separate election of auditors, we have indicated that further negotiations between party leaderships are needed to review the Democratic Party's proposal."

The ruling and opposition parties have agreed to resume the subcommittee meeting at either 3 p.m. or 4 p.m. to continue discussions.