Further Discussions on Treasury Share Cancellation Scheduled for July and August
Easing of Breach of Trust Provisions to Be Addressed at the September Regular National Assembly Session
The Democratic Party's KOSPI 5000 Special Committee, following the passage of the Commercial Act amendment that enshrines directors' fiduciary duty to shareholders, plans to prioritize supplementary legislation, including the expansion of cumulative voting and the separate election of audit committee members. The committee also intends to further discuss additional measures such as the cancellation of treasury shares. Additionally, the committee plans to address the business community's request to ease the criminal breach of trust provisions under the Criminal Act during the regular National Assembly session in September.
On this day, the Democratic Party's KOSPI 5000 Special Committee held a closed-door meeting at the National Assembly Members' Office Building with officials from the Ministry of Economy and Finance, the Ministry of Justice, the Financial Services Commission, and other government agencies. The agenda included discussions on easing the breach of trust provisions under the Commercial and Criminal Acts, the principle of mandatory cancellation of treasury shares, and the advancement of the capital market. During the meeting, the Ministry of Economy and Finance reported on the current status of efforts to include Korea in the Morgan Stanley Capital International (MSCI) index, the Ministry of Justice presented key issues related to the Commercial Act amendment, and the Financial Services Commission provided updates on capital market revitalization and liquidity enhancement.
Oh Ki-hyung, chair of the Democratic Party's KOSPI 5000 Special Committee and a member of the Economic Planning Subcommittee of the National Policy Planning Committee, met with reporters after the meeting and said, "We have decided to urge the National Assembly's Legislation and Judiciary Committee to swiftly address the cumulative voting system and the expansion of the separate election of audit committee members, which are follow-up tasks to the Commercial Act amendment and were left unresolved in the previous plenary session."
Regarding the issue of making the cancellation of treasury shares mandatory, he stated, "While the (President Lee Jae-myung's) campaign pledge is to apply it in principle, there are ongoing debates about whether it should be legislated under the Commercial Act or the Capital Markets Act," adding, "If various proposals emerge in July and August, we plan to finalize the discussion during the regular National Assembly session."
The committee also agreed to continue discussions on easing the breach of trust provisions under the Commercial and Criminal Acts during the September regular session. Oh stated, "There are concerns in the business community regarding the breach of trust provisions, so we have decided to keep the discussion open," and added, "Since the regular session is scheduled for the fall, we will need to coordinate how to proceed with the discussions at that time."
Previously, the business community had requested the easing of breach of trust provisions after the National Assembly passed the Commercial Act amendment, which expands directors' fiduciary duty from the company to shareholders. In response, Representative Ko Dongjin of the People Power Party has introduced amendments to the Commercial and Criminal Acts reflecting these concerns. Oh commented, "If there are other proposals in addition to Representative Ko's bill, we are open to reviewing them as well."
The committee also plans to listen to the views of stakeholders, including companies, investors, and investment advisory firms, to ensure that amendments to the Capital Markets Act related to mergers, physical spin-offs, disclosures, listings, and mandatory tender offer systems can be discussed during the September regular session.
In addition to efforts to join the MSCI index, the committee is known to have discussed the fund-type conversion of retirement pensions as a means to secure liquidity. Oh explained, "Looking at the National Pension Service's annual return, it has been about 8% over the past five years and about 6% over the past 20 years, but the return on retirement pensions is only 1-2%," adding, "Therefore, it is necessary to convert them into funds, and if we do so, there will be room to invest a certain proportion in the capital market, which could serve as a basis for securing liquidity."
Oh emphasized, however, "This meeting was primarily an opportunity to hear concerns and opinions regarding the revitalization of the capital market, not to finalize any positions," and added that the committee would continue discussions with the government going forward.
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