Second Set of Commercial Act Amendments and Treasury Share Cancellation Proposed Together
Commercial and Criminal Act Revisions Reflect Some Business Community Requests
The Democratic Party of Korea, which has been introducing a series of bills aimed at achieving the KOSPI 5000 target?including measures to strengthen the protection of general shareholders’ rights and to increase the accountability of controlling shareholders and management?has now proposed legislation to completely abolish the special breach of trust offense under the Commercial Act and to clearly define the “business judgment rule” in the Criminal Act’s breach of trust provisions. This move reflects, in part, the business community’s concerns that ambiguity in business judgment, excessive checks on management by minority shareholders and foreign or activist funds, could stifle corporate activity.
According to Democratic Party lawmaker Kim Taenyon’s office and the National Assembly’s legislative information system on July 15, Kim submitted bills late the previous day to delete the special breach of trust provisions from the Commercial Act and to amend the Criminal Act accordingly.
Under the current Commercial Act, the special breach of trust offense stipulates that company executives, such as directors, who act in violation of their duties to gain property benefits for themselves or third parties, causing damage to the company, are subject to imprisonment of up to 10 years or a fine of up to 30 million won. The Criminal Act also punishes those entrusted with another’s affairs who, by violating their duties, gain property benefits for themselves or enable a third party to do so, thereby causing loss to the principal. This has led to ongoing debates about overlapping legislation and double punishment. In addition, with the Commercial Act now explicitly stating directors’ fiduciary duties to shareholders, the business community has raised concerns that corporate activity could be excessively restricted.
Regarding the purpose of these amendments, Kim stated, “By abolishing the special breach of trust provision, we aim to streamline overlapping legal provisions, enhance predictability and legal stability in corporate management, and ensure managers’ autonomy and responsible decision-making, thereby creating institutional conditions for sustained investment and innovation.” He added, “Through the Criminal Act amendment, we intend to specify that when those entrusted with another’s affairs?such as company management?make the most reasonable decisions for the benefit of the principal without any conflict of interest, the breach of trust offense should not apply.”
Following the recent passage of a Commercial Act amendment, the Democratic Party is also pushing to process a second set of supplementary Commercial Act reforms?including cumulative voting, expanded separate election of audit committee members, and treasury share cancellation?within this month or early next month. Against this backdrop, Kim’s bill is seen as a response to demands from the business sector.
Some interpret Kim’s introduction of these Commercial and Criminal Act amendments as an effort to move beyond the “anti-business, anti-market” frame sometimes associated with the Democratic Party, and to emphasize revitalization of stock market investment. Kim has previously advocated for the enactment of a special semiconductor law involving policy support of around 100 trillion won, and is regarded as someone with a rational perspective on business and industry, to the extent of influencing President Lee Jaemyung’s semiconductor-related pledges. Furthermore, as the leader of “Economy is the Democratic Party,” the party’s largest policy research group, Kim wields significant influence over the party’s economic policies. Democratic Party floor spokesperson Moon Geumjoo also told reporters that day, “Democratic Party floor leader Kim Byungki has said that the business community’s concerns about the breach of trust offense should be taken into account.”
Kim repeatedly emphasized, “This amendment is intended to complement the Commercial Act revision passed on July 3, removing excessive criminal risks and enabling sound business judgment. We will establish an institutional foundation of trust to support a Korea where people invest in stocks, not just real estate, and to achieve the KOSPI 5000 era.” He added, “Politics should not be about regulation for regulation’s sake, but about building a properly functioning capital market. I will fulfill my legislative responsibility for capital market recovery to the very end.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
