Stronger Commercial Act Amendments Proposed... 3% Rule to Apply to Companies with Less Than 2 Trillion Won in Assets When Amending Cumulative Voting Articles

Kim Hyunjung of the Democratic Party Proposes Even Stronger Cumulative Voting Amendment

The Democratic Party of Korea has been introducing a series of increasingly strengthened amendments to the Commercial Act. A new amendment has been proposed that would apply the 3% rule to listed companies with total assets of less than 2 trillion won when amending their articles of incorporation regarding cumulative voting.

On July 3, the partial amendment to the Commercial Act was passed at the plenary session of the National Assembly. 2025.7.3 Photo by Kim Hyunmin

According to the National Assembly's legislative information system on July 24, Democratic Party lawmaker Kim Hyunjung introduced an amendment to the Commercial Act the previous day, which includes expanding cumulative voting and the separate election of audit committee members. These two elements are in line with the party platform bill (Lee Jungmoon bill) that the Democratic Party aims to pass during the July extraordinary session, but the content is even stronger.

Both bills essentially prohibit listed companies with total assets of 2 trillion won or more from excluding cumulative voting from their articles of incorporation. However, Kim Hyunjung's bill also stipulates that, for listed companies with less than 2 trillion won in total assets?which previously had no conditions for amending their articles of incorporation to exclude cumulative voting?shareholders holding more than 3% of the total issued shares cannot exercise voting rights for the excess portion.

Kim Hyunjung also introduced a bill requiring companies to immediately cancel treasury shares upon acquisition. Lawmaker Kim Namgeun previously introduced a bill on July 9 that would require treasury shares to be canceled within one year of acquisition.

In contrast, the People Power Party has been submitting bills aimed at mitigating the side effects of the Commercial Act amendments. On July 21, lawmaker Choi Eunseok proposed an amendment to the Commercial Act that would introduce management defense measures such as stock option rights (poison pill).

On July 2, lawmaker Ko Dongjin prepared a bill that would specify the business judgment rule in the Commercial Act to ease the burden of criminal liability for breach of trust on companies. Democratic Party lawmaker Kim Taenyeon also introduced a bill to delete the special breach of trust provision from the Commercial Act.