[Exclusive] Asset Threshold from 2 Trillion to 5 Trillion Won, Related Parties from Sixth to Fourth Degree... Business Community Strikes Back to Change the Framework of the Commercial Act

Business Community to Push for 'Revision of Standards' After Passage of Second Commercial Act Amendment
Raising Asset Threshold from 2 Trillion to 5 Trillion Won... Calls to Reduce Regulatory Targets
Proposal to Narrow Definition of Related Parties to Fair Trade Act Standards
Management Restrictions and Confusion Highlighted Due to Legal Inconsistencies
Second Amendment Set for Plenary Session... Corporate Governance Regulations to Be Strengthened

As the National Assembly prepares to bring the second amendment to the Commercial Act to a plenary session, the business community is working on proposals to update longstanding regulations-such as the asset threshold and the definition of related parties-to better reflect current realities. The second amendment aims to strengthen management control over listed companies with total assets of 2 trillion won or more, while the third amendment is expected to introduce a mandatory buyback and cancellation of treasury shares. The business sector, anticipating that blocking the current amendment will be difficult, plans to revise the Commercial Act framework after the plenary session by raising the asset threshold to 5 trillion won and narrowing the scope of related parties. This is widely seen as a 'counterattack' from the business community.

According to industry sources on August 13, the current Commercial Act defines listed companies with total assets of 2 trillion won or more as 'large-scale listed companies' and subjects them to key corporate governance regulations, such as mandatory cumulative voting and separate election of audit committee members. When these rules were first introduced, only a small number of companies were affected, but as of June 2025, the number has grown to 225, accounting for about 45% of companies subject to mandatory disclosure. The business community argues that a regulatory structure in which rules become significantly stricter once a certain threshold is crossed can undermine incentives for corporate growth.

Park Iljun, Executive Vice Chairman of the Korea Chamber of Commerce and Industry, Lee Donggeun, Executive Vice Chairman of the Korea Employers Federation, Kim Changbeom, Vice Chairman of the Korea Economic Association, and other executives from eight economic organizations held a press conference on March 19 at the National Assembly Communication Center urging the acting president to exercise the right to request reconsideration of the Commercial Act amendment passed by the plenary session. 2025.3.19. Yonhap News

There are also concerns about confusion caused by different legal definitions of company size. The Commercial Act defines listed companies with total assets of 2 trillion won or more as large-scale listed companies and applies corporate governance regulations to them. In contrast, the Fair Trade Act designates business groups with total assets of 5 trillion won or more as 'public disclosure target business groups,' subjecting them to regulations such as disclosure of internal transactions and designation of a controlling shareholder. The business sector believes that the 2 trillion won threshold, set based on the size of the economy 20-30 years ago, no longer matches current asset values, unnecessarily expanding the scope of regulation and even creating side effects that deliberately suppress growth.

The need to address inconsistencies in the definition of related parties (same person) has also been raised. The Commercial Act unconditionally includes spouses, blood relatives up to the sixth degree, and relatives by marriage up to the fourth degree. In contrast, the Fair Trade Act, following a 2022 amendment, narrowed the scope to blood relatives up to the fourth degree and relatives by marriage up to the third degree, and only includes blood relatives of the fifth or sixth degree and relatives by marriage of the fourth degree if certain conditions such as control are met. As a result, the Fair Trade Act is considered more favorable to the same person than the Commercial Act. A narrower regulatory scope means fewer restrictions on family involvement in management. The business community plans to recommend establishing unified standards, citing confusion caused by the different criteria in the two laws.

A senior industry official stated, "Some provisions of the Commercial Act were designed based on the economic circumstances of 20-30 years ago, and many are now out of step with reality." He added, "Given that discussions on amendments are already underway, companies are also preparing ways to adjust the application criteria and structures to better fit the current business environment."

Meanwhile, the second amendment to the Commercial Act, which is expected to be brought to a plenary session this month, would prohibit listed companies with total assets of 2 trillion won or more from excluding cumulative voting in their articles of incorporation, and would increase the number of audit committee members subject to separate election from one to two. The intention is to lower the barriers for minority shareholders and activist funds to join boards of directors, thereby strengthening checks on controlling shareholders. The bill passed the National Assembly's Legislation and Judiciary Committee on August 1, and the ruling party is seeking to have it passed in the August extraordinary session. The ruling party also plans to include a provision in the third amendment requiring companies to cancel treasury shares within a certain period after acquisition.