[Exclusive] Business Community Seeks Overhaul of Commercial Act Framework: Asset Threshold from 2 Trillion to 5 Trillion Won, Related Parties Narrowed from Sixth to Fourth Degree

Business Groups Shift Strategy on Commercial Act Reform
Propose "Realistic Updates" to Lawmakers Ahead of Plenary Vote

As the National Assembly prepares to put the second amendment to the Commercial Act to a plenary vote, the business community is reportedly working on proposals to update longstanding regulations, such as the asset threshold and the definition of related parties, to better reflect current realities. The ruling party plans to introduce and pass the second amendment to the Commercial Act-aimed at strengthening management control over listed companies with total assets of 2 trillion won or more-at the August extraordinary session scheduled for the 21st. Believing it will be difficult to block the amendment, the business sector has shifted its focus to fundamentally changing the framework of the law. It is reported that the business community plans to formally propose these changes to lawmakers as early as the upcoming regular session, in line with the ongoing discussions on the third amendment, which would mandate the cancellation of treasury shares.

A senior official from a major business association said on the 13th, "Some provisions of the Commercial Act were designed 20 to 30 years ago based on the economic conditions of that time, and many are now out of touch with reality." He added, "There is a need to reconsider the framework of the system itself. Since discussions on amendments are already underway, companies are preparing measures to adjust the application standards and structures to better fit the current business environment."

The business community is seeking to revise the provision that defines a "large listed company" as one with total assets of 2 trillion won, by raising the threshold to 5 trillion won in line with the Monopoly Regulation and Fair Trade Act, and by narrowing the scope of related parties. Currently, the Commercial Act defines listed companies with total assets of 2 trillion won or more as "large listed companies," subjecting them to key governance regulations such as mandatory cumulative voting and separate election of audit committee members. When the system was first introduced, only a few companies were affected, but as of June 2025, the number has increased to 225, accounting for about 45% of companies required to disclose corporate governance information (those listed on the KOSPI with assets of 500 billion won or more). Approximately 30% of KOSPI-listed companies are subject to these regulations. The business sector argues that the sharp increase in regulatory requirements once a certain threshold is crossed could dampen incentives for corporate growth.

There are also concerns about confusion arising from different legal standards for company size. Under the Commercial Act, a listed company with total assets of 2 trillion won or more is classified as a large listed company and is regulated accordingly. In contrast, the Monopoly Regulation and Fair Trade Act designates a business group with total assets of 5 trillion won or more (on a same-person basis) as a "publicly notified business group," subjecting it to group-level regulations such as disclosure of internal transactions and designation of the group head. If the Commercial Act threshold is raised to 5 trillion won as proposed by the business community, the number of large listed companies would drop from 225 to around 10. Companies with total assets of 5 trillion won or more include Samsung Electronics, SK Hynix, Hyundai Motor, Kia, POSCO Holdings, LG Energy Solution, Samsung Biologics, Hanwha, HD Hyundai Heavy Industries, and KB Financial Group. In this scenario, a significant number of mid-sized and small listed companies would be excluded from the regulations, narrowing the scope of governance oversight and making management control easier.

Economic 8 Organizations Holding a Press Conference on the Commercial Act Amendment. Yonhap News

The need to address inconsistencies in the definition of related parties (same-person group) has also been raised. The Commercial Act currently includes spouses, blood relatives up to the sixth degree, and relatives by marriage up to the fourth degree without exception. In contrast, the Monopoly Regulation and Fair Trade Act, following its 2022 amendment, limits 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 and 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 group compared to the Commercial Act, as a narrower scope of regulation reduces restrictions on family involvement in management. The business community plans to formally propose the establishment of unified standards, citing confusion caused by the differing criteria in the two laws.

If the scope of related parties under the Commercial Act is reduced to the level of the Fair Trade Act, obligations for reporting and approval related to same-person groups, as well as transaction restrictions, would be eased, thereby expanding the scope of management control. In particular, it would become possible to leverage family members' shares during the appointment of outside directors, separate election of audit committee members, and shareholder meetings, potentially increasing the influence of controlling families. There would be more opportunities for family members to be appointed as executives or directors, and it would become easier to circumvent the 3% voting rights cap. Some transactions that previously required board approval or shareholder meeting reports would no longer be regulated, streamlining procedures, and reducing the amount of information about the controlling family's shares and transactions disclosed to the public, thereby lessening the burden of exposing management information.

Kim Hyun, former president of the Korean Bar Association and managing partner at Sechang Law, stated, "It is reasonable to adjust the standards of the Commercial Act and the Fair Trade Act to reflect inflation and changes over time. Just as international treaties are updated through amendments after several decades, we should also revise our criteria to align with global trends." Regarding the current amendment to the Commercial Act, he pointed out, "There is a tendency to focus excessively on protecting minority shareholders, which can result in reverse discrimination against major shareholders and sound industrial capital."

The second amendment to the Commercial Act, expected to be brought to a plenary vote within this month, includes provisions that would prohibit listed companies with total assets of 2 trillion won or more from opting out of cumulative voting in their articles of incorporation, and would increase the number of audit committee members required to be separately elected from one to two. The intent is to lower the barriers for small 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 the 1st, and the ruling party is pushing for its passage at the August extraordinary session. In the third amendment, the ruling party also plans to include a measure making it mandatory to cancel treasury shares within a certain period after acquisition.