Kim Seungwon Proposes Bill to Compel Disqualified Major Shareholders of Financial Firms to Dispose of Shares

Amendment to the Act on Corporate Governance of Financial Companies

Seungwon Kim, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, announced on January 20 that he has sponsored a partial amendment to the Act on Corporate Governance of Financial Companies. The amendment would allow the government to order the largest shareholders of non-bank financial institutions to dispose of their shares.

The main content of the amendment is to establish a new authority that, if an eligibility review target who has received a voting rights restriction order from the Financial Services Commission fails to comply, the commission can order the disposal of at least 10 percent of the shares held, setting a period of up to six months for compliance.

The government currently conducts periodic eligibility reviews of the largest shareholders of banks and savings banks. If it is determined that the soundness of a financial company cannot be maintained due to legal violations or other reasons, the government can order the largest shareholder to dispose of their shares.

Seungwon Kim, Member of the Democratic Party of Korea. Office of Seungwon Kim

However, under the current Act on Corporate Governance of Financial Companies, which applies to non-bank financial institutions, there is no legal basis to order the disposal of shares even if the largest shareholder violates a voting rights restriction order. Only provisions for voting rights restrictions exist. As a result, if the largest shareholder resigns from their position as an executive or employee of the financial institution, effective punishment becomes impossible, leading to concerns about the effectiveness of sanctions and raising issues of fairness compared to banks and savings banks.

This amendment focuses on addressing these legislative shortcomings. Kim explained that if the amendment is passed, it is expected to prevent moral hazard among the largest shareholders of financial institutions and promote responsible management.

Seungwon Kim emphasized, "The eligibility of the largest shareholders of financial institutions is a critical issue directly linked to market order," adding, "This amendment will strictly hold the largest shareholders accountable and serve as an opportunity to enhance transparency in the financial market."