SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
purpose as set forth in the KCC, and such acquisi- tion of treasury stock may be made regardless of whether or not distributable profits exist. Specific purposes include, among others, cases where a shareholder exercises appraisal rights, where a company acquires treasury shares as a result of a merger with (or transfer of the entire business of) another company, or where it is necessary to dispose of fractional shares.
of at least a certain percentage of shares have the right to call a general meeting and propose to elect or remove a director at such meeting. On the other hand, if the dismissal of a director is rejected at the general meeting of shareholders despite the director’s misconduct or serious viola- tion of laws and regulations or the company’s AOI, the holders of at least 3% or more of the total issued and outstanding shares of a listed company (or, in the case of a listed company, at least 0.5% of the total issued and outstanding shares for at least six months, or 0.25% if the company’s total capital is KRW100 million) may request the court to dismiss the director within one month from the date of the general meeting of shareholders. Under the KCC, a company must elect its director(s) by way of cumulative voting if any shareholder holding at least 3% of the total number of issued and out- standing shares of the company (or in the case of a listed company, any shareholder holding at least 1% of the total number of issued and outstanding shares) makes a request for such measure. Under cumulative voting, each shareholder is given a number of votes equal to the number of shares they hold multiplied by the number of directors to be elected. Shareholders can allocate their votes in any manner they choose, concentrating them on a single candidate or distribut- ing them among several candidates. However, the KCC also allows companies to exclude cumulative voting by including an opt-out provision in their AOI, and in practice, most listed companies in Korea have made use of this option to preclude cumulative voting. If a listed company seeks to amend its AOI to either adopt or opt out of cumulative voting, such an amendment requires approval by a special resolution of the general meeting of shareholders. In this context, any shareholder who holds more than 3% of the issued and outstanding shares is restricted from exercising voting rights for the portion of their shares that exceeds the 3% threshold. Currently, several bills to further amend the KCC have been submitted to the National Assembly, seeking to make cumulative voting mandatory for the election of two or more directors in large listed companies.
5. Dividends 5.1 Payments of Dividends
The company may pay dividends if it has distribut- able income and dividend payment is approved at the general meeting of shareholders, or by the board of directors if the board of directors approves the finan- cial statements of the company. Distributable income means the amount available from the net assets in the balance sheet of the company as at the end of the immediately preceding financial year, after deducting the paid-in capital, the statutory capital reserve, surplus earnings to be cumulated as the statutory capital reserve as at the end of the cur- rent financial year, and unrealised profit. Under the KCC, dividend payments are permitted strictly within the scope of the distributable income as shareholders have a junior claim to the claims of creditors. Once dividend payment is approved by a resolution of the shareholders or the board of directors, dividends must be paid within one month after the date of such resolution, unless the date of payment is determined otherwise in such resolution. 6. Shareholders’ Rights as Regards Directors and Auditors 6.1 Rights to Appoint and Remove Directors The approval of a general meeting of shareholders is required in order to appoint (by an ordinary resolution) or remove (by a special resolution) a director to/from the board of directors of a company. Although the board of directors typically calls a general meeting of shareholders to appoint or remove a director, holders
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