SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
6.2 Challenging a Decision Taken by Directors Any shareholder has the right to bring an action in court for revocation or nullification of a board resolu- tion, so long as such person holds at least one share. The court will then decide whether to revoke or nullify the resolution, based on the applicable law. Holders of at least 1% of the total issued and out- standing shares have the right to demand, on behalf of the company, that a director refrain from taking cer- tain actions or cease to take certain actions that are in violation of laws and regulations or the AOI of the company, if such actions would result in irreparable harm to the company. In the case of a listed com- pany, shareholders meeting the following thresholds also have the same right: • 0.05% of the total shares continuously held for at least six consecutive months; or • 0.025% of the total shares continuously held for at least six consecutive months if the paid-in capital of the immediately preceding financial year is at least KRW100 billion. Shareholders do not have the power to require a direc- tor to actively take certain actions. However, if a direc- tor commits an unlawful act resulting in damage to the company, shareholders may either sue (or demand that the company sue) the director or adopt a resolu- tion to remove the director (following which resolution the removal takes effect immediately). 6.3 Rights to Appoint and Remove Auditors In principle, the provisions of the KCC applicable to directors apply mutatis mutandis to auditors. There- fore, shareholders have the right to propose to the board the appointment or removal of an auditor and to adopt a special resolution to remove an auditor, sub- ject to the same shareholding thresholds as applied to the shareholder rights with respect to directors. A shareholder who holds more than 3% of the total number of issued and outstanding voting shares at the time of appointment of an auditor is not entitled to cast votes in excess of that 3%. The largest shareholder of a listed company is sub- ject to tighter restrictions on voting rights – ie, a 3%
limit – which may be aggregated with shares held by a certain group of its specially related parties. Listed companies with total assets of KRW2 trillion or more as of the end of the most recent fiscal year must establish an audit committee instead of appointing an auditor. In such cases, the following special rules apply to the appointment and removal of audit com- mittee members: • the election of one director who will serve as a member of the audit committee must be conduct- ed separately from the election of other directors to ensure the independence of members of the audit committee of listed companies; and • the KCC restricts all shareholders from casting votes in respect of their shares in excess of 3% of total issued shares as an agenda item when appointing or removing audit committee mem- bers, provided that the largest shareholder is also restricted from casting votes in respect of their shares in excess of 3% (aggregated with shares held by its related parties) as an agenda item when appointing or removing audit committee members who are not outside directors. Furthermore, pursu- ant to the 2025 KCC Amendment, effective as of 23 July 2026, the rule limiting the combined voting rights of the largest shareholder and their related parties to 3% will be extended to the election of outside directors who will serve as audit committee members.
7. Corporate Governance Arrangements 7.1 Duty to Report
In principle, a company’s director is not obliged to report any corporate governance arrangements or other corporate information to any individual share- holder. For listed companies, particularly, reporting of undisclosed internal information to certain sharehold- ers may raise issues such as the principle of share- holder equality, violation of the fair disclosure obliga- tion or the use of undisclosed material information. Despite the foregoing general rule, KOSPI-listed com- panies with total assets of KRW500 billion or more
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