SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
FSCMA Disclosure Requirements On the other hand, shareholding disclosure require- ments under the FSCMA may serve to check share- holder activism. Under the FSCMA, a shareholder who comes to own at least 5% of a listed company must report its shareholding status and the purpose of ownership to the FSC and the KRX within a specified period. Thereafter, such shareholder must also file a detailed account of any changes in its shareholding ratio by at least 1% of the total issued and outstanding shares, any changes in its purpose of shareholding, or any other material matters. A shareholder who holds shares without the “intent to influence corporate management” will be subject to more relaxed regulations regarding the content and timing of the report. Recent Changes to the KCC The following changes under the 2025 KCC Amend- ments are expected to have a significant impact on shareholder activism: • From 23 July 2026, this 3% aggregate voting cap in large listed companies will apply to all cases of election or removal of audit committee members, regardless of whether they are outside directors. • Directors owe a duty of loyalty to all sharehold- ers and must treat their interests fairly. If a conflict occurs between the interests of the company or controlling shareholders, on the one hand, and those of minority shareholders, on the other hand, directors can still be held liable for breaching their duty of loyalty to shareholders. • From 1 January 2027, certain listed companies, as may separately be classified by a Presidential Decree based on factors such as asset size, will be required to hold virtual general meetings of share- holders. This will enhance minority shareholders’ accessibility to general meetings of shareholders. 11.2 Aims of Shareholder Activism The key aims of activist shareholders are to enhance the corporate value and thereby the shareholder val- ue. To that end, activist shareholders tend to propose the following matters to the management, or actively oppose the agenda proposed by the management:
Furthermore, shareholders of the parent company have the right to bring a derivative suit against the directors of a direct subsidiary (ie, a company of which more than 50% of the shares are held by the par- ent company) or indirect subsidiary (ie, a company of which more than 50% of the shares are held by the parent company and a direct subsidiary in aggre- gate), so long as such shareholders hold at least 1% of the total issued and outstanding shares of the par- ent company (if the parent company is listed, holders of at least 0.5% of the total issued and outstanding shares for at least six consecutive months also have this right). 11. Shareholder Activism 11.1 Legal and Regulatory Provisions Legal Framework for Shareholder Activism in Korea Shareholder activism is generally subject to the pro- visions of the KCC, the FSCMA and the KRX regula- tions. The government has been reinforcing laws and regulations to improve transparency in large business groups’ investments structures as well as their cor- porate management, and to strengthen shareholders’ rights in individual companies. Rights Under the KCC Activist shareholders generally rely on the specific rights afforded to minority shareholders under the KCC, including the right to: • call a general meeting of shareholders; • propose the agenda of such meeting; • request cumulative voting with regard to the appointment of directors; • request an injunction (suspension) against a direc- tor’s misconduct; • institute a derivative suit; and • inspect the company’s books and records. The KCC has a number of “special provisions” appli- cable to listed companies that relax the shareholding ratio requirement for minority shareholders to exercise their rights. To prevent abuse of these provisions, the KCC generally requires a minimum holding period as well (eg, six months).
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