SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
11.6 Proportion of Activist Demands Met While it is difficult to ascertain the exact proportion of public activist demands that have been met, a number of activist demands have led to significant changes in Korean corporate governance in recent years. For instance, a group of activists successfully car- ried out a public campaign opposing a large listed company’s corporate restructuring in a shareholder ballot. In other instances, some listed companies vol- untarily accepted the activist shareholders’ proposal to diversify the composition of the board of directors to include foreign and/or female outside directors, or to expand the shareholder return policies. Furthermore, activist shareholders have a bet- ter chance of successfully appointing their director designee to the audit committee, due to the special provisions in law applicable to large listed companies. See 6.3 Rights to Appoint and Remove Auditors for further details. 11.7 Company Prevention and Response to Activist Shareholders Korean companies have limited options in respond- ing to an activist shareholder. Each share must gen- erally carry one vote under Korean law, and poison pills and multiple voting shares are not available to Korean companies, with limited exceptions, as dis- cussed below. Companies may consider increasing the shareholding stake of a friendly third party by way of issuing new shares or transferring available treasury shares to such third party. However, the court may invalidate the new issuance of shares to a third party if such issuance does not serve any reasonable busi- ness purpose but appears solely to be for the pur- pose of defending against shareholder activism. Addi- tionally, as a result of the 2025 KCC Amendments’ expansion of the fiduciary duties to shareholders, the above-mentioned transactions may be subject to heightened scrutiny by the Korean courts. Companies are expected to carefully review whether any of such transactions is in the interests of their shareholders as a whole, beyond the interests of the company and/or the board of directors’ determination of its reasonable business purpose.
agenda to appoint inside, outside and other non- executive directors in 2020 (together with other shareholders with whom KCGI entered into a joint equity agreement), but the proposal was rejected at the 2020 annual general meeting of shareholders; and (ii) in 2024, Truston Asset Management made a shareholder proposal to appoint two outside directors and one inside director to the board of directors of Taekwang Industrial Co., Ltd., and the proposal was accepted at the 2024 annual general meeting of shareholders. 11.5 Most Active Shareholder Groups Shareholder Activist Funds The recent increase in the number of asset manag- ers and assets managed by asset managers has led to a balloon effect, resulting in a rise in the market for shareholder activist funds. With the emergence of new asset managers, funds advocating shareholder activism have emerged, such as those employing strategies of investing in the shares of undervalued listed companies in order to obtain investment returns through eliminating the factors leading to undervalua- tion of a relevant company. These activist funds seek to improve the governance structure and increase dividend amounts through active exercise of their minority shareholders’ rights. National Pension Service The NPS enacted its internal shareholder activism guidelines known as the Korean Stewardship Code, which became effective on 27 December 2019, estab- lishing detailed standards and processes for share- holder activism. With these guidelines, the NPS has taken a more active stance as a shareholder and, for certain portfolio companies selected by its fund man- agement committee, to exercise its shareholder rights to the fullest extent permitted under applicable laws and regulations. Minority Shareholder Associations Recently, a new form of shareholder activism is on the rise, where minority shareholders use certification- based shareholder activism platforms such as “Act” to form “minority shareholder associations” to exer- cise their shareholder rights, particularly in small-sized listed companies.
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