SOUTH KOREA Law and Practice Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
Audit committee The KCC requires stock companies with total assets of less than KRW100 billion to either appoint an audi - tor or establish an audit committee. Listed companies with total assets of at least KRW100 billion but less than KRW2 trillion must either appoint a full-time audi - tor or establish an audit committee. Listed companies with total assets of KRW2 trillion or more are required to establish an audit committee. An audit committee established in a listed company with total assets of KRW100 billion or more, or KRW2 trillion or more, must consist of three or more directors, with inde - pendent directors constituting at least two-thirds of the members (see 3.4 Appointment and Removal of Directors/Officers ). Composition of the independent director nomination committee Listed companies with total assets of KRW2 trillion or more must establish an independent director nomi - nation committee as a subcommittee of the board of directors. A majority of the members of this committee must be independent directors. Public disclosure of corporate governance report All Korea Composite Stock Price Index (KOSPI)-listed companies are required to publicly disclose their cor - porate governance reports. For a more detailed dis - cussion, please refer to 5.2 Corporate Governance Arrangement Disclosure . 1.4 Stock Exchange Requirements Developments Characteristics and Development of Corporate Governance in Korea Corporate governance in Korea is characterised by controlling shareholders’ dominance over manage - ment. This holds true even for listed companies. As a result, the agency issues between the management and the shareholders commonly found in other jurisdic - tions are not as frequently observed in Korea. Instead, conflicts of interest between controlling shareholders and other shareholders have historically been the pri - mary governance challenge in Korea. Commentators have noted that the recent amendments to the KCC appear to be intended to address this issue.
The following recent changes may have an impact on the corporate governance of listed companies in Korea. These changes are anticipated to contribute to the advancement of corporate governance and the enhancement of shareholder value. Amendments to the KCC The key amendments to the KCC in 2025 are as fol - lows (please refer to the South Korea Trends & Devel - opments chapter in this guide for detailed informa - tion). Duty of loyalty of directors While the previous version of the KCC provided that directors must perform their duties in good faith “for the interest of the company” in accordance with stat - utes, and the articles of incorporation, the amended KCC now require directors to perform their duties “… for the interest of the company and the shareholders”. Furthermore, it is now explicitly stipulated that direc - tors have an obligation to protect the interests of the shareholders as a whole and to treat the interests of all shareholders equitably. These changes apply to both listed and unlisted companies. Cumulative voting Listed companies with total assets of KRW2 trillion or more are now prohibited from excluding cumulative voting through their articles of incorporation (AOI). Independent directors The title “outside director” for listed companies has been changed to “independent director”. The required proportion of independent directors on the board has been raised to at least one-third. Aggregated 3% rule (combined cap) For listed companies with assets of KRW2 trillion or more, or those with assets between KRW100 billion and KRW2 trillion that have established an audit com - mittee, the voting rights of the largest shareholders are now capped at 3% in the aggregate (including shares held by their specially related persons) when voting on the appointment or removal of an audit committee member.
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