SOUTH KOREA Law and Practice Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
3.2 Board Members Directors are classified into inside directors, outside directors (independent directors) and directors who are not engaged in regular business. These three types of directors have equal voting rights on the board of directors. • Inside director: A director who engages in the company’s day-to-day operations. The representa - tive director is appointed from among the inside directors. • Outside directors (independent directors): Outside directors (independent directors) are directors who do not engage in the company’s day-to-day operations. Although the term “outside director” was previously used for listed companies as well, the 2025 amendment to the KCC introduced a separate term: “independent director”. The two are essentially the same, with the director’s independ - ence being the key element. • Other non-executive directors: These are directors who do not engage in the company’s day-to-day operations but do not meet the qualifications for outside directors. 3.3 Board Composition Composition Requirements Applicable to All Stock Companies Composition of the board of directors Directors appointed at the general meeting of share - holders automatically become members of the board of directors without any additional procedures, and the board of directors cannot be composed of indi - viduals who are not directors. Number of directors Every company must have at least three directors (except for companies with a total capital of less than KRW1 billion where a board of directors is not estab - lished). While the KCC does not impose a maximum limit, a ceiling may be set through the AOI. Composition of the audit committee Where an audit committee is established within the board of directors, it must consist of three or more directors, and at least two-thirds of the members must be outside directors.
Auditor (or Audit Committee) Auditors exercise their authority independently, whereas an audit committee exercises its authority through committee resolutions. The operation of the audit committee, including its convocation and reso - lution methods, follows the procedures for commit - tees within the board of directors as prescribed by the KCC. Specifically, notice must be dispatched to each committee member one week prior to the meet - ing date, though this period may be shortened by the AOI, and a meeting may be held at any time without notice upon the unanimous consent of all committee members. Adoption of resolutions require the attend - ance of a majority of the members and the affirmative vote of a majority of the members present, though the AOI may set a higher threshold. The board of directors is composed of all directors elected at the general meeting of shareholders. While the KCC does not have any specific provisions regard - ing the chairperson of the board of directors, it is com - mon practice for a company’s AOI to designate the representative director as the chair. Large corporations often establish various committees within their board, such as audit committees, com - pensation committees and director nomination com - mittees. The audit committee serves as a body that can replace the auditor and is governed by specific provisions under the KCC. Other general committees are established in accordance with the AOI, based on the general provisions of the KCC that serve as the legal basis for committees. A committee consists of two or more directors, and the board of directors may delegate its authority to a committee, except for the following matters: • proposals regarding matters requiring approval by the general meeting of shareholders; • appointment and dismissal of the representative director; • establishment of committees and the appointment and dismissal of their members; and • matters specified in the AOI 3. Directors and Officers 3.1 Board Structure
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