SOUTH KOREA Law and Practice Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
Exclusion of Voting Rights for Directors With Special Interest A director who has a special interest in a resolution of the board of directors cannot exercise his/her vot - ing right in relation to that resolution. Here, a “special interest” refers to a director’s personal interest that conflicts with the interests of the company. Examples include a director who is the subject of a resolution for the approval of a director’s concurrent positions/ employment, the approval of self-dealing or the approval of the appropriation of corporate opportuni - ties. Board of Director Approval for Conflict of Interest Matters The KCC requires board approval for a director’s concurrent positions/employment, self-dealing and appropriation of corporate opportunities. While the approval for a director’s concurrent positions/employ - ment requires a majority of directors present and a majority vote of those present, the approval for a director’s self-dealing and the appropriation of cor - porate opportunities requires the affirmative vote of at least two-thirds of the directors in office. 3.6 Legal Duties of Directors/Officers Duty of Care As mandataries of the company, directors have a duty to process entrusted affairs with the “care of a good manager” in accordance with the tenets of the mandate. Korean courts apply the so-called business judgement rule. Under this rule, a director’s action is deemed to be within the scope of managerial discre - tion if the director: • sufficiently collected, investigated and reviewed necessary information within a reasonably available range; • reasonably believed the decision to be in the best interest of the company based on such informa - tion; and • made a managerial judgment in good faith, pro - vided that the content is not significantly unreason - able and falls within a range that a typical director could reasonably choose.
pendent directors, including relationships with major shareholders or recent employment history. Except for outside directors and independent directors, the KCC does not provide specific qualifications for directors. That said, as an auditor cannot concurrently hold the office of a director of the company or its subsidiaries, an auditor of the company or the company’s parent company cannot become a director of that company. Appointment and Removal of Audit Committee Members Within the Board of Directors Appointment/removal In the case of unlisted companies and listed com - panies with total assets of less than KRW100 billion, audit committee members are appointed and removed by the board of directors. A resolution to remove an audit committee member must be made by a two- thirds majority of the total number of directors. For listed companies with total assets of KRW100 billion or more, audit committee members are appointed by a simple resolution of the general meeting of sharehold - ers and removed by a special resolution of the general meeting of shareholders. Disqualification of audit committee members A director must not have any disqualifications as defined by the KCC to serve as a member of the audit committee of a listed company with total assets of KRW100 billion or more but less than KRW2 trillion, regardless of whether the individual is an independent director. The KCC lists factors relating to the ability to manage the company and creditworthiness (such as being a minor) and factors that could compromise independence from the company (such as being an officer or employee of the company) as grounds for disqualification. 3.5 Independence of Directors Appointment of Outside and Independent Directors The KCC provides criteria for the disqualification of outside directors and independent directors, pre - venting individuals with close relationships with the company or its controlling shareholders from being appointed to these positions (see 3.4 Appointment and Removal of Directors/Officers ).
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