SOUTH KOREA Law and Practice Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
Sub-duties recognised under the duty of care include the duty to comply with laws, the duty of oversight and
primarily encompasses the long-term interests of the shareholders. Meanwhile, the 2025 amended KCC explicitly pro - vides that directors must perform their duties in good faith “for the company and the shareholders”. Further - more, considering the company’s stakeholders other than shareholders – such as creditors and employees – and implementing ESG management for the com - pany’s long-term interests and sustainability is both permitted and required as part of a director’s fiduci - ary duty to the company. It is unlikely that the recent amendments were intended to require directors to place the interests of the shareholders above all, or In the event of a director’s breach of duty, the general meeting of shareholders may remove the director. If the resolution for removal is rejected at the general meeting of shareholders despite a material fact involv - ing misconduct or a violation of laws or the AOI by the director in connection with their duties, a shareholder holding 3% or more of the total issued and outstand - ing shares (or a shareholder of a listed company who has held 0.5% or more for at least six months; 0.25% for listed companies with total assets of KRW100 bil - lion or more) may file a lawsuit for the removal of the director. When a lawsuit for removal is filed, the court may, upon the application of a party, suspend the director’s performance of duties via an injunction and appoint a temporary acting director. Directors’ Liability for Damages to the Company If a director, either intentionally or through negligence, acts in violation of laws or the AOI, or neglects their duties, the director is jointly and severally liable to the company for damages. If such an act was based on a resolution of the board of directors, directors who voted in favour of the resolution are also liable. A law - suit to pursue a director’s liability to the company may be filed directly by the company or by a shareholder. • Lawsuit by the company against a director: In a lawsuit filed by the company against a director, the auditor represents the company. at the expense of other stakeholders. 3.8 Breach of Directors’ Duties Removal of Directors
the duty of internal control. Duty to comply with the law
Directors are obligated to comply with the various provisions of the KCC and other regulations that indi - vidually prescribe duties to be observed in the perfor - mance of their tasks, as well as regulations the com - pany must follow in its business activities. Precedents maintain that illegal acts cannot be protected by the business judgement rule. Duty of oversight and internal control Directors have a duty to monitor whether the execu - tion of duties by other directors or management is being conducted appropriately without violating laws or the AOI, and to take necessary measures to prevent improper acts. Furthermore, courts have recognised the duty to establish an internal control system, hold - ing that “each director constituting the board has an obligation to ensure that a reasonable information and reporting system is established and functioning prop - erly”. Courts have also held that even outside direc - tors have an obligation to urge the establishment of an internal control system and to demand corrective measures without ignoring the situation when there are grounds to suspect the system is not operating properly. Duty of Loyalty Directors must faithfully perform their duties for the company and the shareholders in accordance with laws and the AOI. In addition, directors bear duties such as the prohibi - tion of self-dealing, the prohibition of competition, the prohibition of misappropriating corporate opportuni - ties and the duty of confidentiality (see 3.5 Independ- ence of Directors ). 3.7 Responsibility/Accountability of Directors Directors are mandataries entrusted with the manage - ment of the company’s affairs. Therefore, the party to whom a director owes duties is, in principle, the company. However, the “corporate interest” that a director must protect and promote is not merely an increase in the net assets of the legal entity itself, but
654 CHAMBERS.COM
Powered by FlippingBook