SOUTH KOREA Trends and Developments Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
sitions (M&A), corporate splits, comprehensive share exchanges and the issuance of new shares – have consistently been identified as an area for improve - ment. To address these issues, Article 382-3 of the KCC was amended in July 2025. The revised provision now explicitly stipulates that directors owe a duty of loyalty to “shareholders” as well as the company. It further mandates directors to protect the interests of shareholders as a whole and ensure the substantive equitable treatment of all shareholders. Key provisions and interpretations The text of the revised Article 382-3 (Duty of Loyalty of Directors, etc) of the KCC is provided below: • directors shall perform their duties in good faith for the interest of the company and the sharehold - ers in accordance with statutes and the articles of incorporation (AoI); and • in performing their duties, directors shall protect the interests of the shareholders as a whole and treat the interests of all shareholders equitably. Below are some notes regarding the interpretation of the new Article 382-3. • “Shareholders” in paragraph 1 refers not to specific individual shareholders, but to the collective body of all shareholders – the ultimate beneficiaries of the company’s corporate value. • “Shareholders as a Whole” in paragraph 2 refers to the collective body of all shareholders. “Interests of the shareholders as a whole” means the aggregate interest of the entire shareholder base. This does not mean honouring every individual preference; rather, it requires protecting the collective interest of the group. Furthermore, “interest” is defined as long-term value, encompassing sustainable growth rather than mere short-term gains. • “The interests of all shareholders” in paragraph 2 refers to the duty of equitable treatment of every individual shareholder. This does not mandate mechanical equality; instead, it prohibits the sub - stantive infringement of a specific group’s rights in
favour of others without a justifiable cause aligned with the company’s long-term interests. MOJ guidelines on the conduct of directors in corporate restructuring To provide specific standards of conduct for direc - tors in the context of corporate restructurings, such as M&As, the Korean Ministry of Justice (MOJ) issued the Guidelines on the Standard of Conduct for Directors in Corporate Restructuring (the “Guidelines”) in February 2026. While the Guidelines are generally considered as non-binding soft law, they are nonetheless expect - ed to serve as a meaningful benchmark for boards in their practical decision-making processes. Some of the notable aspects of the Guidelines follow. In contrast to the business judgement rule (BJR) in the USA, which operates as a standard of review that is less stringent than the entire fairness standard applied in cases involving self-interest or conflicts of interest, the BJR in Korea is often understood as providing a set of factors, as recognised in numerous Korean judicial precedents, to determine whether a director has breached their fiduciary duties in instances where the company has sustained damages. The Guidelines clarify that this Korean concept of BJR also applies to the directors’ newly codified fiduciary duty to share - holders under the amended KCC. Specifically, a director may be shielded from legal liability – even for a decision that ultimately results in a loss for shareholders – provided that the director made a reasonable business judgment in good faith, without any intent of self-dealing, and based on the following criteria: • informed decision-making – the director must have diligently collected, investigated and reviewed all necessary and sufficient information; • reasonable belief – the director must have acted with a reasonable belief that the decision was in the best interests of both the company and its shareholders; and • prudent judgement – the decision must have been a rational business judgement made in accordance with the principles of good faith.
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