SOUTH KOREA Trends and Developments Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
The Guidelines also recommend that in transactions involving conflicts of interest – whether between the company and its directors, controlling shareholders or management, or between the controlling and minority shareholders – conflict-cleansing procedures such as (i) consulting with special committees comprised of professional and independent members, (ii) obtain - ing reviews from independent external experts on the fairness of transaction procedures and terms, and (iii) providing full disclosure of information to shareholders may be considered in order to enhance the fairness of such transactions. Notably, while the “majority of minority” (MoM) approval may assist in enhancing fair - ness depending on the specific case, it has not been endorsed as a universally recommended procedural safeguard. The Guidelines also provide examples of conflict- cleansing procedures based on the type of transac - tions. For instance, for intra-group mergers, such pro - cedures include: • ensuring arm’s-length transaction conditions; • ensuring the fairness of the merger ratio; and • full and fair disclosure of information to sharehold - ers. As for going-private transactions*, such measures include: • submission of an opinion letter on the tender offer; • verification of the fairness of the offer price; and • a fairness review during the subsequent cash-out share exchange. *Going-private transactions typically involve a two- step process: (i) the controlling shareholder acquiring a significant stake through a tender offer, followed by (ii) the acquisition of all remaining shares via a com - prehensive share exchange under the KCC. Practical implications and outlook The codification of the fiduciary duty to sharehold - ers is already having a profound impact on corporate behaviour and litigation risks in Korea.
Corporate governance and restructuring Practices under the previous version of the KCC that may damage shareholder value – such as unfair merg - er ratios, “IPO of split-off subsidiary” (ie, transactions in which a parent company separates a core business division into a subsidiary – typically through a physi - cal split-off – and subsequently lists that subsidiary, often resulting in a form of duplicate listing and raising concerns over the dilution of existing shareholders’ interests)**, or squeezing out minority shareholders via capital reduction – face heightened scrutiny. Since the amendment, such cases have significantly decreased. **In March 2026, the Korean government announced its intention to prohibit duplicate listings of parent and subsidiary companies under which such listings will, in principle, be restricted unless adequate protec - tion of minority shareholders is ensured. If pursued, the parent company’s board will be subject to a duty of loyalty to shareholders, requiring it to assess the impact on share value, implement appropriate safe - guards, and ensure adequate disclosure and share - holder communication. Civil liability Previously, directors often defended themselves against claims involving conflict of interest by argu - ing that such conduct did not harm the company. Under the revised KCC, an increase in direct damage claims by shareholders under Article 401 (Liability to Third Parties) is expected. Directors may now incur civil liability for failing to safeguard the interests of shareholders as a whole or for treating specific share - holders in a discriminatory manner. Criminal liability There is also an ongoing debate regarding whether a breach of duty to shareholders can constitute criminal breach of trust. While some argue that the lack of a direct contractual relationship between directors and shareholders limits the scope of criminal punishment, others call for further legislative clarity or expanded interpretations via the Guidelines to enhance predict - ability. For foreign investors, these developments signal a sig - nificant strengthening of shareholder rights in Korea. It is now imperative to monitor how boards demonstrate
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