SOUTH KOREA Trends and Developments Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
shareholder. In response, many listed companies have already amended their AoI during the March 2026 annual general meetings to reflect these requirements. The synergy between the “Aggregated 3% Rule” and the expanded separate election system is expected to significantly empower minority shareholders in placing independent overseers on corporate boards. Implementation of hybrid/virtual shareholder meetings Beginning 1 January 2027, listed companies will be permitted to hold hybrid shareholder meetings (com - bining physical and electronic attendance), and this will be mandatory for listed companies with total assets of KRW2 trillion or more. The primary objective of this reform is to modernise corporate infrastructure and improve shareholder accessibility. Historically, the March annual general meeting season in Korea saw a high concentration of meetings on the same dates, often at remote head - quarters with limited transportation. This logistical burden frequently discouraged active shareholder participation, making proxy solicitation the primary – and often sole – tool for engagement. The institutionalisation of electronic shareholder meet - ings is expected to: • enable direct participation regardless of physical location or residency (benefiting domestic minority shareholders and foreign investors alike); • strengthen the oversight function by facilitating real-time communication and voting; and • increase corporate efficiency and reduce long-term costs associated with physical-only meetings. Rebranding and strengthening of independent directors As of 23 July 2026, the external directors of listed companies – termed “outside directors” under the previous KCC – will be known as “independent direc - tors”. Furthermore, all listed companies must increase the proportion of independent directors to at least one-third of the total board members (up from the previous one-fourth) by 22 July 2027.
The change in nomenclature signifies a shift in focus: from merely being an “outsider” to being truly inde - pendent of the controlling shareholder and manage - ment. The amended KCC provides a clearer definition, explicitly stating that these directors must perform their functions independently of inside directors, exec - utive directors and those with the authority to instruct others to conduct business as defined under Article 401-2 of the KCC. This reform aims to realise the original intent of the director system – effective monitoring and balanc - ing of management – to represent the interests of all shareholders and enhance the overall fairness and transparency of corporate governance in Korea. Key Reforms to Treasury Shares Introduction Effective 6 March 2026, the KCC requires, as a gen - eral rule, the cancellation of treasury shares within one year of acquisition. The reform tightens the rules gov - erning the retention and disposal of treasury shares and limits how they may be used in financing and corporate transactions. Background Under the previous framework of the KCC, companies could hold treasury shares without a general cancella - tion duty and could dispose of them to third parties by board resolution (Former Article 342 of the KCC). This allowed treasury shares to function as a practical tool for investment, financing, restructuring and, in some cases, corporate governance purposes. The amend - ment, which was intended to curb the misuse of treas - ury shares and ensure they operate in the genuine interests of all shareholders, fundamentally changes existing practice by limiting the situations in which treasury shares can continue to be held or deployed. Mandatory cancellation requirement and exceptions The amended KCC establishes cancellation of treas - ury shares as the default rule as opposed to retention. Starting 6 March 2026, when a company acquires treasury shares, it must cancel them within one year from the date of acquisition (Article 341-4 (1)) absent an applicable exception. With respect to treasury shares held by the company prior to 6 March 2026,
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