SOUTH KOREA Law and Practice Contributed by: Ki Wook Kang, Kyung Chun Kim, Junghae Kang and Do Kyeom Kim, Lee & Ko
23 July 2026. Under the previous regulatory regime, where a shareholder holding more than 3% of the shares was the largest shareholder, the voting rights attached to shares exceeding 3% – calculated by aggregating the holdings of its specially related par - ties – could not be exercised in the appointment or removal of an audit committee member who was not an outside director. The amended law expands the application of the 3% cap by providing that, regard - less of whether the audit committee member is an outside director, the voting rights attached to shares exceeding 3% – again calculated on an aggregated basis with the largest shareholder’s specially related parties – may not be exercised in any appointment or removal of audit committee members. Mandatory Adoption of Cumulative Voting and Expansion of Separately Elected Audit Committee Members The amended Korean Commercial Code, promulgated on 9 September 2025 and scheduled to take effect on 10 September 2026, mandates the adoption of a cumulative voting scheme for listed companies with total assets of KRW2 trillion or more and increases the number of audit committee members to be elected separately from other directors from one to two. As a result, the likelihood of appointing directors and audit committee members capable of representing the interests of minority shareholders is expected to increase, thereby enhancing the protection of minority shareholder rights. At the same time, however, there is a possibility that threats to management control and governance stability may also rise, including potential disputes or conflicts between controlling and minority shareholders with a significant level of shareholding, increased attempts by hedge funds or activist inves - tors to gain board representation, and a higher inci - dence of hostile takeover attempts. Mandatory Cancellation of Treasury Shares As of February 2026, the introduction of an amend - ment to the Korean Commercial Code which would primarily provide for the mandatory cancellation of treasury shares, is under consideration. The proposed amendment would require a company to cancel treas - ury shares held by it, except for certain grounds speci - fied in its articles of incorporation; prohibit the allot - ment of new shares to treasury shares; and require the
mutatis mutandis application of provisions governing the issuance of new shares to the disposal of treas - ury shares, thereby restricting the utilisation of treas - ury shares. Accordingly, the use of treasury shares as a means of maintaining control over a company is expected to face limitations, and companies will need to comprehensively review their treasury share cancellation and disposal plans. See the South Korea Trends and Developments article in this guide for fur - ther details. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies In the case of acquiring a Korean-listed company in a friendly transaction, if there is a controlling sharehold - er in the company, the purchaser normally acquires the shares of the controlling shareholder first and then, if needed, acquires the remaining shares of the minor - ity shareholders through a tender offer, to go private thereafter. In the case of a hostile takeover of a Korean listed company, the bidder usually acquires less than 5% of the target company’s shares in order to avoid filing the 5% Disclosure Report; see 4.2 Material Share- holding Disclosure Threshold . A failure to fulfil the requirement to file a 5% Disclosure Report will result in restrictions on voting rights and the FSC may order the disposal of such shares held in violation. Conversely, in some cases a mandatory tender offer may be required; see 6.2 Mandatory Offer Threshold . 4.2 Material Shareholding Disclosure Threshold The FISCMA provides that if an investor (which includes specially related persons and parties acting in concert) intends to hold 5% or more of the voting shares or other equity securities issued by a listed company, such investor must file a report with respect to the contemplated shareholding with the FSC and the Korea Exchange (KRX) within five business days of both the execution date of the relevant share purchase agreement (SPA), as well as the closing date of the transaction contemplated thereby (the “5% Disclosure Report”). In the case of any change of 1% or more in
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