SOUTH KOREA Trends and Developments Contributed by: Ki Wook Kang, Kyung Chun Kim, Junghae Kang and Do Kyeom Kim, Lee & Ko
from labour dispute actions. As a result, other than for a few exceptional circumstances, labour unions and their members will be generally protected from large-scale damages claims and related litigations arising out of collective labour actions such as strikes. • Discretionary Waiver of Liability: A new provision has been introduced to provide a legal basis for an employer to voluntarily waive claims for damages or other liabilities against a labour union or employ - ees arising from collective bargaining, labour dispute actions, or other union activities. Recent Court Judgment On 24 April 2025, the Supreme Court of Korea held that where a person who is both a director and a shareholder exercises voting rights at a general meeting of shareholders with respect to an agenda approving the ceiling on directors’ remuneration, such person constitutes a “shareholder having a special interest” under Article 368 (3) of the Korean Commer - cial Code, and his or her voting rights would therefore be restricted. Under the established Supreme Court precedents and prevailing academic views, a “special interest” under Article 368 (3) refers to a situation in which a particular shareholder has a personal interest sepa - rate from his or her position as a shareholder. There have been conflicting views with respect to whether a director-shareholder has such a special interest in both practical and academic settings. In practice, the prevalent view was that director-shareholders could exercise voting rights on agenda items approving the aggregate ceiling on directors’ remuneration. In this case, the court of first instance recognised the existence of a special interest on the part of director- shareholders on the grounds that (i) the ceiling on directors’ remuneration approved at the general meet - ing of shareholders inevitably has a significant impact on the determination of the specific remuneration to be paid to individual directors in the future, and (ii) the remuneration of a director who is also a sharehold - er is closely related to such shareholder’s personal interests, rather than to interests relating to corporate control. The appellate court and the Supreme Court
subsequently affirmed the position of the court of first instance. In light of this decision, changes to existing practice whereby director-shareholders are allowed to exercise voting rights on resolutions approving the ceiling on directors’ remuneration seem unavoidable. Recent Court Judgment Meanwhile, on 16 October 2025, the Supreme Court of Korea held that the transfer of shares in a subsidiary which engages in the core business of the company may constitute a transfer of material business, thereby requiring a special resolution of the general meeting of shareholders. The Supreme Court further held that where the company refused a shareholder proposal submitted by minority shareholders to include an approval of such transaction in the agenda, the com - pany and its directors could be held liable. This Supreme Court decision reaffirms the existing precedent that the disposal of business assets, if resulting in an effect equivalent to transferring or dis - continuing all or a significant part of a company’s busi - ness operations, constitutes a transfer under Article 374 (1)(i) of the Commercial Code requiring a special shareholder resolution. Furthermore, with respect to the disposal of shares in a subsidiary, the Supreme Court held that if such disposal leads to the elimi - nation of the company’s revenue and other business outcome, as well as business relationships associated with the relevant business operation, it amounts to a material transfer of business, thereby necessitat - ing a special resolution at the shareholders’ meeting along with the procedures for dissenting sharehold - ers’ appraisal rights (right to request the company to purchase their shares). In addition, the Supreme Court recognised that where a company refuses a shareholder proposal relating to the appraisal rights of dissenting shareholders, the company and its representative director may be directly liable for damages to the shareholders. This decision clearly establishes that a transaction involving the transfer of shares in a subsidiary may be deemed a material business transfer if certain materiality criteria are satisfied, thereby triggering the
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