SOUTH KOREA LAW AND PRACTICE Contributed by: Tehyok Daniel Yi, Gun Kim, Kyu Hyun Kim, Sun Hee Kim, Yong Whan Choi, Yong Min Lee, Jung Woo Lee and Hyeon Jeong, Yulchon LLC
• adopt a mandatory cumulative voting system; and • increase the number of audit committee members elected separately from other directors from one to two. These changes are expected to improve minority shareholder representation on boards and further stimulate the activities of minority investors and activ - ist funds in the Korean market. 4.3 Disclosure and Reporting Obligations South Korea imposes no additional FDI-specific dis - closure requirements on foreign investors. However, shareholders of public companies are subject to own - ership-based disclosure obligations, with thresholds triggering reporting requirements (eg, 5% and 10%). For private companies, disclosures are governed by the Act on External Audit of Stock Companies, which mandates financial statement and audit report dis - closures for companies meeting specific thresholds. Disclosure is required if a company is either: • a stock or limited liability company with total assets or sales of at least KRW50 billion in the previous business year; or • a company that meets at least two of the following criteria for stock companies, or three for limited liability companies: (a) total assets of KRW12 billion or more at the end of the previous year; (b) total liabilities of KRW7 billion or more at the end of the previous year; (c) sales of KRW10 billion or more in the previous year; (d) 100 or more employees at the end of the previ - ous year; or (e) 50 or more members at the end of the previous year for limited liability companies.
larger companies and its KOSDAQ market catering to smaller, high-growth firms. South Korean businesses have traditionally relied heavily on bank financing. However, since the 1997 Asian financial crisis, corporate bonds and equity offerings have gained popularity, allowing companies to reduce dependence on bank loans. The equity market strengthened substantially in 2025, and as of October 2025, the KRX reported a market capitalisa - tion of approximately KRW3,088 trillion, reflecting the continued depth and maturity of the Korean equity market. Meanwhile, the corporate bond market has also expanded significantly, with companies increas - ingly turning to bond issuance as a preferred fund - ing strategy. In the first half of 2025, corporate bond issuance by Korean firms exceeded KRW75 trillion, representing a 15% increase from the same period in the previous year. Despite this shift, bank financing remains crucial, particularly for small and medium-sized enterprises (SMEs). Overall, South Korea’s capital markets pro - vide a well-balanced mix of funding options, under - scoring the country’s dynamic and mature financial landscape. 5.2 Securities Regulation South Korea’s capital markets are governed by the Financial Investment Services and Capital Markets Act (FSCMA), which regulates financial investment business licensing, securities issuance, public com - pany regulation, prevention of unfair trading, fund management and the governance of market institu - tions, such as the Korea Financial Investment Asso - ciation and Korea Securities Depository. The KRX sets listing and disclosure requirements for its three main markets as follows. • KOSPI: companies must meet both quantitative criteria (eg, operating history, capital size, financial performance) and qualitative criteria (eg, manage - ment transparency, investor protection). • KOSDAQ: listing requirements are less stringent, focusing on share distribution, financial perfor - mance and investor protection. • KONEX: targeted at SMEs and venture compa - nies, KONEX offers smaller-scale compliance and
5. Capital Markets 5.1 Capital Markets Overview
South Korea’s capital markets have matured sig - nificantly, offering diversified funding sources that support the country’s economic development. The Korea Exchange (KRX) remains the primary platform for securities trading, with its KOSPI market serving
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