SOUTH KOREA Law and Practice Contributed by: Kyu Seok Park, Dahye Cho and Justin Kim, Lee & Ko
the acquisition of target shares to the Korea Trade- Investment Promotion Agency, foreign exchange banks and/or the Bank of Korea under the Foreign Exchange Transaction Act or the Foreign Investment Promotion Act. Furthermore, these overseas funds may be restricted from investing, or limited in their shareholding ratio, in certain industries in which for - eign investments are statutorily barred or regulated, such as broadcasting or telecommunications. In addition, if the target possesses National Core Technology as designated under the Act on Preven - tion of Divulgence and Protection of Industrial Tech - nology, the overseas fund must obtain prior approval from, or file a report in advance with, the Minister of Trade, Industry and Energy in order to acquire over a certain percentage of the target’s shares. Recent Developments or Evolution On 22 July 2025, an amendment to the Korean Com - mercial Code concerning directors’ fiduciary duties came into effect. Directors are now subject to a fidu - ciary duty not only towards the company but also towards all shareholders, not just controlling or select shareholders. Under the previous law, directors were only required to faithfully perform their duties in the interest of the company. The Supreme Court of Korea had also held that granting preferential rights or status to certain shareholders could be permissible if it followed due process or was justifiable under specific circumstanc - es. However, the amended Commercial Code now explicitly provides that: “In performing their duties, directors must protect the interests of all shareholders and treat the interests of all shareholders fairly.”This amendment is consistent with Korea’s broader legisla - tive trend of strengthening minority shareholder pro - tection under the Commercial Code and the Capital Markets Act. Issues such as (i) the use of unfair merg - er ratios leading to dilution of minority shareholders’ interests, (ii) stock price declines following physical spin-offs and relisting of subsidiaries, and (iii) capital increases or treasury share disposals favouring con - trolling shareholders, have been persistently raised in the Korean market. In response, recent legislative and regulatory reforms include (a) enhanced disclosure and external valuation requirements for mergers, (b)
mandatory appraisal rights for dissenting sharehold - ers in physical spin-offs, and (c) stricter regulations on the use of treasury shares. The latest amendment to the Commercial Code, tak - ing a step further from such institutional improve - ments, codifies as a fundamental principle the duty of directors to act fairly towards all shareholders. As a result, in transactions that may give rise to con - flicts of interest among shareholders – such as cor - porate restructurings – directors will need to conduct more rigorous reviews and establish internal control standards to fulfil their fiduciary duties. Some critics, however, argue that this heightened obligation may unduly constrain directors’ managerial discretion and discourage proactive business decision-making. Given that the amended law has only recently taken effect, its practical implications are currently being closely observed in both academic and legal practice circles. In the course of M&A in Korea, it is standard practice to conduct full-blown due diligence, unless the target is very small. Information is usually provided through a virtual data room and management presentations/ break-out sessions, as well as periodic requests for information (RFIs) and written Q&As, among other platforms. While the depth of review differs on a case- by-case basis, the legal due diligence is generally conducted without a materiality threshold. For private equity investors, the focus of legal due diligence does not stray significantly from that of a corporate buyer and due diligence is conducted in all areas including corporate/securities, equity own - ership/dilution, material contracts, licences/permits, employment/labour and litigation, etc. However, in the case of private equity investors, it is more common to perform separate due diligence on compliance mat - ters (anti-bribery and corruption/AML/sanctions) or ESG issues. 4. Due Diligence 4.1 General Information
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