SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
directors and insider trading. It is mandatory for publicly traded companies to comply with list - ing rules, including those derived from the FIS - CMA and the applicable listing rules of the Korea Exchange (eg, KOSPI Market Listing Rules and KOSDAQ Market Listing Rules). Act on External Audit of Stock Companies (External Audit Act) The External Audit Act is a crucial legal frame - work that mandates companies to undergo external audits and prescribes essential matters related to accounting management for compa - nies subject to external audits and the audit - ing process conducted by external auditors. It ensures transparency, maintains investor trust and upholds corporate integrity by verifying a company’s financial health and the appropriate - ness of its financial reports. Please refer to Sec - tion 6.1 Financial Reporting for details on the External Audit Act. 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares Various corporate governance requirements for publicly traded companies are provided by the KCC and FISCMA, as well as listing rules for the Korea Exchange (KRX), including the following. Appointment of Outside Directors and Statutory Auditors Listed companies are required to appoint at least one-quarter of the total number of their directors as outside directors (ie, independent directors). Publicly traded companies with total assets equal to or above KRW2 trillion must have three or more outside directors, and a majority of the total number of directors must be outside direc - tors. Furthermore, the individuals that have been involved in the company’s business activities within the preceding three-year period cannot
be appointed outside directors. The total tenure of outside directors cannot exceed nine years. Regarding statutory auditors, publicly traded companies with total assets equal to or above KRW100 billion must appoint a full-time audi - tor or establish an audit committee to oversee the company’s affairs and accounting practices, and publicly traded companies with total assets equal to or above KRW2 trillion must set up an audit committee. Individuals appointed as audi - tors or audit committee members must meet specific qualifications, as stipulated under the KCC. Corporate Governance Report Listed companies above a certain size are required to disclose corporate governance reports in accordance with the Corporate Gov - ernance Report Guidelines issued by the KRX. Corporate governance reporting was voluntary when first introduced to Korea in 2017. However, with disclosure requirements gradually expand - ing, it is anticipated that, by 2026, such require - ments will become applicable to all publicly traded companies on the KOSPI market. In addition to the above, publicly traded com - panies are subject to various other regulations under applicable laws and regulations, such as the requirement to include certain information about candidates for directors or auditors in the notice convening a shareholders meeting, and the requirement to make disclosures on a regular basis or in relation to transactions of a certain nature. Key issues in corporate governance reporting will be discussed hereafter.
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