SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
significant interest in the company, such as business relations with the company; and • directors, auditors, executive officers and employees of another company in which directors or employees of the relevant com - pany work as directors, auditors, executive officers or employees. In addition, the KCC stipulates additional rea - sons for disqualification of an outside director of a publicly traded company, including the fol - lowing: • a minor or a person of incompetence or of quasi-incompetence; • a person for whom two years have not passed since being dismissed or removed from office after they violated acts relating to finance separately determined by presiden - tial decree, including, but not limited to, the FISCMA, the Banking Act and the Insurance Business Act; • the largest shareholder and their specially related persons; • a shareholder who owns more than 10% of the total number of issued shares, other than non-voting shares, by their calculation, regardless of the name of a shareholder, or who exerts de facto influence on important matters related to the management of public - ly traded companies and their spouse, lineal ascendants and lineal descendants; and • a person determined by presidential decree to have difficulty faithfully performing their duty as an outside director, or who may have an influence on the management of publicly traded companies. 4.5 Rules/Requirements Concerning Independence of Directors Generally, the board of directors takes a holistic approach to ensuring the independence of direc -
tors and preventing potential conflicts of inter - est, including by considering the totality of fact and circumstances to determine whether there is any special/material relationship between a director and the affairs of the company. Accord - ing to court decisions, a special/material rela - tionship between any director and the affairs of the company exists if there is a personal conflict with the matter being discussed and decided upon (eg, if the director becomes a counter-par - ty to a transaction with or in a matter against the company, or if the discussion and vote concern their compensation). If it is determined that there is any special/ material relationship between any director and the affairs of the company, the director will not be permitted to vote on the company’s relevant affairs. With regard to the rules and requirements around the independence of “outside directors,” please refer to 4.4 Appointment and Removal of Direc- tors/Officers . 4.6 Legal Duties of Directors/Officers Under the KCC, a company director is consid - ered an agent of that company with two primary categories of duty: (i) the duties of a good faith caretaker toward the company ( “Duty of Care” ) (Article 382 (2) of the KCC; Article 681 of the Civil Act); and (ii) the duties to act in good faith in the interests of the company in compliance with the relevant laws and the company’s arti - cles of incorporation ( “Duty of Loyalty” ) (Arti - cle 382-3 of the KCC). Furthermore, based on court decisions interpreting the KCC, a director is recognised as having a duty to oversee other directors’ duties ( “Duty of Oversight” ). Duty of Care, Duty of Loyalty and Duty of Oversight shall hereinafter be collectively referred to as “Fiduci- ary Duties” .
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