SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
Derivative Actions With respect to any indirect damages (through damages incurred by the company), the share - holders may bring a derivative action against the directors on behalf of the company. Specifically, if a director causes damage to the company through violation of laws or articles of incorporation, or through negligence in perform - ing their duties, the shareholders can demand that the company file a lawsuit to hold the direc - tor accountable. If the company does not file a lawsuit against the director within 30 days of receiving such a demand, the shareholders can immediately file a lawsuit against the director on behalf of the company to claim damages as derivative actions (Article 403 of the KCC). In the case of private companies, shareholders owning more than 1% of the total issued shares can file such lawsuits. However, for publicly traded companies, only the shareholders who have continuously held at least 0.01% of the total issued shares for the past six months can initiate representative lawsuits (Article 542-6, Paragraph 6 of the KCC). 5.5 Disclosure by Shareholders in Publicly Traded Companies The 5% Reporting Rule Any individual or entity holding 5% or more of a publicly traded company’s total outstanding shares must report their share-ownership status, changes in holdings, and the purpose of their holding to the Financial Services Commission. The 5% threshold for disclosure is calculated by aggregating not only the shares held by the relevant shareholder but also the shares held by such shareholder’s related parties. In this case, the individual holding the largest number of shares (when aggregated with the shares held by their related parties) has the right to file the
report as the representative reporter, enabling consolidated reporting. The 10% Reporting Rule An individual ( “major shareholder” ) who acquires ownership of 10% or more of the total issued shares of a company is required to disclose this ownership, and any subsequent changes in the number of shares owned must also be disclosed. However, if the change in the share - holding involves less than 1,000 shares and the applicable amount is lower than KRW10 million, the obligation to report the change does not apply. Unlike the 5% rule, the 10% rule does not aggregate the number of shares held by related parties. There is no disclosure obligation in relation to the ultimate beneficial owner of publicly trad - ed companies, although such disclosure may be required in certain regulated industries (eg, financial institutions). 6. Corporate Reporting and Other Disclosures 6.1 Financial Reporting Listed and certain other companies are obliged to submit an annual report, and regular disclo - sures must be made on its business through quarterly, semi-annual and annual reports, which are made available to the public on an electron - ic public disclosure platform maintained by the Financial Supervisory Service such as the “Data Analysis, Retrieval and Transfer System” (DART). In addition, such companies must submit time - ly reports setting forth information on material events having an effect on the management or assets of the company (eg, mergers, spin-offs, comprehensive exchanges of shares, transfers
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