SOUTH KOREA Trends and Developments Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
• Penalties in the event of a violation (eg, failure to disclose the transaction plan, false dis - closure, or failure to execute the disclosed transaction plan) an amount corresponding to 0.02% of the market capitalisation can be imposed as a penalty surcharge, which is capped at KRW2 billion. Potential Future Legislative Amendments Thus far, so-called “targeted regulations” have been introduced under the FSCMA to address specific areas such as merger procedures, restrictions on the acquisition and disposal of treasury stock, and disclosure obligations. How - ever, legislative discussions are also underway to more comprehensively and fundamentally resolve the conflict-of-interest issue between the controlling shareholder and minority share - holders. Among these, the two most actively discussed and potentially impactful reforms – which, if adopted, are expected to bring sig - nificant changes to capital markets and related practices – are: i) amendments to the KCC to expand the scope of directors’ duty of loyalty; and ii) the introduction of a mandatory tender offer regime. Expansion of Directors’ Duty of Loyalty Scope A proposed amendment to the KCC that imposes a duty of loyalty on directors toward shareholders passed the plenary session of the National Assembly on 13 March 2025. However, the legislative process was suspended when the Acting President exercised the right to request reconsideration (ie, veto on legislation) on 1 April 2025. The National Assembly attempted to re- pass the bill on 17 April 2025, but the bill did not pass and was subsequently abandoned. Despite strong criticism from the business com - munity, public opinion continues to support the
necessity of amending the KCC to fundamen - tally address the issue of controlling sharehold - ers’ pursuit of private interests and the resulting harm to minority shareholders. Given that the majority party in the National Assembly has tak - en a highly supportive stance on the proposed amendment, there remains a significant possibil - ity that the bill will be reintroduced and passed in the near future. The proposed amendment to the KCC provides that “a director shall faithfully perform his or her duties for the benefit of the company and its shareholders in accordance with applicable laws and the articles of incorporation” , thereby expanding the scope of a director’s duty of loy - alty to include not only the company but also its shareholders. Furthermore, the amendment stipulates that directors must protect the inter - ests of all shareholders and treat them equitably in the performance of their duties. If this amendment is ultimately enacted, com - panies will be expected to conduct a more thor - ough review from the perspective of shareholder protection when undertaking corporate restruc - turings or capital transactions, such as mergers or divestments. While it is generally understood that the interests of a company align with those of its shareholders, and that a director’s duty of care and loyalty as an agent of the company inherently includes the protection of shareholder interests, the current interpretation of the KCC could already be viewed as embedding such an obligation for the directors. However, in corpo - rate restructuring or capital transactions where minority shareholders in Korea have raised con - cerns about the infringement of their proportion - al interests – such as the listing of a spun-off subsidiary, allegations of unfair merger ratios, or third-party allotments of new shares – the pro - posed amendment may lead to an interpretation
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