Shaking the Principles of the Free Market Economy

Timeline of the Commercial Act Amendment:
From Initial Proposal to the Present

The government, opposition parties, and business sector have been actively engaged in the process surrounding the Commercial Act amendment. This timeline provides an overview of major events and FKI’s actions since the amendment was first proposed in 2022 up to the present.

2022

2022 January–March

January–March

Proposed Commercial Act amendment regarding directors’ duty of loyalty

·
Expanded the scope of directors’ duty of loyalty to include proportional shareholder interests (Bill No. 2114916)
·
Expanded the subjects of directors’ duty of loyalty to include the entire body of shareholders, in addition to the company (Bill No. 2119370)

2024 June

June

A Commercial Act amendment bill expanding directors’ duty of loyalty was proposed after the opening of the 22nd National Assembly

·
Led by National Assembly members Jun-ho Jeong, Joo-min Park, and Hoon-sik Kang, among others
·
Pending in the Legislation and Judiciary Committee

June 11

FKI released a research report on the expansion of directors’ duty of loyalty (Professor Jae-yeol Kwon)

·
Protecting shareholders’ proportional interests is an idealistic notion that cannot be realized
·
Concerns about reduced corporate competitiveness due to delayed management decisions

June 16

The Chief Presidential Secretary for Policy mentioned the abolishment of breach of trust or the need to review indemnity provisions if the Commercial Act is amended

June 25

Eight economic organizations,¹, including FKI, jointly submitted a proposal regarding the Commercial Act amendment

·
Concerns over disruption to the existing legal system and incompatibility with global standards
·
Fear of excessive judicial risks due to punishment for breach of trust under the Criminal Act
·
Potential to create confusion in routine management activities

1. The Federation of Korean Industries, Korea Chamber of Commerce and Industry, Korea Federation of SMEs, Korea Enterprises Federation, Korea International Trade Association, Federation of Middle Market Enterprises of Korea, Korea Listed Companies Association, KOSDAQ Listed Companies Association.

June 26

FKI, Korea Listed Companies Association, and KOSDAQ Listed Companies Association co-hosted a seminar on “Governance Reform for Corporate Value-Up”

Discussed long-term strategies for enhancing shareholder value and corporate competitiveness

2024 July

July 15

FKI hosted a roundtable titled “What’s Wrong with Expanding Directors’ Duty of Loyalty?”

·
Concerns about the Commercial Act amendment leading to reduced corporate investment and accelerating the Korea discount
·
Emphasized the need for legislation on cost-effective, efficient management defense tools such as poison pills and dual-class shares
·
Stressed avoiding punishment for directors’ breach of trust under the Criminal Act, considering the unique nature of management decisions

July 17

Deputy Prime Minister for Economy Sang-mok Choi: “The Commercial Act amendment will not result in outcomes that worry businesspeople.”

*The 47th KCCI Jeju Forum

July 30

Chairman Seong-jun Jin of the Policy Committee of the Democratic Party announced the Korea Boost-Up Project centered on corporate governance reform

Aims to expand shareholder rights greatly, including extending directors’ duty of loyalty to shareholders and mandating the appointment of independent directors who are not influenced by controlling shareholders

Special Issue

Timeline of the Commercial Act Amendment: From Initial Proposal to the Present

Timeline of the Commercial Act Amendment:
From Initial Proposal to the Present