Korea’s Commercial Act Reform

Opposition Shifts Stance on Korea’s Commercial Act Reform Amid Retail Investor Pressure

On June 30, South Korea’s Democratic Party (DPK) announced it had entered the final stage of review for its proposed Commercial Act amendments, aiming to pass the legislation during the current National Assembly session, which ends July 4. The party invited leaders of six major business associations to the National Assembly to hear their concerns. Despite continued opposition from the business community over shareholder lawsuits and expanded criminal liability for executives, the DPK reaffirmed its intent to enact the law first and revise it later if needed.

Signaling a political shift, the opposition People Power Party (PPP)—which previously opposed the amendments—said it is now open to discussion and called for complementary legislation such as tax incentives for shareholder-friendly companies.

Key Provisions of the Proposed Commercial Act Reform

• Expansion of fiduciary duties of corporate directors to include not only the company but also its shareholders.

• Mandatory electronic shareholder meetings to boost transparency and accessibility.

• Cumulative voting system for listed companies with assets over ₩2 trillion, giving minority shareholders greater influence in electing board members.

• 3% voting cap on major shareholders and affiliates when appointing audit committee members.

The DPK said these reforms are aimed at empowering retail investors and limiting the excessive influence of controlling shareholders. Cumulative voting, for example, allows minority shareholders to concentrate their votes on a preferred candidate, increasing the likelihood of their representation on the board.

Concerns from the Business Community

The Korea Chamber of Commerce and Industry and other economic groups warned that the reforms could invite foreign speculative forces, destabilize corporate governance, and increase frivolous shareholder lawsuits. KCCI Vice Chairman Park Il-joon stated, “We support fair capital markets, but excessive exposure to legal risks like expanded breach-of-duty charges and weakened management rights must be addressed.”

In response, the DPK argued that existing court precedents already prevent abuse of the breach-of-duty charge, and that the law will not hinder legitimate business decisions. Rep. Oh Ki-hyung, who leads the party’s “KOSPI 5000 Special Committee,” stated, “We are open to further discussions, especially on concerns about criminal liability, but the legislation will proceed first.”

PPP’s Strategic Shift: From Opposition to Negotiation

PPP Floor Leader Sung Il-jong announced that the party had revised its position, citing the need to better protect shareholder value. He added, however, that the DPK’s current proposal could act as overregulation of private businesses, and called for a package deal including dividend tax relief and preferential tax treatment for high-dividend firms.

While the PPP had previously supported strengthening shareholder protections via the Capital Markets Act (which applies only to listed firms), the party now acknowledges the limitations of relying solely on that law. A PPP lawmaker noted, “We cannot ignore the voices of Korea’s 14 million retail investors, especially as stock investment has become central to the financial lives of the middle class and people in their 30s and 40s.”

Some within the PPP argue that negotiating terms and inserting complementary bills could be more effective than outright opposition, especially given the DPK’s parliamentary majority.

DPK Firm on Legislative Timeline

Despite the opposition’s new willingness to negotiate, the DPK appears unwilling to delay. Deputy Floor Leader Moon Jin-seok told reporters, “We still plan to pass the bill by July 3 or 4.” Policy Committee Chair Jin Sung-joon added that while bipartisan discussion will take place at the Legislation and Judiciary Committee, “There is no reason to postpone the vote.”