The Amendment of the Commercial Act was approved by the National Assembly on December 9, 2020, promulgated on December 29, 2020, and enforced on the same day. Key aspects of the recent amendment include the implementation of multiple derivative suits by shareholders, change in the composition of audit committees, etc.

[3] Other Amended Issues

1) Amendment of the Minority Shareholders’ Rights in Listed Companies

Commercial Act before the Amendment provided in subparagraphs 1 to 6 of Article 542-6 minority shareholders’ rights. Some of the important minority shareholders’ rights includes the shareholders’ rights to make proposals(Article 363-2) and motion for removal of directors(Article 385). In order for a minority shareholder to exercise these rights, the shareholder is required to obtain 3% or more of total shares.

Article 542-6 provided alleviated standards for minority shareholders in listed companies to exercise these rights because obviously obtaining 3% or more shares of listed companies is obviously practically impossible for an ordinary person. Subparagraphs of Article 542-6 begins like this: “Any person who has continued to hold stocks equivalent to no less than (a number of total shares, this number varies according to the size of various listed companies) of a listed company for more than six months may exercise shareholder’s rights…”. The requirement of having to hold a number, albeit small, of listed companies’ shares, for more than six months was a burden on minority shareholders of listed companies.

Disagreements existed as to whether the shareholder holding more than 3% of the total shares of the listed company but not for more than six months shall also be granted the aforementioned rights. Those who argued he shall not asserted that there is no provision in the Commercial Act which allowed otherwise; those who argued that he shall reasoned that since the whole reason for the implementation of Article 542-6 was to lower the minimum number of shares required for the shareholder to assert his rights, therefore general law must apply where the special law cannot be applied. Cases in the lower court reflected these inconsistent opinions. Thus, the Amendment created a new subparagraph in Article 542-6 subparagraph 10 which cleared up the controversy, and went with the affirmative: shareholders who has not hold the required number of shares for more than six months, can still exercise pursuant rights if he meets the 3% minimum requirement.

2) Relaxed Shareholders Meetings Approval Requirement for Auditor Eleciton

When a listed company with more than total assets of 2 trillion KRW, elects an audit committee member at the general shareholders’ meeting, it had to meet the approval requirement of more than one fourth of total shares in addition to the more than half of the total shares attending the meeting. The Amendment relaxes this requirement when an audit committee member is elected via electronic means—the company does not have to meet the more than one fourth of total shares requirement to elect an audit.

3) Amendment of the Dividend Base Date

Article 350 subparagraph 3 of the Commercial Act before the Amendment supposed the dividend base date as the end of the previous business year. When new shares are issued, the company could regard the new shares to have been issued at the end of the previous year under its Articles of Incorporation to allocate dividends to new shares as to old shares. However, in order to allocate dividends this way the company had to align their dividend base date to the date at the end of business year, which caused regular shareholders meetings to be held intensively within March.

This paragraph has been stricken off the Amendment along with other provisions that has referred to the paragraph hereinabove to solve this problem in practice. Companies may now hold regular general shareholders meetings freely as they wish.

However, with this Amendment, problem remains as to when the dividend base date shall be conceived for companies which state a specific date in their Articles of Incorporation.