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D.CODE 작성일2025-07-30본문
[Analysis of Recent Amendment of Korean Commercial Act] Expansion of Directors' Fiduciary Duties and Corporate Response Strategies |
On July 3, 2025, the Commercial Act amendment was passed by the National Assembly plenary session and was promulgated and took effect on July 15. The core amendment in this Commercial Act revision—the expansion of directors' fiduciary duty scope—extends the scope from "company" to "company and shareholders," aiming to protect minority shareholders and enhance corporate governance transparency.
This newsletter examines the legal and practical impacts of this Commercial Act amendment on the corporate management environment and proposes corporate response strategies accordingly.
1. Expansion of Directors' Fiduciary Duty Scope (Commercial Act Article 382-3)
Previous Regulation: The existing Commercial Act Article 382-3 stipulated directors' fiduciary duty as "the duty to faithfully perform their duties for the company in accordance with laws and articles of incorporation."
Amendment Content: The amended law expands the scope of fiduciary duty to "company and shareholders," and through the addition of Paragraph 2, specifies concrete obligations: "Directors must protect the interests of all shareholders in performing their duties and treat all shareholders' interests fairly."
Effective Date: July 15, 2025 (immediately upon promulgation), applicable to all stock companies including listed and unlisted companies
Other Related Amendments:
Strengthening Independent Director System: Changed the name of outside directors of listed companies to "independent directors" and increased the mandatory appointment ratio from one-quarter (25%) to one-third (33.3%) of total directors (Commercial Act Article 542-8; listed companies must meet this requirement within one year of implementation) Expansion of 3% Rule: Limits voting rights of largest shareholders and specially related parties to 3% of total issued shares when appointing/dismissing audit committee members (Commercial Act Article 542-12, effective July 2026) Mandatory Electronic Shareholders' Meetings: Large listed companies must mandatorily hold both in-person and electronic shareholders' meetings concurrently (Commercial Act Article 542-14, effective January 1, 2027; optional for general listed companies)
2. Background and Significance of the Amendment
There have been continuous controversies that minority shareholders' rights were infringed during decision-making processes in cases such as the Samsung merger and the physical spin-off and separate listing of promising business divisions. Against this backdrop, this Commercial Act amendment expanding directors' fiduciary duty scope (hereinafter "this fiduciary duty expansion") imposes explicit legal obligations for directors not to favor major shareholders' interests but to balance the interests of all shareholders in corporate decision-making processes.
Accordingly, minority shareholders of stock companies can now exercise damage compensation claims or prohibition and suspension claims based on directors' breach of fiduciary duty when there is unfair treatment of minority shareholders in major capital transactions such as mergers, stock exchanges, or physical divisions.
3. Changes in Management Judgment Principles
Even before this Commercial Act amendment, the Business Judgment Rule was widely applied, whereby directors of stock companies must make decisions based on rational and objective grounds in the best interest of "the company," and if such decisions were made, they could be exempted from liability even if company losses occurred subsequently.
While shareholders' interests were indirectly protected through protection of company interests, this Commercial Act amendment explicitly stipulates shareholders' interests parallel and equal to company interests. Therefore, for stock company directors to receive protection under the Business Judgment Rule, they must comprehensively and sufficiently consider both company interests and shareholders' interests in decision-making processes.
Thus, directors must consider "the interests of all shareholders" in all corporate decision-making processes, and particularly in situations where major shareholders and minority shareholders have conflicting interests, proving procedural and numerical fairness has become essential.
Ultimately, under this Commercial Act amendment, whether "the interests of all shareholders" were sufficiently considered in decision-making processes will be more strictly reviewed in applying the Business Judgment Rule. To achieve this, more stringent procedural legitimacy must be secured, including obtaining independent third-party evaluations, securing expert opinions on procedural and numerical fairness, forming special committees, or obtaining minority shareholders' meeting approval.
4. Impact on All Stock Companies
This fiduciary duty expansion applies not only to listed companies but also to unlisted companies, covering all stock companies. For stock companies established as joint ventures with domestic and foreign partners, stock companies where shares have been divided due to inheritance, and other stock companies with high potential for conflicts of interest between major shareholders and minority shareholders, this amendment provides minority shareholders with an additional weapon to challenge the breach of fiduciary duty by directors appointed by major shareholders.
Practically, litigation based on minority shareholder interest infringement due to specific transactions is expected to increase in all stock companies. Particularly for listed companies, litigation from minority shareholder platforms and activist funds, which have been actively operating recently, is expected to increase significantly.
5. Corporate Response Strategies
5.1 Strengthening Independent Director System
Listed companies must prioritize expanding the independent director ratio to the statutory standard of at least 1/3 by July 2026 and reorganize appointment standards that ensure substantial independence.
For listed companies with independent director ratios below 1/3, additional appointment of independent directors at the next shareholders' meeting Expanding candidate pools and ensuring diversity through professional institutions Establishing dedicated education programs for independent directors and operating regular meeting bodies
When conducting transactions where major shareholders and minority shareholders may have conflicting interests, such as mergers and divisions, procedural legitimacy can be better secured by forming special committees centered on independent directors to review transactions.
Compose at least 2/3 of committee members as independent directors Establish external expert advisory systems and grant independent investigation and review authority Clarify committee authority and responsibility scope and pre-establish conflict resolution procedures
It is necessary to improve the board's decision-making process to enable constant monitoring of potential violations.
Introduce systems for pre-assessing fiduciary duty violation risks for major agenda items Create new pre-review stages for external law firms' shareholder interest impact analysis and fairness review Specify shareholder interest considerations and individual independent director opinions in board minutes
5.2 Strengthening Minority Shareholder Communication and Transparency
Strengthening Minority Shareholder Communication: Multi-faceted communication channels that reflect minority shareholders' voices in management are needed.
Hold quarterly minority shareholder meetings (with participation of IR executives and independent directors) Establish permanent shareholder communication platforms (Q&A, opinion collection, information provision)For listed companies, transparent information disclosure is essential.
Specific disclosure of shareholder interest considerations in major decision-making processes Detailed disclosure of fairness assurance efforts in conflict-of-interest transactions Visualization of long-term value creation efforts through transparent disclosure of ESG activities and performance
Large listed companies must prepare in advance for the electronic shareholders' meeting era (mandatory implementation for large listed companies in 2027).
Selection and construction of platforms considering security, stability, and user convenience Introduction of real-time electronic voting systems and preparation of accessibility enhancement measures Preparation of reliable proxy securing means in anticipation of proxy competition Creation of technical failure response manuals and establishment of stable operational foundations
5.3 Strengthening Legal Risk Management
A systematic approach is needed to objectively prove the fairness of decisions and processes so that the Business Judgment Rule can be applied to board decisions.
Mandating acquisition of fairness opinions from independent third-party institutions Establishing permanent advisory relationships with specialized law firms (interpretation of fiduciary duty legal principles, case analysis) Active utilization of independent corporate value evaluations by accounting firms
At the stock company level, it is essential to respond to increasing litigation risks.
Review and optimize Directors & Officers (D&O) insurance conditions and compensation scope Review specialized insurance products for class action response Establish guidelines for responding to shareholder fiduciary duty violation litigation
5.4 Internal System Improvement
It is necessary to reorganize articles of incorporation and internal regulations reflecting legal requirements under the amended Commercial Act.
Strengthening approval procedures for conflict-of-interest transactions Pre-organizing provisions related to electronic shareholders' meetings Reflecting expanded independent director ratios and formalizing special committee operating procedures Stricter standards for reviewing specially related party transactions and specifying fair price calculation procedures
6. Conclusion
The 2025 Commercial Act amendment represents a critical turning point demanding fundamental changes in Korea's corporate governance structure. The introduction of directors' fiduciary duties to shareholders signifies a paradigm shift in corporate management beyond simple legal amendments, making proactive and systematic corporate responses essential.
D.Code Law Group provides comprehensive solutions to help clients transform these changes into opportunities rather than crises, securing legal compliance as well as enhancing long-term corporate value. We will support clients' successful change management through professional consultation across all areas including articles of incorporation amendments according to the amended Commercial Act, board operation improvements, internal control system establishment, and litigation risk management.
Additionally, to mitigate the heightened risks related to stock company management due to the Commercial Act amendment, long-term strategies such as delisting or conversion to limited liability companies should be actively considered.
If you need legal consultation regarding corporate governance improvement or wish to consult on establishing response strategies for the amended Commercial Act, please contact D.Code Law Group at any time.
