"Cumulative Voting Coming in September: Law Firms See Surge in 'Regulatory Boom' Ahead of Commercial Act Amendments"

Law Firms See a Boom Ahead of the Second Commercial Act Amendment

Rising Demand for Board Compensation and Remuneration Advisory Services

Shareholder Meeting Notices by Listed Companies Up 80% This Year

The second round of amendments to the Commercial Act, set to take effect in September, is being diluted in practice due to companies opting for the workaround of amending their articles of incorporation. As the implementation of the amendments—which mandate cumulative voting and expand the separate election of audit committee members—draws near, the demand for legal consultation on articles of incorporation revisions has surged, resulting in an exclusive boom for law firms.

According to the business and legal sectors on June 20, law firms report that demand for advisory services has increased two to threefold since the first round of amendments to the Commercial Act last year. They are actively holding seminars and forums to introduce strategies for articles of incorporation revisions that could mitigate the impact of the Commercial Act amendments, intensifying competition to secure clients.

Major law firms began preparing dedicated response teams as early as the first half of last year. The seven leading firms—Kim & Chang, Lee & Ko, Bae, Kim & Lee, Shin & Kim, Yulchon, Hwa Woo, and Jipyong—formed task forces between May and July and strengthened their advisory capabilities by recruiting external experts.

Barun Law LLC will hold a seminar on June 30 with the Korea Venture Capital Association to address changes in director appointment systems. There has also been an increase in advisory requests related to board compensation systems and procedures to protect minority shareholders during mergers and acquisitions (M&A). This trend is attributed to growing challenges from institutional investors such as the National Pension Service and the expansion of directors’ fiduciary duties.

A lawyer at a major law firm told The Asia Business Daily, “There is a particular concentration of inquiries about the mandatory cumulative voting system and the 3% rule applicable to the separate election of audit committee members. As more companies are required to reconvene general shareholders’ meetings or face disputes with activist funds, the demand for legal advice continues to grow.”

The solutions proposed by law firms are highly specific. By setting an upper limit on the total number of directors, companies can reduce the likelihood of appointing several directors at once, thereby limiting the effectiveness of cumulative voting. Introducing staggered board terms can decrease the chances of candidates recommended by minority shareholders joining the board. Reducing the number of separately elected audit committee members to the statutory minimum of two is also being considered. These tactics essentially circumvent the legislative intent of the law.

Industry observers note that, following the enactment of the Yellow Envelope Act (amendments to Articles 2 and 3 of the Labor Union Act) and the first and second rounds of Commercial Act amendments under the Lee Jaemyung administration, law firms have benefited from the growing demand for advisory services. Companies have also started to actively revise their articles of incorporation. From April 1 to June 18, there were 271 shareholder meeting convening notices issued by listed companies, an increase of about 80% compared to 151 during the same period last year.

According to the report “Key Takeaways and Improvement Tasks for the 2026 Regular General Shareholders’ Meetings,” published by Align Partners on June 18, 95% of the 21 KOSPI 200 companies that proposed flexible director term agendas had those agendas approved. Similarly, 92% of the 25 companies that proposed reducing or capping the number of directors saw those proposals passed.

Oh Sehyung, head of the Economic Policy Team at the Citizens’ Coalition for Economic Justice, stated, “While it is necessary for companies to respond to amendments to the Commercial Act, revisions to the articles of incorporation should reflect the intent of the changes, rather than undermining their purpose.”

This content was produced with the assistance of AI translation services.