One Year Since Commercial Act Amendment... 84% of Listed Companies "Changed Board Management"

KCCI Survey of 300 Companies

Transparency Improved, but "Litigation Fears" Are Spreading

1 in 5 Companies Reports Delays in M&A and Investment

One year has passed since the amended Commercial Act, which centers on expanding the duty of loyalty for directors, came into effect. During this period, it has been found that more than 8 out of 10 listed companies in Korea have changed their board management practices, indicating overall changes in the corporate management environment.

According to a survey conducted by the Korea Chamber of Commerce and Industry on 300 listed Korean companies, titled "One Year Since the Commercial Act Amendment: Management Environment Changes and Support Tasks for Institutional Settlement," 84.3% of responding companies stated that there had been changes in their board management practices since the amendment was implemented.

Specifically, the most common change, cited by 47.0% of respondents, was the establishment or strengthening of internal review procedures centered on legal and compliance teams. This was followed by the expansion of external expert consultations (45.7%), more detailed documentation of board meeting minutes (43.7%), and the reinforcement of pre-review procedures for agenda items (39.7%).

While companies acknowledged the positive effects of the amendment, they also reported an increased management burden. Among the respondents, 39.6% said there were positive impacts, such as enhanced accountability in decision-making and increased transparency in governance. However, 22.4% indicated that the burden had grown, citing increased compliance costs and delays in decision-making.

Concerns about litigation have also grown. More than half (53.7%) responded that concerns over lawsuits, such as shareholder derivative suits and claims for damages, have increased since the expansion of the directors' duty of loyalty. Additionally, 21.7% reported that major decisions, such as investments or business restructuring, had been delayed, put on hold, or canceled due to strengthened legal review. Among these, issues related to new investments, such as new businesses and mergers and acquisitions (M&A), accounted for the largest share at 30.8%.

Regarding follow-up systems such as the mandatory implementation of electronic general shareholders' meetings and the expansion of the proportion of independent directors, which are set to take effect in January next year, it was found that many companies are still in the process of preparation. Among companies subject to the mandatory electronic shareholders' meeting, only 16.0% have completed the establishment of their operating systems, and 52.8% of companies required to increase the proportion of independent directors stated that they are in the process of selecting candidates.

Companies pointed out that, for the new Commercial Act regime to take root, it is necessary to prepare specific guidelines for the duty of loyalty for directors and to codify the principles of business judgment, among other policy improvements.

Choi Eunrak, Head of the Research Division at the Korea Chamber of Commerce and Industry, said, "Companies have worked hard to comply with the system by changing the way their boards operate," adding, "There is a need for specific guidelines that reflect real-world cases, as well as policy support to reduce the practical burden."

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