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Jipyong News|Legal Updates

Amendment to the Korean Commercial Act

2011.03.21

1. The article on partnerships composed of an executive partner and a limited partner has been newly established (Articles 86-2 through 86-9) and the article on limited liability companies has also been established, which provides that a partner shall have limited liability and his personal control shall be widely recognized with respect to the establishment and operation of the company and the structure of organizations (Article 287-2 through 287-45). 
 
2. By introduction of a non-par value share, a company may have the option to issue either par value shares or non-par value shares, and the minimum capital requirement system has been repealed (Articles 291, 329 and 546). 
 
3. The company may issue a variety of shares, including shares with specific voting rights for special agendum only (Articles 344 through 346). 
 
4. Electronic registration system of shares and bonds has been introduced so that the exercise of rights, including assignment of rights and creation of security, may be carried out without issuing the share certificates and bond certificates in physical forms as well as eliminating the need for being in physical possession of the securities if registration has taken place with the electronic registration authorities (Articles 356-2 and 478 (3)). 
 
5. Controlling shareholders holding ninety five percent or more of the issued and outstanding shares may purchase the shares owned by the minority shareholders at a fair price and the minority shareholders may exercise the appraisal rights to controlling shareholders (Articles 360-24 through 360-26). 
 
6. Requirements for transaction between a director and a company for his/her own account have been strictly regulated. Thus, a transaction by and between a company and a director, director’s spouse, lineal ascendants and descendants, lineal ascendants and descendants of a director’s spouse and their personal company shall obtain the directors’ affirmative votes of two-thirds or more at the company’s board of directors and the contents of the transaction shall be fair (Article 398). 
 
7. Directors’ liability system has been improved so that directors’ liability to a company shall be limited to six times of the amount of annual remuneration for the preceding year (three times in case of outside directors), except for cases where directors causes damage to the company by their willful act or gross negligence and any amount in excess of such threshold shall be exempted (Article 400 (2)). 
 
8. Ground regulation on executive officers who are in charge of the execution of the company’s business under the supervision of the board of directors has been established. However, whether to introduce such system shall be at the discretion of each company (Articles 408-2 through 408-9). 
 
9. The current accounting standards under the Korean Commercial Act cannot properly reflect the changes in the corporate accounting standards. The principle regulation has been newly established so that the company’s accounting shall generally comply with the fair and proper accounting practices. Furthermore, the regulations on specific accounting treatments have been deleted and the documents other than the balance sheet and income statement shall be prescribed by the Presidential Decree in order to facilitate prompt adoption of the changes in the accounting standards (Articles 446-2, 447, 447-4, etc.). 
 
10. Reserve in excess of one hundred and fifty percent (150%) of the capital shall be used as dividends pursuant to the resolution of the meeting of shareholders (Articles 460 and 461-2). 
 
11. The right to decide the dividends shall be granted to the board of directors under the Articles of Incorporation and distributions in-kind in addition to the monetary distributions shall be permitted (Articles 462 (2) and 462-4). 
 
12. Provision on the limit of aggregate issuing amount of bonds has been deleted and legal grounds have been established so that the bonds in various types of forms may be issued, including bonds with participating dividends, and the function of bond management of the rights of the trust company shall be separated so that the bond management company may handle such functions (Articles 469, 481 through 485). 
 
13. A listed company shall establish the standards for compliance control prescribed by Presidential Decree by considering the scale of assets, etc. and a company shall have one or more compliance officer who is in charge of ensuring compliance with such standards (Article 542-13). 
 
14. Download : <a href="http://www.jipyong.com/origin/newsletter/30_201103/data/law1.pdf" target="_blank">Partially Amended Bill of the Korean Commercial Act (alternative)</a>

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