Just one day after South Korea’s National Assembly passed sweeping amendments to the Commercial Act, more than 1,000 corporate executives and legal professionals packed a seminar in Seoul to make sense of the new regulations.
The July 4 event, hosted by a major law firm, reached capacity within 10 minutes. Another 800 participants joined online, including many from the legal, finance, and compliance teams of large and mid-sized companies.
“We received a flood of inquiries from firms preparing stock issuances, spin-offs or mergers,” said a law firm official. “They want to know whether their plans comply with the revised law and how to respond to activist funds or minority shareholders.”
That same day, an online forum for investor relations professionals was flooded with questions. “Are you reviewing D&O insurance in response to the amendments?” one user asked. Another wrote, “Can we meet the outside director ratio requirement by the 2026 shareholders’ meeting?”
Key changes in the law include expanded fiduciary duties for directors, a higher threshold for independent directors, and a 3% rule restricting voting rights of major shareholders in appointing or dismissing auditors. These provisions are expected to reshape shareholder meetings and board governance.
Most provisions take effect in July 2026, but the clause requiring directors to serve both the company and its shareholders is already in force. Many firms are now seeking legal advice to prepare for increased scrutiny from minority shareholders and activist investors.
Law firms are launching dedicated corporate governance units to meet demand. “We’re preparing for both shareholder lawsuits and efforts to challenge management control,” said another law firm official. “This includes special shareholder meetings and proxy fights.”
One executive at a major corporation observed, “Law firms are in a celebratory mood. Whether it’s advisory work or litigation, lawyers are bound to benefit.”
Although the most stringent provisions target listed companies with assets exceeding 2 trillion won ($1.5 billion), smaller firms are also grappling with the changes. “It’s not just the 3% rule,” said an official from the Federation of Middle Market Enterprises of Korea. “Other clauses could slow decision-making, and that worries many businesses.”
Firms with weak governance structures, those planning restructurings, and companies previously targeted by activist funds are particularly concerned.
More reforms are expected, including mandatory cumulative voting and separate elections for audit committee members. Legal professionals are increasingly being tapped as outside directors to help companies navigate compliance risks.
The revised law raises the required proportion of outside directors from one quarter to one third for companies with assets between 100 billion and 2 trillion won. Many firms are already struggling to fill these roles.
“The qualifications for outside directors here are among the world’s strictest,” said an executive at a major firm. “We may have to consider candidates with less experience just to meet the quotas.”
