Biz community protests Assembly committee's passage of Commercial Act revision

Rep. Park Beom-kye of the main opposition Democratic Party of Korea, chair of the Legislation and Judiciary Committee, strikes the gavel during a bill review session at the National Assembly in Seoul, Monday. Yonhap

The business community expressed its strong opposition to the passage of the Commercial Act amendment through a parliamentary judiciary subcommittee led by the main opposition party, calling for reconsideration, industry officials said Tuesday.

The Democratic Party of Korea (DPK) passed the amendment unilaterally through the subcommittee of the National Assembly’s Legislation and Judiciary Committee on Monday, while the ruling People Power Party (PPP) boycotted the vote.

The revision is aimed at expanding corporate directors’ fiduciary duties to include greater responsibility toward shareholders, and applies to both listed and unlisted corporations. The DPK seeks to pass the amendment in the Assembly’s plenary session on Thursday.

The eight major business organizations, including the Federation of Korean Industries, the Korea Chamber of Commerce and Industry, the Korea Enterprises Federation and the Korea International Trade Association, issued a joint statement right after the amendment's passage, expressing deep concern.

“We have continuously raised issues with the amendment, but none of our concerns have been accepted, leaving us deeply frustrated,” the statement read. “At a time when global economic competition is intensifying and the competitiveness of key industries is weakening, excessively tightening corporate governance regulations will only dampen companies’ growth ambitions and undermine the industrial foundations.”

They stressed that domestic businesses are facing unprecedented uncertainties, including sluggish domestic demand, the return of U.S. President Donald Trump to the White House and the expansion of protectionist policies.

“The Commercial Act amendment will lead to excessive lawsuits against directors and be exploited as a tool for activist funds to attack corporate management, making Korea a more difficult place to do business,” they said. “It will weaken corporate competitiveness, deepen the Korea discount and ultimately inflict significant harm on domestic retail investors.”

Rep. Lee Jae-myung, left, leader of the main opposition Democratic Party of Korea, meets with Sohn Kyung-shik, chairman of the Korea Enterprises Federation (KEF), at the KEF building in Seoul, Nov. 11, 2024. Joint Press Corps

The ruling party, for its part, decided to request acting President Choi Sang-mok, who is also the minister of economy and finance, to veto the amendment.

“The amendment is highly likely to cause confusion in corporate management and lead to a surge in legal costs,” PPP spokesperson Park Soo-min told reporters on Tuesday. “Such matters require careful deliberation, but the bill was rushed through unilaterally, which is truly regrettable.”

PPP Rep. Yoo Sang-bum also pointed out that the opposition party pushed through an unreasonable amendment, even though the government, together with the ruling party, had proposed an amendment to the Capital Markets Act as an alternative to address the concerns raised by the business community. He claimed the DPK’s action was aimed solely at making sure the party’s leader becomes president in the event of an early election.

The government previously announced plans to amend the Capital Markets Act to introduce targeted regulations protecting minority shareholders in mergers and acquisitions and physical spinoffs, applying only to listed companies. This move was in response to concerns that the Commercial Act amendment would hinder corporate management.