Democratic lawmaker introduces two bills to overhaul shareholder meeting infrastructure

Rep. Park Hong-bae of the Democratic Party of Korea, a member of the National Assembly's Political Affairs Committee, said Wednesday he had introduced two bills: a partial amendment to the Commercial Act that would extend the shareholder meeting notice period for listed companies above a certain size, and a partial amendment to the Financial Investment Services and Capital Markets Act that would make electronic shareholder registers mandatory.

The amendments are designed to give ordinary shareholders and institutional investors sufficient time to review shareholder meeting agenda items and meaningfully exercise their voting rights.

Park said that while recent efforts have been made to amend the Commercial Act and the Capital Markets Act to improve corporate governance and strengthen the rights of ordinary shareholders, the shareholder meeting regime underpinning the actual exercise of shareholder rights remains inadequate.

Under the current system, listed companies are only required to give notice of a shareholder meeting two weeks in advance — a window Park said leaves shareholders too little time to thoroughly review key agenda items and decide how to vote.

A seminar held July 31 by the Korea Corporate Governance Forum, titled "Improving the Shareholder Meeting System to Enhance the Effectiveness of the Stewardship Code," also raised concerns that the short notice period, along with other systemic factors, makes it difficult for ordinary shareholders and institutional investors to actively exercise their rights. Participants argued that improving the related regime — so that shareholders can meaningfully participate in corporate decision-making — is necessary to strengthen the stewardship code's effectiveness.

The Commercial Act amendment would require listed companies above a size threshold set by presidential decree — based on factors including asset size — to give notice of shareholder meetings four weeks in advance, up from the current two. The change is intended to give shareholders adequate time to analyze agenda items and decide how to cast their votes. The amendment envisions applying the requirement to listed companies with total assets of 2 trillion won ($1.42 billion) or more at the end of the most recent fiscal year.

The bills also include safeguards to protect personal information and ensure the regime's effectiveness. Anyone soliciting proxy votes who receives an electronic shareholder register and uses it for purposes other than the solicitation, or discloses or leaks it to a third party, would face up to five years in prison or a fine of up to 200 million won.

The amendments are also seen as reinforcing the stewardship code revisions currently being pursued.

"Shareholder rights cannot be realized simply by writing them into law," Park said. "Shareholders must be guaranteed both sufficient time to review agenda items and the means to communicate." He added that he would work to "systematically strengthen the institutional foundation for exercising shareholder rights, so that the gains from the Commercial Act amendments and stewardship code improvements actually take effect on the floor of shareholder meetings."