The Amended Korean Commercial Code (KCC), that comes into effect in April of 2012, will require listed Korean companies with less than KRW 2 trillion in assets to either:
- Appoint a Statutory Auditor; OR
- Form a “Mandatory Audit Committee
If a Mandatory Audit Committee is formed, a shareholder with more than 3% of the voting shares is prohibited from voting the shares in votes concerning the Mandatory Audit Committee.
Prior to this amendment, the “3% Rule,” Mandatory Audit Committee and statutory auditor were, previously, avoidable by listed companies in Korea with less than KRW 2 million in assets through the adoption of a General Audit Committee. The General Audit Committee allowed a shareholder with more than 3% of the voting shares of the company to vote for the appointment of members of the Committee.
Because of perceived transparency issues, the exception, available for smaller listed companies under the present KCC will be eliminated under the revised KCC. The revised KCC, in all, may be found useful for minority shareholders in listed companies controlled by a dominant majority.
I wrote other updates on the Korean Commercial Code which may be found below:
- Limited Liability Companies under The Amended Commercial Code of Korea
- Korean Commercial Code Revisions Make Capital Reductions in Korea Easier
- Classification of Directors in Korea under The Korean Commercial Code: Inside, Outside and Other Directors in Korea
- Establishing a Company in Korea: New Corporate Forms Available under Revised Korean Code
- Squeezing-out Minority Shareholders under Korean Corporate Law
- Limiting Director Liability under Korean Law: Don’t drop the Insurance Policy Yet
- Involuntary Dissolution of a Company in Korea: Shareholder Disputes in Korean Companies
- Participating and Exchangable Bonds Issuance by Non-listed Companies in Korea
- Limiting Director Liability in Korea under new KCC
- Derivative/Shareholder Suits in Korea: Corporate Governance in Korea
- Rights of “Non-Registered” Shareholders in Korea
- Legal/Compliance Checklist for your Korean Company: Top 7 Things to Do Before you Do Business in Korea