With regard to listed companies, the code permits derivative suits when a shareholder has held not less than 1/10,000th of the total and outstanding shares of the listed company for the last 6 months. Whether listed or not, minority shareholders must maintain the portion of the share requirement up until the filing of the suit. A portion of shares may fall below the statutorily prescribed level after the suit has been filed.
Derivative suits emerged in Korea as a response to the 1997 Asian Financial Crisis as a means for improving corporate governance. At first it was mainly civic groups filing these suits and it is still rare to see a derivative suit filed independently, and not paired with other causes of action against those in control of the company. The derivative suit, however, is still a viable option, however, for any shareholders of any company, large or small, who want to address wrongs or potential wrongs committed by those controlling the company.
Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He has, recently, been ranked as one of only two non-Korean attorneys as a Top Attorney working in Korea by AsiaLaw.
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