Quick answer
Korea amended its Commercial Act twice in 2025, and the changes took effect in stages. Since 22 July 2025, directors owe their duty of loyalty to the company and its shareholders. From 23 July 2026, a listed company’s largest shareholder must aggregate its related parties’ shares under the 3% voting cap when audit committee members are elected or removed. From 10 September 2026, large listed companies (assets of KRW 2 trillion or more) cannot opt out of cumulative voting and must elect at least two audit committee members separately from other directors.
Correction (5 October 2026): an earlier version of this guide dated all changes to July 2026, described rights introduced in 2020 as 2026 reforms, and included illustrative “case examples” that could not be sourced. It has been rewritten against the text of the Commercial Act.
Why this matters to foreign investors
Foreign funds and strategic investors holding minority stakes in Korean listed companies have long pointed to controlling-shareholder dominance as a source of the “Korea discount”. The 2025 amendments target that directly: they make directors answerable to all shareholders, weaken a controlling family’s grip on the audit committee, and give minority holders a realistic path to a board seat at the largest companies. For a fund planning a stake, the questions are which rule applies to which company and from which shareholders’ meeting.
The four changes, with effective dates
| Change | Provision | Applies to | Effective |
|---|---|---|---|
| Directors’ duty of loyalty extends to shareholders; duty to protect and treat all shareholders fairly | Art. 382-3 | All stock companies | 22 July 2025 |
| Largest shareholder’s 3% voting cap aggregates related parties when electing or removing any audit committee member (and statutory auditors) | Art. 542-12(4), (7) | Listed companies with an audit committee or auditor | 23 July 2026 |
| Cumulative voting can no longer be excluded by the articles | Art. 542-7(3) | Listed companies with assets ≥ KRW 2 trillion | 10 September 2026 |
| At least two audit committee members elected separately from other directors (articles may require more) | Art. 542-12(2) | Listed companies with assets ≥ KRW 2 trillion | 10 September 2026 |
1. Directors owe duties to shareholders
Article 382-3 now reads that directors must perform their duties faithfully “for the company and its shareholders”, and must protect the interests of all shareholders and treat them fairly. Before the amendment the duty ran to the company only, which made it hard to challenge transactions that harmed minority holders without harming the company itself, such as mergers at ratios favouring the controlling family or dilutive issuances to insiders. The amendment does not create a new cause of action by itself, but it gives minority shareholders a statutory basis to argue that a board decision breached directors’ duties.
2. The aggregated 3% rule for audit committee elections
Listed companies already capped voting at 3% when audit committee members were elected. The change is in how the largest shareholder is counted: when any audit committee member is elected or removed, the largest shareholder’s shares are added together with those of its related parties and the total is capped at 3% of voting shares (Art. 542-12(4)). Other shareholders are capped individually at 3%. The same rule applies to the election of statutory auditors at listed companies without an audit committee (Art. 542-12(7)).
In practice, a family group holding 35% through several affiliates now votes 3% in total on audit committee resolutions, while a foreign fund holding 4% also votes 3%. The resolution is therefore decided largely by institutional and retail holders outside the controlling group, which raises the value of engagement with domestic pension funds and proxy advisers.
3. No more opting out of cumulative voting
Under cumulative voting, each share carries as many votes as there are directors to be elected, and a shareholder may concentrate them on one candidate (Art. 382-2). Most listed companies had excluded it in their articles. For listed companies with assets of KRW 2 trillion or more, that exclusion is no longer permitted (Art. 542-7(3)). Holders of 1% or more of voting shares may request cumulative voting at those companies, in writing at least six weeks before the meeting (Art. 542-7(1), (2)).
Whether a minority holder can actually win a seat depends on the number of seats up for election and turnout, not just on its stake. Our separate guide to cumulative voting for foreign shareholders works through the arithmetic.
4. Two separately elected audit committee members
Large listed companies must elect at least two audit committee members in a separate vote, rather than first electing directors and then choosing audit members from among them (Art. 542-12(2)). Combined with the aggregated 3% rule, this is the clearest route for minority shareholders to place an independent member on the audit committee.
What did not change in 2026
Two tools are often described as new but have been in the Commercial Act since the December 2020 amendments:
- Multiple derivative suits (Art. 406-2): shareholders of a parent holding 1% (0.5% for listed companies, with six months’ holding) can sue directors of a subsidiary in which the parent holds more than 50%.
- Choice of thresholds at listed companies (Art. 542-6(10)): shareholders of a listed company may use either the listed-company thresholds with the six-month holding requirement, or the general thresholds without it.
The thresholds for inspecting accounting books, calling a shareholders’ meeting or seeking removal of a director are otherwise unchanged. For a summary of those rights at unlisted companies, see our shareholder agreement guide.
Practical checklist for investors
- Confirm company size. The cumulative voting and two-member separate election rules apply only to listed companies with assets of KRW 2 trillion or more.
- Check the meeting date. The aggregated 3% rule applies to meetings held from 23 July 2026; the cumulative voting and separate election rules from 10 September 2026. Articles of incorporation had to be amended accordingly.
- Calendar the six-week deadline for a cumulative voting request, counted from the meeting date (for an annual meeting, the anniversary of the previous year’s annual meeting).
- Map the controlling group. The aggregated cap depends on who counts as a related party; check the latest ownership disclosures on DART.
- Watch the 5% rule. Holding 5% or more of a listed company triggers reporting under the Financial Investment Services and Capital Markets Act, and an intent to influence management changes the reporting form.
For governance changes affecting foreign-owned subsidiaries rather than listed investments, see corporate governance reform for foreign shareholders. Our incorporation and corporate services team handles shareholder meetings and articles amendments for foreign-owned companies.
FAQ
When did the director duty to shareholders take effect?
On 22 July 2025, when the first 2025 amendment to Article 382-3 was promulgated and took effect.
Does the aggregated 3% rule apply to unlisted companies?
No. Article 542-12 applies to listed companies. Unlisted companies follow the general rules on electing auditors and audit committee members.
Which companies must allow cumulative voting?
Listed companies with total assets of KRW 2 trillion or more, from 10 September 2026. Other companies may still exclude it in their articles.
Are multiple derivative suits new in 2026?
No. They were introduced by the December 2020 amendments (Article 406-2).