1. Current Legal Landscape in Corporate M&A and Labor Law

A. Amendment to the Commercial Act

Recent amendments to the Korean Commercial Act have introduced material changes to Korea’s corporate governance and management environment. The principal elements of the amended Commercial Act are as follows: ① express codification of directors’ duty of loyalty to shareholders (Article 382-3 of the Commercial Act), ② establishment of a statutory basis for electronic general meetings of shareholders and a requirement that large listed companies hold electronic shareholders’ meetings in parallel with physical meetings (Articles 364, 368, 542-14, and 542-15), ③ replacement of the term “outside director” with “independent director” for listed companies and an increase in the mandatory appointment ratio (Articles 400, 524-4, 542-8, 542-11, and 635), ④ further tightening of voting-right restrictions on the largest shareholder when appointing or removing audit committee members (Article 542-12), ⑤ mandatory cumulative voting for listed companies with total assets of KRW 2 trillion or more (Article 542-7), and ⑥ expansion of the requirement to elect audit committee members separately (Article 542-12).

Among these measures, the core reform is the codification of directors’ duty of loyalty to shareholders in Article 382-3. Under the prior version of the Commercial Act, a director’s duty of loyalty was framed solely in relation to the company. The amended Commercial Act now expressly provides that the duty of loyalty also extends to “the interests of shareholders.

Previous Provision	Amended Provision
Article 382-3 (Duty of Loyalty by Directors) Directors shall perform their duties in good faith in the interest of the company in accordance with statutes, and the articles of incorporation.	Article 382-3 (Duty of Loyalty by Directors, etc.) ① Directors shall perform their duties in good faith in the interest of the company and its shareholders in accordance with statutes, and the articles of incorporation. ② Directors, in performing their duties, shall protect the interests of the shareholders as a whole and treat the interests of all shareholders equitably.

This amendment represents more than a simple addition of statutory language. Korea’s economy has developed under the ownership driven management structure of large conglomerates, commonly referred to as “chaebol,” where controlling shareholders have traditionally exercised dominant influence. This has often led to situations where the interests of minority shareholders were subordinated to those of controlling shareholders. Typical examples include steering business opportunities within the group in a way that favors particular affiliates, restructuring transactions that erode shareholder value, and mergers carried out at unfair exchange ratios.

In this context, the amendment’s express linkage of a director’s duty of loyalty to the interests of shareholders may create meaningful change in areas where the interests of the company and the interests of shareholders diverge, and in areas where the interests of controlling shareholders and minority shareholders conflict. Under the previous framework, a director’s legal exposure generally arose when the company itself suffered loss. Under the expanded duty, a director may also face civil liability if the director’s conduct infringes the rights or economic interests of specific shareholders. As a result, management level decision making is now more likely to be monitored, challenged, and litigated by shareholders. This development is expected to increase transparency in corporate management and to strengthen the protection of minority shareholders. Some observers have also raised the concern that this may lead to unnecessary lawsuits and may chill decisive management action.

The precise scope and requirements of the term “interests of shareholders” will ultimately be defined by future court decisions and market practice. Even so, the core purpose of this reform is clear. It is to update the legal environment in a way that reduces conflict between controlling shareholders and minority shareholders and to promote greater transparency at the board level.

Other important elements of the amended Commercial Act are as follows.

	Category	Details
②	Establishment of a statutory basis for electronic general meetings of shareholders and mandatory parallel electronic meetings for large listed companies	A listed company may, unless its articles of incorporation provide otherwise, convene an electronic general meeting of shareholders. An electronic general meeting of shareholders refers to a shareholders meeting in which shareholders may participate and vote by electronic means from a remote location, in parallel with the physical meeting held at the place of convening. For certain listed companies, based on asset size and other criteria, the Commercial Act now makes it mandatory to hold an electronic general meeting of shareholders in parallel with the physical meeting. This reform is understood to be aimed at encouraging shareholder participation while at the same time reinforcing the fairness and transparency of corporate decision making.
③	Change in title from Outside Director to Independent Director for listed companies and increase in the mandatory appointment ratio	For non-listed companies, the existing term Outside Director will continue to apply. For listed companies, however, the term Independent Director will replace Outside Director. In addition, the required ratio of independent directors has been raised from one fourth to one third. This appears intended to emphasize the independence of directors in listed companies and to strengthen fairness and transparency in corporate governance.
④	Stronger voting right restrictions on the largest shareholder when appointing or removing audit committee members	Under the previous version of the Commercial Act, (i) in the appointment or dismissal of audit committee members who are outside directors, each shareholder’s voting rights were capped at 3 percent of the total issued and outstanding shares (the “individual 3 percent rule”), and (ii) in the appointment or dismissal of audit committee members who are not outside directors, the largest shareholder’s voting rights were restricted if the combined shareholding of the largest shareholder and its specially related parties exceeded 3 percent (the “aggregate 3 percent rule”), while all other shareholders remained subject to the individual 3 percent rule. In contrast, the amended Commercial Act now applies the aggregate 3 percent rule to the largest shareholder for the appointment and dismissal of all audit committee members, regardless of whether they are outside directors. This amendment is understood to be aimed at creating conditions for a more independent audit framework by limiting the largest shareholder’s influence over the composition of the audit committee.
⑤	Mandatory cumulative voting for listed companies with total assets of KRW 2 trillion or more	Under the previous version of the Commercial Act, a shareholder holding at least 3 percent (or, in certain cases, 1 percent) of the total issued and outstanding shares, excluding non-voting shares, could request that directors be elected through a cumulative voting system. However, a company’s articles of incorporation could exclude the application of such cumulative voting. Under the amended Commercial Act, large listed companies with total assets of at least KRW 2 trillion as of the end of the most recent fiscal year can no longer exclude the cumulative voting system, effectively making it mandatory for such companies. (Unlisted companies and listed companies with total assets below KRW 2 trillion may still opt out of cumulative voting through their articles of incorporation.) By adopting the cumulative voting system, minority shareholders can concentrate their voting rights on specific candidates they support, thereby increasing the likelihood of electing those candidates to the board. This amendment is understood to reflect an intention to enhance shareholder participation and influence in the management of large listed companies.
⑥	Expansion of separate election of audit committee members	Audit committee members may be elected in two ways: (i) through a combined election method, in which shareholders elect several directors at the general meeting and the audit committee members are then selected from among those elected directors, or (ii) through a separate election method, in which shareholders directly designate and elect the directors who will serve as audit committee members at the outset. The key distinction is that the aggregate 3% rule does not apply under the combined election method but does apply under the separate election method. Under the previous version of the Commercial Act, large listed companies with total assets of at least KRW 2 trillion, as well as listed companies with total assets of at least KRW 100 billion that had established an audit committee in lieu of a full-time statutory auditor, were required to elect audit committee members through the combined election method, while at least one audit committee member had to be elected separately. In contrast, the amended Commercial Act now requires that at least two audit committee members be elected separately. This change is viewed as an effort to strengthen the independence and effectiveness of audit functions and to give minority shareholders a greater ability to influence the composition of audit committees.

 

B. Amendment to the Trade Union and Labor Relations Adjustment Act (the “Trade Union Act”)

The amendment to the Trade Union Act was promulgated on September 9, 2025, and is scheduled to take effect six months later, on March 10, 2026.

The amended Trade Union Act is widely known in Korea as the “Yellow Envelope Law.” The name originates from a 2014 incident involving the SsangYong Motor strike, where a court ordered workers who had participated in the strike to pay approximately KRW 4.7 billion in damages. In response, citizens collected donations and delivered the funds in yellow envelopes as an expression of solidarity, and the term has since become symbolic of public support for workers facing excessive damage claims.

The amendment introduces several significant changes, including an expansion of the statutory definition of “employer,” a broader scope of what may constitute a lawful industrial dispute, and new limitations on the civil liability of trade unions for damages. The key elements of the amended Trade Union Act are as follows.

Category	Details
Expansion of the definition of “employer” (Article 2, Subparagraph 2)	The amended Trade Union Act broadens the scope of who qualifies as an “employer.” The definition now includes not only those who directly employ and pay workers but also persons or entities that have the actual ability to control or determine working conditions in a substantial and specific manner. This change enables trade unions composed of indirectly employed workers, such as those of subcontractors, dispatch companies, subsidiaries, or affiliates, as well as unions whose members are not in a direct employment relationship, to demand collective bargaining with principal contractors or parent companies that exercise such control. The meaning of “substantial and specific control or determination” as a component of the employer definition is expected to be clarified through future rulings by the Labor Relations Commission and court decisions. Until such interpretive standards are established, uncertainty regarding the precise boundaries of the expanded definition is likely to persist.
Strengthening of rights to join and participate in trade unions (deletion of Article 2, Subparagraph 4, Item (a))	Before the amendment, the Trade Union Act excluded any organization that allowed non-workers to join from being recognized as a trade union. In effect, individuals who were not classified as “workers” were barred from union membership. The amended Act deletes this restriction, thereby allowing non-employee workers such as special-type workers and platform workers to join trade unions. As a result of this amendment, a labor organization that includes non-employee members can now be recognized as a valid trade union, and an increase in the establishment and membership of unions representing special-type and platform workers is anticipated.
Expansion of the scope of industrial disputes (Article 2, Subparagraph 5)	Before the amendment, the Trade Union Act recognized industrial disputes only when they related to the “determination” of working conditions. The amended Trade Union Act expands this scope to include “managerial decisions affecting working conditions” and “material breaches of collective agreements.” According to the Ministry of Employment and Labor (Q&A on the Amendments to Articles 2 and 3 of the Trade Union Act, July 31, 2025), “managerial decisions” refer to business decisions that are closely linked to and necessarily accompanied by changes in working conditions, such as collective dismissals. The Ministry clarified that a mere possibility of an impact on working conditions is not sufficient for a dispute to qualify as an industrial dispute. However, based on the text of the amended Trade Union Act, an M&A decision that directly affects employees’ working conditions may also fall within the scope of an industrial dispute.
Limitation of trade union liability for damages (Articles 3(2) and 3(3))	The amended Trade Union Act restricts claims for damages arising from industrial action by trade unions or employees. Where losses result unavoidably from acts taken in response to an employer’s unlawful conduct, such as obstruction of lawful industrial action, trade unions and employees are exempt from liability for damages. According to the Ministry of Employment and Labor (Q&A on the Amendments to Articles 2 and 3 of the Trade Union Act, July 31, 2025), this exemption applies only when the employer’s interference with the right to strike, such as through violence or other urgent acts, leaves no alternative but an unavoidable response by the union or employees. Furthermore, even when a trade union or individual employees are found liable for damages, the amended Act requires courts to assess compensation amounts individually, taking into account each member’s role and level of participation within the union. This approach is intended to limit the scope of liability imposed on individual union members in cases of unlawful industrial action.
Exemption from liability (Articles 3(4) through 3(5) and Article 3-2)	Under the amended Trade Union Act, trade unions and employees may petition the court for a reduction of damages. The amendment also limits the liability of guarantors and prohibits employers from exercising a claim for damages that is intended to undermine the existence or functioning of a trade union. In addition, the amended Trade Union Act introduces a new provision allowing an employer to voluntarily waive claims for damages against a trade union or its members arising from collective bargaining, industrial action, or other trade union activities. This framework is intended to ensure that damage claims are not used as a means to suppress legitimate union activity while maintaining flexibility for voluntary settlement between labor and management.

2. Three key pieces of advice for clients operating in Korea under the recent legal reforms

Amid the recent amendments to the Commercial Act and the Trade Union Act, we would highlight the following three points for clients conducting business in Korea.

A. Ensuring procedural fairness in decision-making and reinforcing transactional integrity

With the duty of loyalty now extended to shareholders, the legality of board decisions in major matters such as restructurings, mergers, and intercompany transactions that may involve conflicts of interest between the company, its controlling shareholders, and minority shareholders will largely depend on the basis and procedure through which the board reached its decision.

In this regard, it is recommended that the decision making process include not only a record of the votes cast but also a clear explanation of the reasoning that led to the decision and an analysis of how the decision aligns with the interests of the company and all shareholders. Maintaining such a record demonstrates that the company acted in good faith and in accordance with its fiduciary duties under the Commercial Act and can serve as useful evidence to protect the company in any subsequent dispute.

In addition, by establishing internal manuals and systems that govern decision making procedures and by improving transparency in board operations and record keeping, companies can proactively prevent future legal disputes.

The purpose of the amendment to the Commercial Act also includes the prevention of unfair transactions that may harm shareholder interests. Transactions involving controlling shareholders require particular caution because controlling shareholders, by virtue of their influence over the board, are more likely to engage in transactions on terms favorable to themselves. Examples include the sale of treasury shares to friendly parties at below market prices, which strengthens control while diluting minority interests, and situations where controlling shareholders use superior access to management information to affect market prices or to time transactions for their own benefit.

In transactions such as related party dealings, mergers, and corporate divisions where conflicts of interest may arise between the company and its shareholders, a failure to ensure the fairness of the transaction may increase the risk of allegations that shareholder interests have been infringed.

To ensure the fairness of a transaction, it is important that the structure and terms of the transaction are disclosed transparently and that sufficient information is provided to shareholders or the market. Such transparency strengthens confidence among investors and stakeholders.

It is also advisable for companies to secure the objectivity of transaction pricing through evaluations by independent appraisal institutions or verification by third parties. In particular, for assets without a clear market price or for transactions involving related parties, companies should clearly present the basis used to determine fair value.

By ensuring the fairness of transactions in this way, companies can not only reduce legal risks but also strengthen overall trust in corporate governance and management practices.

B. Strengthening shareholder communication and building supportive shareholder relationships

As the institutional environment now allows minority shareholders to exercise their rights more actively, companies should adopt management approaches that focus on building trust with shareholders. The amended Commercial Act strengthens minority shareholder influence by applying the aggregate 3 percent rule even to the appointment and removal of audit committee members and by mandating cumulative voting for certain listed companies.

Accordingly, companies should pursue management based on the principles of shareholder protection and equal treatment. To achieve this, it is advisable to establish diverse communication channels with shareholders and to build long term relationships of trust. Controlling shareholders should also consider strategies to secure supportive shareholders who are not classified as related parties.

In addition, companies can reduce the risk of shareholder disputes by diversifying communication platforms, providing transparent disclosures, and fulfilling their explanatory obligations in a timely and sincere manner.

C. Establishing strategies for managing labor relations

Under the amended Trade Union Act, a company may be deemed an employer if it is found to exercise substantial and specific control over the working conditions of workers employed by subcontractors, dispatch companies, subsidiaries, or other indirectly related entities, even where there is no direct employment relationship. Although the scope of what constitutes such substantial control has yet to be clarified through case law, companies should review their operational structures in advance to determine whether any elements might be interpreted as control or decision making authority over subcontracted workers’ conditions. This assessment will help define the range of unions that may lawfully demand collective bargaining and guide how the company should respond to such demands.

Companies should therefore analyze not only their direct employment relationships but also those involving subcontractors, dispatch agencies, subsidiaries, and special type workers, in order to understand working practices across the organization and to prepare appropriate labor relations strategies.

As managerial decisions that affect working conditions now fall within the scope of industrial disputes, companies should evaluate whether a given business decision could impact employee conditions. If it does, prior consultation with the relevant trade union is recommended. This is particularly important in industries such as automobiles, steel, and shipbuilding, where employment levels are high and trade unions are traditionally strong.

Finally, when an industrial dispute arises, the company’s response should depend on the nature and intensity of the collective action. If the action involves unlawful conduct, evidence of such acts should be gathered through proper means. Companies are therefore advised to prepare internal manuals addressing potential industrial disputes and to ensure that staff are familiar with lawful evidence collection procedures.

3. What are the greatest threats and opportunities in your practice area law in the next 12 months?

Korea – Corporate/M&A: Threats and Opportunities (Q4 2025 – Q3 2026)

Korea’s M&A market is rebounding in 2025, with deal momentum strengthening in the second half. According to public market trackers, announced transactions in Q3 2025 totaled KRW 21.7 trillion (approximately USD 14.2 billion), up around 70 percent year-on-year and already surpassing the first-half aggregate. The Bank of Korea has maintained its base rate at 2.50 percent since a 25-basis-point cut in May 2025, reflecting slower disinflation and persistent household-debt concerns. Meanwhile, the won trades near KRW 1,427–KRW 1,429 per USD, its weakest level since April, increasing import costs and complicating cross-border valuations.

Opportunities

Value-up restructuring and carve-outs.

Korean conglomerates are unlocking shareholder value through spin-offs, asset sales, and treasury-share transactions. Carve-outs and asset disposals now comprise most domestic deal activity as conglomerates restructure portfolios in anticipation of the 2025 amendments to the Commercial Act restricting listed companies’ ability to hold or deploy treasury shares for governance or acquisition purposes. This restructuring wave gives both strategics and PE investors entry into mature yet undervalued assets.

High-momentum sectors: semiconductors, mobility, energy, and software.

In April 2025, the government announced a KRW 34 trillion (≈ USD 23 billion) “K-Chips 2.0” program to strengthen domestic chip manufacturing and materials supply. Together with rising EV-battery demand and grid modernization, these policies have fueled major transactions in semiconductors, e-mobility platforms, and renewable infrastructure. Semiconductor exports reached USD 16.6 billion in September 2025, up 22% year-on-year.

Private-credit expansion and hybrid deal structuring.

As banks pull back from highly leveraged corporate loans, private-credit funds and domestic asset managers are filling the financing gap. At the same time, investors are structuring deals more flexibly through minority investments, joint ventures, and earn-out arrangements. Such structures help manage regulatory risk, preserve upside, and allow gradual transfers of control rather than one-time acquisitions.

Cross-border supply-chain repositioning.

Korean industrials are acquiring overseas logistics, mining, and component assets to reduce China dependence. Conversely, inbound investors such as Air Liquide are expanding their presence in Korea, exemplified by the ≈ KRW 4.6 trillion re-entry deal, which underscores selective strategic inflows despite global uncertainty.

Threats

Intensified tech and data screening.

Since late 2024, inbound transactions involving “national core” or “strategic” technologies have faced mandatory prior approval and potential ex officio review under Korea’s foreign-investment and industrial-technology protection laws. Deals in semiconductors, batteries, AI, and defense technology now require early mapping of sensitive assets and advance engagement with regulators.

The Korea Fair Trade Commission’s expanded merger-control focus.

The Korea Fair Trade Commission (“KFTC”) has stepped up scrutiny of platform and data-driven mergers, treating data-sharing as a competition concern. In September 2025, it conditionally cleared the AliExpress Korea–Shinsegae JV, imposing a three-year ban on cross-border data sharing. In August 2025, KFTC fined Asiana Airlines KRW 12.1 billion for violating merger conditions. The former illustrates the KFTC’s use of behavioural remedies (forward-looking conduct commitments required for merger clearance) while the latter shows strict enforcement of merger conditions when such commitments are violated. Such remedies, alongside heightened review of platform integration and data use, are expected to shape merger-clearance outcomes in 2026.

Financing and execution stress.

Although the base rate has plateaued, elevated loan spreads and hedging costs continue to constrain deal financing. The weakness of the Korean won (KRW), while improving nominal purchasing power for foreign investors, complicates pricing and leverage through higher funding and hedge expenses. Execution cycles are lengthening, and many deals now include long-stop deadlines that stretch toward 12 months or beyond, prompting parties to adopt more robust MAC clauses, reverse break fees, and currency-adjusted pricing mechanisms.

Geopolitical headwinds.

U.S.–China strategic rivalry continues to shape Korean outbound strategy. Export-control alignment with U.S. policy and rising tariff risk have dampened China-related investments while encouraging friend-shoring acquisitions in Southeast Asia and North America.

Bottom Line

From late 2025 through 2026, the Korean M&A market will favor disciplined opportunists who are willing to pursue value-up carve-outs, high-growth tech assets, or supply-chain acquisitions while embedding resilience. Deals will succeed only with early regulatory mapping, flexible capital structures, and contractual buffers against rate and FX shocks. The next M&A cycle will be shaped by the convergence of tighter regulatory scrutiny and evolving financing structures, rewarding transactions that combine precision, flexibility, and disciplined risk management.

4. How do you ensure high client satisfaction levels are maintained by your practice?

Client satisfaction lies at the heart of our M&A and corporate advisory work. We, JIPYONG LLC (“JIPYONG”), view M&A not as a technical legal exercise but as a process of understanding how a business evolves and what drives its decisions. Every transaction reflects the management’s vision, the structure of its industry, and the shifting regulatory landscape. Our priority is to understand those dynamics in depth and deliver solutions that are practical, strategic, and aligned with the client’s objectives.

M&A transactions rarely follow a straight line. Regulators, competitors, employees, and other stakeholders can all affect timing and execution. When unexpected issues arise, what matters most is the ability to anticipate risk, respond quickly, and communicate clearly. JIPYONG’s teams operate as an integrated unit, combining lawyers from different disciplines who work closely together to find solutions. We review every detail with care and coordinate seamlessly across practice areas so that problems are resolved before they escalate. For clients, this consistency and precision translate directly into trust.

The same approach defines our general corporate advisory practice. JIPYONG aims to be the legal partner most closely involved in our clients’ everyday decision making. In a constantly changing regulatory environment, we help clients manage risk and move decisively. Our advice spans contracts, governance, compliance, and internal control, ensuring that legal considerations are built into the fabric of their business operations. Long-term relationships are central to this model. When clients pursue a new project or face a challenge, they already have an advisor who understands their business and can act immediately.

JIPYONG’s international network also plays a key role in maintaining client confidence. We advise on cross-border transactions and global operations through offices in Vietnam, Indonesia, China, Laos, Cambodia, Myanmar, Russia, and Hungary. These offices are fully operational and staffed by Korean lawyers working alongside local counsel to provide advice that is fast, coordinated, and commercially sound. We identify local risks early and propose solutions that are both legally robust and practical to implement. This ensures that our guidance reflects not only the law but also business reality.

For us, client satisfaction means more than delivering outcomes. It means ensuring that our clients feel supported by a team that understands their goals and stands with them through every stage of the business. We believe that enduring trust is the foundation of truly effective legal counsel.

5. What technological advancements are reshaping your practice area[Corporate AdvisoryㆍM&A] law and how can clients benefit from them?

The most significant technological development currently shaping the legal market is the advancement of artificial intelligence (“AI”) technology. As AI has evolved, a wide range of generative AI tools and large language model (“LLM”) services have become available, transforming how legal professionals and clients approach complex work.

The rapid advancement of AI technology is also reshaping the corporate advisory and M&A sectors. AI can now be effectively used for legal research by allowing lawyers to input specific fact patterns, identify relevant lower-court precedents, compare and analyze case law, and discern broader judicial trends. This technology can therefore be usefully applied to conducting more in-depth legal research.

AI technology is also transforming the way contracts are drafted and managed. It is now possible to generate initial drafts and to manage periodically renewed agreements using AI-based tools. From the client’s perspective, this development has increased the value of lawyers who can go beyond the basic templates produced by AI. Clients now look for counsel who can adjust contract terms in light of applicable laws, balance the parties’ subtle commercial interests, and add provisions necessary for how the contract will operate in practice or for potential disputes that may arise from the transaction structure.

AI can also be applied in M&A due diligence, where it is expected to reduce review time by helping identify key issues within the large volumes of data provided by the target company. During negotiations, AI tools may further be used to simulate counterpart positions and prepare strategic responses more effectively.

While AI technology can greatly enhance convenience and efficiency, it also raises concerns about data privacy, corporate information security, and ethical use. To address these risks, Korea enacted the Framework Act on the Advancement of Artificial Intelligence and the Establishment of Trust (the “AI Basic Act”) on January 2, 2025, and amended it on October 1, 2025. The Act is scheduled to take effect on January 22, 2026. Accordingly, companies developing business models that incorporate AI technology will need legal guidance to understand the implications of this new framework and to ensure full compliance with its requirements.

JIPYONG is fully equipped to provide clients with top-quality legal services that align with the rapid advancement of AI technology and the development of the AI Basic Act. Even before the enactment of the Act, JIPYONG had extensive experience advising clients on legal risks and compliance strategies associated with AI-based service development and operation, including potential violations of the Copyright Act and the Personal Information Protection Act.

JIPYONG’s professionals have deep and long-standing expertise in the newly enacted AI Basic Act, its subordinate regulations, and related interpretative guidelines. Based on this advanced understanding and detailed analysis of the legislative framework, the firm provides comprehensive consulting services throughout the entire business life cycle, from AI development and service design to implementation and post-deployment management.

In addition, JIPYONG’s consulting group has strong capabilities in conducting AI human rights impact assessments, enabling clients to fulfil the risk management obligations and pre-assessment requirements set out under the AI Basic Act. By combining legal expertise with technical and policy insight, JIPYONG helps clients implement responsible and compliant AI governance systems that meet the highest professional and regulatory standards.