{"id":108240,"date":"2025-07-10T13:45:50","date_gmt":"2025-07-10T13:45:50","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=108240"},"modified":"2025-08-20T14:53:06","modified_gmt":"2025-08-20T14:53:06","slug":"south-korea-shareholder-activism","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/south-korea-shareholder-activism\/","title":{"rendered":"South Korea: Shareholder Activism"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-108240","comparative_guide","type-comparative_guide","status-publish","hentry","guides-shareholder-activism","jurisdictions-south-korea"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Bae, Kim &amp; Lee LLC<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/07\/BKL-logo_Eng_vertical-type.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Bae, Kim &amp; Lee LLC<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/07\/BKL-logo_Eng_vertical-type.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Shareholder Activism laws and regulations applicable in South Korea<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal sources of laws and regulations relating to shareholder rights and activism? Do insider trading and\/or market abuse rules apply to activist activity?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The principal sources of laws and regulations relating to shareholder rights and activism is generally set forth in the Korean Commercial Code (the \u201cKCC\u201d) and the Financial Investment Services and Capital Markets Act (the \u201cFSCMA\u201d).<\/p>\n<p>In particular, the KCC provides shareholders with statutory rights, including the right to convene a shareholders\u2019 meeting (Article 366), the right to submit shareholder proposals (Article 363-2), the right to inspect and copy accounting records (Article 466), and appraisal rights for dissenting shareholders with respect to certain major decisions of the company such as mergers or business transfers (Articles 522-3, 374-2, etc.).<\/p>\n<p>The FSCMA provides a basis for certain shareholder activities specific to listed companies, including the right to solicit proxy voting (Article 152), and requires listed companies to disclose material information, such as annual business reports (Article 159) and information with respect to shareholders holding 5% or more (Article 147).<\/p>\n<p>In addition, the FSCMA prohibits trading in listed company shares based on material non-public information (Article 174) and manipulative trading practices with respect to listed company shares (Article 176). These provisions do not exempt actors engaging in shareholder activism, and to the extent the conduct of such actors satisfies the requirements of the relevant provisions, such insider trading and\/or market abuse rules may apply to them as well.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is shareholder activism viewed in your jurisdiction by regulators, shareholders (both institutional and retail) and the media?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Regulatory authorities have adopted a neutral stance toward shareholder activism in an effort to ensure a fair and transparent market order, while also expressing a firm commitment to respond strictly\u2014through criminal sanctions, etc.\u2014against conduct that disrupts market order under the guise of shareholder activism.<\/p>\n<p>Meanwhile, the recent rise in activist fund activity has led to growing interest in shareholder activism among institutional investors associated with such funds. From the perspective of retail shareholders, shareholder activism is increasingly viewed favourably, as it is seen as a potential mechanism for enhancing minority shareholder rights.<\/p>\n<p>By contrast, media sentiment remains largely unfavourable toward shareholder activism, often highlighting concerns that it may distort a company\u2019s long-term strategy or give rise to conflicts between management and shareholders. However, there has been a growing number of reports in recent years emphasizing its constructive role in enhancing corporate transparency and improving governance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How common are activist campaigns and what forms do they take? Is activism more prevalent in certain industries?  If so why?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Shareholder activism in Korea is predominantly led by individual retail shareholders. Minority shareholders have organised under a collective group known as the \u201cMinority Shareholders\u2019 Alliance,\u201d through which they have pursued shareholder activism by sending letters to companies requesting regular engagement, and by seeking to advance their positions\u2014such as increased dividends\u2014through dialogue and negotiation. In addition, these shareholders have actively exercised minority shareholder rights granted under the KCC and the FSCMA, including the right to appoint or remove directors and auditors, thereby seeking to exert meaningful influence over corporate management.<\/p>\n<p>In comparison, the adoption of shareholder activism has been slower among institutional investors, private equity firms, and asset management funds. While there are specialized funds whose mandates explicitly include shareholder activism or related strategies\u2014such as Korea Corporate Governance Improvement (KCGI), Align Partners, or certain vehicles managed by MBK Partners\u2014there have been no notably large-scale successes to date. In some cases, funds have since withdrawn or scaled back their activist agendas, as seen with KCGI.<\/p>\n<p>While it is difficult to consider that shareholder activism has been particularly concentrated in any specific industry sector, shareholder activism has emerged targeting companies with low dividend payout ratios or those holding excessive real estate or cash reserves unrelated to their core business operations, often advocating for increased dividend distributions. There has also been a growing number of activism cases targeting founder-controlled companies to improve governance practices.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How common is it for shareholders to bring litigation against a company and\/or its directors and what form does this take?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Article 401 of the KCC, shareholders may sue directors who have intentionally or negligently breached their duties. However, Korean courts distinguish between direct and indirect shareholder damage. They hold that if a company suffers harm, and a shareholder&#8217;s economic interests are adversely affected as a result (like their shares losing value), this is considered &#8220;indirect harm.&#8221; In such cases, shareholders cannot hold directors liable for damages directly under Article 401 of the KCC.<\/p>\n<p>Consequently, shareholders have primarily used derivative actions to seek compensation from directors on behalf of the company for harm caused to the company. Specifically, a director who harms the company is liable to the company for damages (under Article 399 of the KCC). If the company doesn&#8217;t pursue this claim, a shareholder who meets the requirements of Article 403 of the KCC can file a lawsuit on the company&#8217;s behalf. It&#8217;s crucial to understand, though, that these actions are brought by shareholders <u>for the company<\/u>; therefore, the company, not the shareholder, is entitled to recover any damages.<\/p>\n<p>In the absence of a discovery system in Korea, evidence necessary to prove a director\u2019s misconduct is typically borne by the company, making it difficult for shareholders to pursue derivative actions. As a result, shareholder derivative litigation has historically been limited in practice. However, with the recent rise in shareholder activism, there has been a noticeable increase in the number of derivative actions being filed.<\/p>\n<p>Separately, Korea imposes criminal liability on directors for breaches of fiduciary duty. If a director\u2019s criminal liability is confirmed by a court (in favour of the prosecutor), or when administrative liability arising from a company\u2019s violation of competition laws is confirmed by a court or the Korea Fair Trade Commission, shareholders are better positioned to access supporting evidence, which has led to an increase in the number of derivative actions brought in such circumstances.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do shareholders\/activists have to access the register of members?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Shareholders, regardless of whether the company is listed or unlisted, are entitled to inspect and copy the shareholder register upon holding at least one share, and are not subject to any minimum holding period. Article 396(1) of the KCC imposes an obligation on directors to maintain the shareholder register at the company\u2019s principal office and branch offices, while Article 396(2) thereof grants shareholders the right to inspect or copy the register at any time during business hours.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do shareholders have to requisition a shareholder meeting and to table a resolution at the meeting?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 366(1) of the KCC provides that shareholders holding 3% or more of the total issued shares may request the convening of an extraordinary general meeting. In addition, Article 363-2(1) thereof grants shareholders holding 3% or more of the total issued voting shares (excluding non-voting shares) the right to submit shareholder proposals at least six weeks prior to the date of the general meeting.<\/p>\n<p>In the case of listed companies, the above rights are recognised; however, the law also provides for additional rights that may be exercised selectively under different requirements. Specifically, a shareholder who has held 1.5% or more of the total issued shares for at least six months may request the convening of an extraordinary general meeting (Article 542-6(1) of the KCC) and a shareholder holding 1% or more of the total issued voting shares (excluding non-voting shares) for at least six months may exercise the right to submit shareholder proposals (Article 542-6(2) of the KCC).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Where a shareholder requisitions a meeting, who is responsible for the costs of calling and holding the meeting?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While there is no explicit statutory provision specifying who bears the costs required for convening and operating a shareholders\u2019 meeting, Korean courts have held that, pursuant to Article 366(2) of the KCC, where a shareholder obtains court approval to convene a shareholders\u2019 meeting in the capacity of convener, the expenses incurred for convening the meeting must be borne by the company.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any rights to circulate statements to shareholders?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Shareholders holding 3% or more may seek to propose agenda items by requesting to convene an extraordinary general shareholder meeting and submitting the item for resolution at that meeting.<\/p>\n<p>Alternatively, if the company is convening the meeting, shareholders may submit a shareholder proposal at least six weeks in advance to have the item included on the agenda of the shareholders\u2019 meeting.<\/p>\n<p>In the case of a listed company, prior to a shareholders\u2019 meeting, the company or a shareholder may solicit proxy voting by preparing and disclosing a statement of intent to solicit proxies, thereby enabling the circulation of statements to shareholders.<\/p>\n<p>Since there are no legal restrictions in Korea on communications among shareholders, shareholders are generally free to issue public statements or contact other shareholders to promote their proposals. For instance, during Elliott Management\u2019s 2015 campaign opposing the merger between Samsung C&amp;T and Cheil Industries, both Elliott and Samsung C&amp;T engaged in extensive public relations efforts, including press releases, web banner advertisements, and online campaigns through internet forums. In a separate campaign targeting Hyundai Motor Company and Hyundai Mobis in 2018, Elliott launched a dedicated website featuring video introductions of its board nominees and actively solicited shareholder support for their election.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who is entitled to attend and speak at a shareholders\u2019 meeting?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In principle, shareholders have the right to attend general meetings and to speak at such meetings. If a shareholder is unable to attend in person, a proxy authorised by a shareholder may attend the general meeting and exercise the right to speak in the capacity of a shareholder.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What percentage of share capital is needed to appoint or remove a director?  What is the process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Unless otherwise provided in the company\u2019s articles of incorporation, the appointment of directors requires the approval of a majority of the voting rights of shareholders present at the meeting and at least one-quarter of the total issued shares (Article 368(1) of the KCC). The removal of directors requires the approval by two-thirds of the voting rights of shareholders present and at least one-third of the total issued shares (Articles 385(1) and 434 of the KCC).<\/p>\n<p>In order to appoint or remove a director, the relevant resolution must be included as an agenda item at a shareholders\u2019 meeting. <em>See <\/em>response to 2(d) above.<\/p>\n<p>Please note however that, in the case of listed companies, shareholder proposals seeking the removal of a director during his\/her term are not permitted (Article 363-2(3) of the KCC and Subparagraph 4 of Article 12 of the Enforcement Decree thereof) and thus, to remove a sitting director of a listed company, shareholders must request the convening of an extraordinary general shareholders meeting.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What percentage of share capital is needed to block a shareholder resolution?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For agenda items requiring an ordinary resolution, a shareholder proposal will be rejected if it fails to obtain the approval of a majority of the voting rights of shareholders present at the meeting and at least one-quarter of the total issued shares.<\/p>\n<p>In contrast, for agenda items requiring a special resolution, a shareholder proposal will be rejected if it fails to obtain the approval of at least two-thirds of the voting rights of shareholders present and one-third or more of the total issued shares.<\/p>\n<p>However, Korean law contains a unique provision, which restricts voting rights in excess of 3% for certain agenda items (the 3% rule). This rule is primarily applicable to matters involving auditors. In the case of listed companies with total assets of KRW 2 trillion or more, the establishment of an audit committee within the board of directors is mandatory. For such companies, the 3% rule applies from the director appointment stage with respect to at least one member of the audit committee.<\/p>\n<p>In the context of appointing or removing auditors or audit committee members of a listed company, it is important to note that, in calculating the above threshold, shareholders holding more than 3% of the total issued voting shares (excluding non-voting shares) (in the case of the largest shareholder, when appointing or removing a member of the audit committee who is not an outside director, the shares held by the shareholder\u2019s specially related parties and other persons specified by Presidential Decree are aggregated for the calculation) are not permitted to exercise voting rights with respect to the portion of shares exceeding the 3% limit. Because the 3% rule is favourable to minority shareholders, activists are likely to leverage it as a means of placing candidates on the audit committee or the board of directors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do holders of other instruments (e.g. options, warrants, contracts for difference, swaps, cash-settled derivatives) have any of the above rights?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While certain financial instruments may be convertible into or exchangeable for shares, holders of such instruments may not exercise shareholder rights prior to the actual conversion or exchange. In principle, only those listed in the shareholder register are entitled to exercise shareholder rights in relation to the company, and only shareholders who hold \u201cshares\u201d are eligible to be recorded in the shareholder register. Accordingly, persons holding financial instruments other than shares are not entitled to exercise shareholder rights such as the right to convene an extraordinary general meeting, the right to submit shareholder proposals, or voting rights.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is stamp duty payable on share acquisitions?  Can this be avoided\/mitigated (e.g. through use of derivatives)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Korea, no stamp duty is imposed upon the acquisition of shares. However, taxes such as securities transaction tax, capital gains tax, and dividend income tax may be imposed upon the disposal of shares.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what level can you acquire shares without having to publicly (or privately) disclose your position?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While there are no specific regulatory requirements for unlisted companies, an investor acquiring 5% or more of the shares of a listed company is subject to a large shareholding reporting obligation and must publicly disclose the acquisition (Article 147 of the FSCMA). Following the initial disclosure, any subsequent change of 1% or more in shareholding, or any change in the purpose of holding such shares, must also be disclosed through an additional filing.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the disclosure threshold different if the issuer is subject to a takeover offer?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The so-called \u201c5% rule\u201d under Article 147 of the FSCMA applies even in the case of a tender offer. Accordingly, any person acquiring 5% or more of the shares of a listed company is required to file a large shareholding report disclosing the acquisition. Furthermore, any subsequent change in shareholding of 1% or more, or any change in the purpose of holding such shares, must also be disclosed through an additional filing.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any rules which restrict the speed at which you can build a position?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In the case of a listed company, any person who reports that the purpose of shareholding is to influence the management of the issuing company pursuant to Article 147 of the FSCMA is prohibited from acquiring additional shares or exercising voting rights with respect to shares already held for a period of five days following the date of filing, counted from the date on which the reporting obligation arose (Article 150(2) of the FSCMA).<\/p>\n<p>If this restriction is violated and additional shares are acquired, voting rights with respect to the additional shares may not be exercised, and the Financial Services Commission may order the disposition of such shares within a prescribed period of up to six months (Article 150(3) of the FSCMA).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there circumstances in which a mandatory takeover is required?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In the case of a listed company, a person who, (i) within the six months preceding the acquisition date, (ii) intends to purchase shares outside the securities market \u00a0(iii) from ten or more individuals, is required to make a tender offer, (iv) if the aggregate of the number of shares to be held by the person and his or her specially related persons after the purchase is not less than five percent of the total number of the shares (including where a person, already holding five percent or more together with specially related persons, makes a purchase of the shares) (Article 133(3) of the FSCMA).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does collective shareholder action or \u2018acting in concert\u2019 have any consequences in your jurisdiction (e.g for disclosure purposes or the rules on mandatory offers)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The large shareholding reporting obligation and the corresponding public disclosure of the share acquisition under Article 147 of the FSCMA apply not only when a single person independently holds 5% or more of the shares of a listed company, but also when the aggregate shareholding of \u201cjoint holders,\u201d as defined in Article 141(2) of the Enforcement Decree thereof, reaches the 5% threshold.<\/p>\n<p>The term \u201cjoint holders\u201d refers to persons who have agreed to: (i) jointly acquire or dispose of stocks, etc.; (ii) acquire stocks, etc. jointly or individually and subsequently transfer or acquire such stocks, etc. among themselves; or (iii) jointly exercise voting rights (including the authority to direct the exercise of such rights). If minority shareholders are deemed joint holders under any of the above requirements and their combined holdings amount to 5% or more of the total issued shares, the obligation to file a large shareholding report arises, requiring public disclosure of the acquisition.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do the same rules and thresholds apply to other instruments (e.g. options, warrants, short positions, contracts for difference, swaps, cash-settled derivatives)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 147 of the FSCMA designates \u201cstocks, etc.\u201d as the subject of the 5% rule reporting requirement. The term \u201cstocks, etc.\u201d refer to securities related to voting stocks such as share certificates, instruments representing pre-emptive rights, convertible bonds, bonds with warrant, exchangeable bonds, and derivative-combined securities based on the above securities as the underlying asset (Article 133(1) of the FSCMA and Article 139 of the Enforcement Decree thereof).<\/p>\n<p>Accordingly, the 5% rule under Article 147 of the FSCMA applies to convertible bonds, bonds with warrants, and exchangeable bonds, etc. (i.e., instruments to which shareholder rights can potentially attach) in the same manner as it does to shares.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If an activist makes a takeover offer, what impact might any prior share purchases have on the minimum offer price or the form of consideration that must be offered?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no explicit statutory provision under Korean law prescribing the tender offer price. However, share prices for acquisitions of shares may be a benchmark as to the fairness and attractiveness of tender offer price, which would impact whether the tender offer would be successful.<\/p>\n<p>The tender offer price may be calculated by applying a premium or discount to the closing price on the business day immediately preceding the tender offer announcement date or the date of the board resolution, or the weighted arithmetic average share price during the preceding one-, two-, or three-month period.<\/p>\n<p>There is not requirement as to the form of consideration but generally takes the form of cash in a hostile takeover context. However, in principle, tender offers may offer shares in another company in exchange for the tendered shares.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What measures are available to companies to protect against an activist campaign?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As defensive measures against shareholder activism, a company may consider the disposal of treasury shares to a white knight or capital increase through third-party allocation. While Korean courts tend to strictly assess the validity of capital increase through third-party allocation in the context of management control disputes, the disposal of treasury shares\u2014authority over which lies, in principle, with the board of directors\u2014 is generally regarded as a relatively legitimate and effective defensive measure in the context of management control disputes.<\/p>\n<p>In addition, a company may adopt provisions in its articles of incorporation that impose supermajority requirements for the appointment or removal of directors, exceeding the thresholds prescribed under the KCC. Such provisions can serve as a means to prevent minority shareholders from easily appointing their own director candidates or removing incumbent directors aligned with management. As a defensive measure against challenges to management control, some companies include \u201cgolden parachute\u201d provisions in their articles of incorporation, requiring the payment of substantial severance compensation upon the removal of a director.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What duties do directors owe to a company and its shareholders?  Highlight any that are particularly relevant in the context of an activist campaign.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the KCC, directors owe the company a duty of care and a duty of loyalty, which means that they perform their duties in the best interests of the company and all of its shareholders. These duties are analogous to the concept of fiduciary duty.<\/p>\n<p>However, Korean courts draw a distinction between direct shareholder losses and indirect losses resulting from damage to the company. <em>See <\/em>response in 1(d). From the perspective of minority shareholders, it has often been pointed out that it is difficult to hold directors liable for capital transactions that do not result in harm to the company or for transactions involving conflicting interests among shareholders.<\/p>\n<p>That said, a proposed amendment to the KCC specifying shareholders as the subject of directors\u2019 duty of loyalty was passed by the National Assembly in a plenary session on March 13, 2025. However, the amendment did not take effect, as the President exercised the power of reconsideration (veto) on April 1, 2025. As such, depending on future legislative developments, there is a possibility that directors\u2019 individual duties toward shareholders may be expressly codified under Korean law. It will be important to closely monitor the progress of the relevant legislative process. If such an amendment is enacted, an increase in shareholder litigation seeking to hold directors accountable may be expected.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights does a company have to require parties to disclose details of their interests (direct and indirect) in the company\u2019s share capital?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Korean law, a company does not have the right to require a third party to disclose any direct or indirect interests in the company\u2019s shares.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there restrictions on companies selectively disclosing inside information to activists?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Selective disclosure of information to certain shareholders may give rise to a risk of violating the prohibition on the use of material non-public information under Article 174 of the FSCMA. It may also constitute a breach of the fair disclosure regime, which is designed to prevent listed companies from selectively providing material information that could affect the stock price to a limited group of people only.<\/p>\n<p>However, in the context of entering into an M&amp;A agreement with certain shareholders, as the transaction must be negotiated and completed with the terms disclosed, selective disclosure of information to certain shareholders may occur by exception in such circumstances. Even in such cases, it is essential to execute a non-disclosure agreement and exercise particular caution to ensure that the disclosure does not result in the use of material non-public information prohibited under the law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are settlement agreements between a company and an activist permitted in your jurisdiction?  How common is it for activist campaigns to be resolved in this way?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The execution of settlement agreements between a company and shareholder activists is not prohibited under Korean law and may be recognised as legally valid contracts. In practice, there have been instances where companies, taking into account the voting dynamics at a shareholders\u2019 meeting, have resolved disputes by partially accommodating the demands of activist shareholders (e.g. the appointment of directors, dividend increases, or share buybacks). However, it is relatively rare for settlement agreements to be executed in formal written form, and such matters are often resolved through informal discussions rather than executed contracts.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">3982<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/108240","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=108240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}