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Acting President Han Duck-soo vetoes bill mandating shareholder protections

Published: 01 Apr. 2025, 10:25 Updated: 01 Apr. 2025, 18:27

SHIN HA-NEE
[email protected]

Acting President Han Duck-soo, center, speaks during a Cabinet meeting held at the government complex in central Seoul on April 1. [YONHAP]

Acting President Han Duck-soo has vetoed a contentious bill that expands the fiduciary duties for corporate board directors to bolster shareholder protection.

Han cited concerns over the bill’s ambiguity and the potential for increased legal risks for companies — which, the government argues, could harm the domestic economy.

“I believe there is a need to find an alternative that minimizes potential side effects through thorough discussions given the bill’s significant implications for business environments and the competitiveness of not only large companies but also smaller ones,” he said during a Cabinet meeting on Tuesday.

“Therefore, after careful deliberation, I request the National Assembly to reconsider the bill.”

This is Han’s seventh rejection of a bill as acting president.

The liberal Democratic Party (DP), which controls the legislature, spearheaded the proposed revision to the Commercial Act and passed it on March 13. The conservative People Power Party and business lobbies had urged the acting president to reject the bill since then, arguing that it could further strain the already struggling economy by increasing legal risks for companies and stifling innovation.

An amendment to the Commercial Act was passed at the National Assembly in Yeouido, western Seoul, on March 13. [NEWS1]

Under the current law, board directors are bound by a duty of loyalty to their company, requiring them to prioritize corporate well-being over personal interests when making decisions. The proposed bill sought to expand that obligation by adding a clause mandating that directors “protect shareholders’ interests and treat them equally.”

The aim was to prevent controlling stakeholders — such as the owning family of a conglomerate — from pursuing gains at the expense of minority shareholders.

While repeatedly emphasizing that the government “agrees with the intention of the bill,” the acting president echoed the business lobbies’ concerns, saying that the expanded duties could lead to higher legal risks.

“The bill is understood to be aimed at mandating board directors to treat all shareholders’ interests equally, without disproportionately favoring a certain group such as controlling shareholders,” said Han.

"However, it is hard to determine which decisions represent all shareholders’ interests fairly in practice based only on the bill’s clauses.”

The bill, therefore, could cause confusion in the decision-making process and stifle business operations, as companies may become reluctant to take bold actions to avoid legal risks, according to Han.

“This would not only defy the initial purpose of protecting general shareholders but also have a negative impact on the national economy.”

The acting president backed an amendment to the Capital Markets Act as an alternative.

On Dec. 2, the government proposed revising the Capital Markets Act instead of the Commercial Act, as the alternative plan will apply only to public companies and a relatively smaller scope of operations to minimize any potential negative outcomes that may restrict corporate activities.

Regardless, the DP said that day that it would continue to pursue the enactment of the Commercial Act revision.

Financial Supervisory Service Gov. Lee Bok-hyun speaks during a press conference in western Seoul on March 19. [YONHAP]

Financial Supervisory Service Gov. Lee Bok-hyun, who strongly opposed the rejection of the bill in an unexpected move, did not make any official comment on the matter.

While the chief financial regulator previously expressed his reservations with the Commercial Act revision — instead supporting the government-proposed revision of the Capital Markets Act — he still defended the enactment of the bill, indicating that it is a step forward, albeit an imperfect one.

Updated, April 1: Added details about Han's comments and the government's proposal to revise the Capital Markets Act.

BY SHIN HA-NEE [[email protected]]