Corporate law revision without breach of trust reform raises doubts about business climate

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Corporate law revision without breach of trust reform raises doubts about business climate

Published: 05 Feb. 2026, 00:00

Audio report: written by reporters, read by AI

President Lee Jae Myung speaks during a business roundtable on expanding youth employment and regional investment at the Blue House on Feb. 4. [PRESIDENTIAL OFFICE]

President Lee Jae Myung met with the heads of Korea’s 10 largest conglomerates at the Blue House on Wednesday and likened the economy to an ecosystem, saying that grass, grasshoppers and rabbits must all exist for a tiger to remain healthy. As the president suggested, growth should allow its benefits to be shared more broadly by small businesses, regional communities and young people. In response, the business community unveiled investment plans totaling 300 trillion won ($206 million), including 270 trillion won earmarked for projects outside the Seoul metropolitan area over the next five years.

While large companies appear eager to answer the president’s call, they have reasons for concern. They are already under pressure from the Trump administration in the United States, which has wielded tariffs to push for more investment, while domestic worries about industrial hollowing out persist. As the president has often stressed, the government must build legal and institutional infrastructure that allows companies to invest in regional areas without undue burden, while improving living conditions through education and cultural facilities. Just as commercial rationality should guide Korea’s investment decisions abroad, the same principle must hold for corporate investment at home. Designing that framework is the government’s responsibility.

It is not clear that the ruling party is fulfilling its role in creating a business-friendly environment. The Democratic Party has announced plans to pass a third revision to the Commercial Act this month that would mandate the cancellation of treasury shares. Business groups warn that applying the rule uniformly, including to so-called involuntary treasury shares acquired during mergers or restructuring, could have serious side effects. Forced cancellation would amount to a capital reduction. Under commercial law, changes to a company’s assets can trigger creditor protection procedures, allowing lenders to raise interest rates, alter loan terms or demand early repayment, threatening financial stability.

The Korea Listed Companies Association estimates that 933 of the country’s 2,417 listed firms could be exposed to such creditor pressure. Over the medium-to-long term, this could undermine shareholder value and hinder necessary industrial restructuring.

While the third revision of the Commercial Act is moving quickly, little progress has been made on reforming the breach of trust provisions that companies have long criticized. The offense is widely seen as overly constraining managerial judgment. Compared to other countries, Korea’s strict punishment for breach of trust has been criticized for delaying corporate decision-making and discouraging innovative management. Those concerns should not be dismissed lightly.

If the government is serious about fostering an economic ecosystem where all participants can thrive, improving the overall business environment must go beyond symbolic gestures. Without addressing legal risks that weigh on corporate decision-making, calls for investment may ring hollow.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.