The Korean Commercial Code (KCC) permits five types of companies: stock companies, limited companies, limited partnership companies, partnership companies and limited liability companies. According to statistics maintained by the Supreme Court of Korea, based on information gathered from corporate registries, as of March 2026, approximately 89.5% of companies in Korea – including all listed companies – are stock companies, and other forms are rarely used. Given the overwhelming prevalence of stock companies, the responses in this chapter are applicable to stock companies unless otherwise specified.

The primary source of law governing corporate governance in Korea is the KCC. The Financial Investment Services and Capital Markets Act (the “Capital Markets Act”) supplements the KCC by imposing additional regulations on listed companies, including requirements related to public disclosure, insider trading and the composition of the board of directors. In addition, listed companies must comply with the Regulation on the Issuance and Disclosure of Securities of the Financial Services Commission (FSC), as well as the Listing Regulations and Disclosure Regulations of the Korea Exchange (KRX).

All listed companies in Korea are stock companies. Therefore, listed companies must comply with the corporate governance requirements applicable to stock companies. In addition, there are corporate governance requirements that apply exclusively to listed companies. For details on the corporate governance requirements applicable to stock companies (general meetings of shareholders, boards of directors, chief executive officers or executive officers, and auditors or audit committees), please refer to 2. Corporate Management, 3. Directors and Officers and 4. Shareholders. The following explains the requirements applicable only to listed companies.

Corporate Governance Requirements for Listed Companies

Appointment and ratio of independent directors

In principle, a listed company must ensure that independent directors – ie, directors who are not engaged in the regular business of the company (known as “outside directors” under the previous version of the KCC) – constitute at least one-third of the total number of directors. For listed companies with total assets of KRW2 trillion or more as of the end of the latest fiscal year, the board must include at least three independent directors who must also constitute a majority of the total number of directors.

Gender diversity of directors

Companies with total assets or capital of KRW2 trillion or more cannot have a board of directors comprised entirely of a single gender.

Audit committee

The KCC requires stock companies with total assets of less than KRW100 billion to either appoint an auditor or establish an audit committee. Listed companies with total assets of at least KRW100 billion but less than KRW2 trillion must either appoint a full-time auditor or establish an audit committee. Listed companies with total assets of KRW2 trillion or more are required to establish an audit committee. An audit committee established in a listed company with total assets of KRW100 billion or more, or KRW2 trillion or more, must consist of three or more directors, with independent directors constituting at least two-thirds of the members (see 3.4 Appointment and Removal of Directors/Officers).

Composition of the independent director nomination committee

Listed companies with total assets of KRW2 trillion or more must establish an independent director nomination committee as a subcommittee of the board of directors. A majority of the members of this committee must be independent directors.

Public disclosure of corporate governance report

All Korea Composite Stock Price Index (KOSPI)-listed companies are required to publicly disclose their corporate governance reports. For a more detailed discussion, please refer to 5.2 Corporate Governance Arrangement Disclosure.

Characteristics and Development of Corporate Governance in Korea

Corporate governance in Korea is characterised by controlling shareholders’ dominance over management. This holds true even for listed companies. As a result, the agency issues between the management and the shareholders commonly found in other jurisdictions are not as frequently observed in Korea. Instead, conflicts of interest between controlling shareholders and other shareholders have historically been the primary governance challenge in Korea. Commentators have noted that the recent amendments to the KCC appear to be intended to address this issue.

The following recent changes may have an impact on the corporate governance of listed companies in Korea. These changes are anticipated to contribute to the advancement of corporate governance and the enhancement of shareholder value.

Amendments to the KCC

The key amendments to the KCC in 2025 are as follows (please refer to the South Korea Trends & Developments chapter in this guide for detailed information).

Duty of loyalty of directors

While the previous version of the KCC provided that directors must perform their duties in good faith “for the interest of the company” in accordance with statutes, and the articles of incorporation, the amended KCC now require directors to perform their duties “…for the interest of the company and the shareholders”. Furthermore, it is now explicitly stipulated that directors have an obligation to protect the interests of the shareholders as a whole and to treat the interests of all shareholders equitably. These changes apply to both listed and unlisted companies.

Cumulative voting

Listed companies with total assets of KRW2 trillion or more are now prohibited from excluding cumulative voting through their articles of incorporation (AOI).

Independent directors

The title “outside director” for listed companies has been changed to “independent director”. The required proportion of independent directors on the board has been raised to at least one-third.

Aggregated 3% rule (combined cap)

For listed companies with assets of KRW2 trillion or more, or those with assets between KRW100 billion and KRW2 trillion that have established an audit committee, the voting rights of the largest shareholders are now capped at 3% in the aggregate (including shares held by their specially related persons) when voting on the appointment or removal of an audit committee member.

Separate election of audit committee members

For listed companies with assets of KRW2 trillion or more, or those with assets between KRW100 billion and KRW2 trillion that have established an audit committee, the number of directors to be elected separately as “directors who will serve as audit committee members” has been increased to at least two (or more if prescribed by the AOI).

Electronic general meetings

Listed companies are now permitted to hold hybrid (ie, in-person and remote) shareholder meetings. For listed companies with total assets of KRW2 trillion or more, the holding of such hybrid meetings is now mandatory.

Amendments to KRX Disclosure Regulations

Following recent amendments to the KRX’s Disclosure Regulations, the requirement to publicly disclose corporate governance reports has been expanded to all KOSPI-listed entities.

Shareholder Activism and Stewardship Code

Shareholder activism has gained significant momentum in recent years. Institutional investors, including the National Pension Service (NPS), are increasingly adopting stewardship codes.

The primary bodies involved in the governance and management of a company in Korea are the general meeting of shareholders, the board of directors, the representative director (or the executive officer) and the auditor (or the audit committee).

General Meeting of Shareholders

The general meeting of shareholders is a mandatory decision-making body of a company composed of its shareholders. It has the power to appoint and dismiss directors and possesses the authority to decide on significant matters, such as the amendment of the AOI.

Board of Directors

The board of directors is the executive body of a company, consisting of all of the company’s directors. It has the authority to make decisions regarding the execution of business and to supervise the directors’ performance of their duties, including those of the representative director.

Representative Director (or Executive Officer)

The representative director represents the company externally and manages the execution of business internally. While the representative director is generally appointed by the board of directors from among its members, the AOI may provide for appointment by the general meeting of shareholders. In a company where an executive officer is appointed, a representative director cannot be appointed; in such cases, decision-making regarding the execution of business generally rests with the board of directors, while the actual execution falls under the authority of the executive officer.

Auditor (or Audit Committee)

The auditor audits the accounting and business operations of the company. A company may optionally establish an audit committee in lieu of an auditor; however, a listed company with total assets of KRW2 trillion or more is required to establish an audit committee. A listed company with total assets of KRW100 billion or more but less than KRW2 trillion must either appoint a full-time auditor or establish an audit committee (see 1.3 Companies With Publicly Traded Shares).

General Meeting of Shareholders

The general meeting of shareholders makes decisions on fundamental matters that significantly affect the interests of shareholders. The KCC lists the following matters as subject to a resolution of the general meeting of shareholders:

• matters concerning fundamental changes to the company – amendment of the AOI, merger, transfer of business, division or merger through division of the company, comprehensive exchange and transfer of shares, reduction of capital, dissolution, etc;
• matters concerning the appointment and dismissal of corporate organs – appointment and dismissal of directors, auditors, liquidators, etc; and
• other matters closely related to shareholder interests – approval of financial statements, determination of dividends, determination of remuneration for directors, post-formation acquisition, etc.

Matters specifically prescribed by the KCC as falling under the authority of the general meeting of shareholders cannot be delegated to the board of directors or the representative director, even by way of an AOI. However, it is permissible for the general meeting of shareholders to decide on significant matters while delegating the determination of specific details to the board of directors.

Board of Directors

The board of directors makes decisions regarding the execution of the company’s business. However, as it is impractical and inefficient for the board to decide on every matter regarding corporate operations, routine day-to-day business decision-making and executive authority is considered to be implicitly delegated to the representative director.

Nevertheless, the following matters (which the KCC specifically provides as being the power of the board of directors), as well as other significant matters, may not be delegated to the representative director:

• disposal and transfer of significant assets, borrowing of large-scale assets, appointment or dismissal of a manager, and the establishment, relocation or closure of branch offices;
• approval of the transfer of shares subject to restriction on transfer;
• convocation of the general meeting of shareholders;
• approval of transactions involving a conflict of interest between a director and the company; and
• issuance of new shares.

Representative Director (or Executive Officer)

For routine day-to-day business, the representative director (or executive officer) is implicitly deemed to have been delegated the decision-making authority, even in the absence of express delegation from the board of directors.

Auditor (or Audit Committee)

Each auditor exercises their authority independently. In contrast, the audit committee, being a collegiate body, exercises its authority through resolutions of the committee. The auditor (or audit committee) holds powers such as:

• the right to audit business operations;
• the right to receive reports from directors on significant matters;
• the right to request the convocation of a general meeting of shareholders;
• the right to investigate subsidiaries;
• the right to represent the company in lawsuits against directors;
• the right to demand that a director stop engaging in illegal acts; and
• the right to audit financial statements.

General Meeting of Shareholders

For details regarding the convocation and resolution procedures of the general meeting of shareholders, please refer to 4.3 Shareholder Meetings.

Board of Directors

Convocation

To convene a meeting of the board of directors, notice must be dispatched to each director and auditor one week prior to the meeting date. However, this period may be shortened by the AOI, and a meeting may be held at any time without notice upon the unanimous consent of all directors and auditors. As there are no restrictions on the method of notice, oral notification as well as notification via email is permitted.

Resolution

Adoption of board resolutions require the attendance of a majority of the directors and the affirmative vote of a majority of the directors present, though the AOI may set a higher threshold. Exceptionally, a two-thirds majority of the directors is required for resolutions regarding the appropriation of corporate opportunities, approval of self-dealing transactions and the dismissal of audit committee members.

Auditor (or Audit Committee)

Auditors exercise their authority independently, whereas an audit committee exercises its authority through committee resolutions. The operation of the audit committee, including its convocation and resolution methods, follows the procedures for committees within the board of directors as prescribed by the KCC. Specifically, notice must be dispatched to each committee member one week prior to the meeting date, though this period may be shortened by the AOI, and a meeting may be held at any time without notice upon the unanimous consent of all committee members. Adoption of resolutions require the attendance of a majority of the members and the affirmative vote of a majority of the members present, though the AOI may set a higher threshold.

The board of directors is composed of all directors elected at the general meeting of shareholders. While the KCC does not have any specific provisions regarding the chairperson of the board of directors, it is common practice for a company’s AOI to designate the representative director as the chair.

Large corporations often establish various committees within their board, such as audit committees, compensation committees and director nomination committees. The audit committee serves as a body that can replace the auditor and is governed by specific provisions under the KCC. Other general committees are established in accordance with the AOI, based on the general provisions of the KCC that serve as the legal basis for committees. A committee consists of two or more directors, and the board of directors may delegate its authority to a committee, except for the following matters:

• proposals regarding matters requiring approval by the general meeting of shareholders;
• appointment and dismissal of the representative director;
• establishment of committees and the appointment and dismissal of their members; and
• matters specified in the AOI

Directors are classified into inside directors, outside directors (independent directors) and directors who are not engaged in regular business. These three types of directors have equal voting rights on the board of directors.

• Inside director: A director who engages in the company’s day-to-day operations. The representative director is appointed from among the inside directors.
• Outside directors (independent directors): Outside directors (independent directors) are directors who do not engage in the company’s day-to-day operations. Although the term “outside director” was previously used for listed companies as well, the 2025 amendment to the KCC introduced a separate term: “independent director”. The two are essentially the same, with the director’s independence being the key element.
• Other non-executive directors: These are directors who do not engage in the company’s day-to-day operations but do not meet the qualifications for outside directors.

Composition Requirements Applicable to All Stock Companies

Composition of the board of directors

Directors appointed at the general meeting of shareholders automatically become members of the board of directors without any additional procedures, and the board of directors cannot be composed of individuals who are not directors.

Number of directors

Every company must have at least three directors (except for companies with a total capital of less than KRW1 billion where a board of directors is not established). While the KCC does not impose a maximum limit, a ceiling may be set through the AOI.

Composition of the audit committee

Where an audit committee is established within the board of directors, it must consist of three or more directors, and at least two-thirds of the members must be outside directors.

Composition Requirements Applicable to Listed Companies

For listed companies, there are specific requirements regarding the number and proportion of independent directors, the gender composition of the board of directors, the composition of the audit committee and the composition of the independent director nomination committee. Please refer to 1.3 Companies With Publicly Traded Shares for more details.

Appointment of Directors

Appointing body and resolution requirements

Directors are appointed at the general meeting of shareholders. The resolution requires a majority of the voting rights present and at least one-fourth of the total issued and outstanding shares.

Recommendation of director candidates

The KCC does not regulate the recommendation of director candidates for unlisted companies. In the case of listed companies, personal information of the candidates must be notified (or publicly disclosed) when convening a general meeting of shareholders for the appointment of directors, and directors must be appointed only from among those candidates. To recommend a person as a director candidate, shareholders may:

• exercise their shareholder proposal rights; or
• request the convening of an extraordinary general meeting of shareholders for the appointment of directors.

Meanwhile, listed companies with total assets of KRW2 trillion or more are required to establish an independent director nomination committee within the board of directors. Independent directors must be appointed from among the candidates recommended by the nomination committee. However, if a shareholder who satisfies the requirements for exercising his/her shareholder proposal rights recommends a candidate for an independent director, the nomination committee is obligated to include such person in the list of candidates.

Cumulative voting

Cumulative voting has been introduced as a system to prevent major shareholders from monopolising the board of directors. Cumulative voting can be implemented unless it is excluded by the AOI. Following the 2025 amendment to the KCC, listed companies with total assets of KRW2 trillion or more are prohibited from excluding cumulative voting in their AOI. Even in companies that have not excluded cumulative voting, it is not automatically implemented; it is conducted when a shareholder holding 3% or more of the total issued and outstanding shares (excluding non-voting shares) requests cumulative voting. For listed companies with total assets of KRW2 trillion or more, this threshold is lowered to 1%.

Removal of Directors

Removing body and resolution requirements

The general meeting of shareholders may remove a director at any time. The removal of a director requires a special resolution (weighted resolution requirement: two-thirds of the voting rights present and one-third of the total issued and outstanding shares). While shareholders may propose the removal of a director by exercising their shareholder proposal rights, in the case of listed companies, directors may refuse a shareholder proposal regarding the removal of an officer currently serving a term. Shareholders who have the right to request the convening of an extraordinary general meeting of shareholders may convene such for the removal of a director.

Removal by the court

If the removal of a director is rejected at a general meeting of shareholders, despite the director having engaged in inappropriate activities or any grave fact in violation of any statute or the AOI in relation to the performance of his/her duties, a shareholder who holds no less than 3% of the total number of issued and outstanding shares (or a shareholder who has held 0.5% of the total issued and outstanding shares of a listed company for at least six months; 0.25% for listed companies with total assets of KRW2 trillion or more) may request the court to remove the director.

Disqualification of Directors

The KCC specifies various disqualification criteria to ensure independence of outside directors/independent directors, including relationships with major shareholders or recent employment history. Except for outside directors and independent directors, the KCC does not provide specific qualifications for directors. That said, as an auditor cannot concurrently hold the office of a director of the company or its subsidiaries, an auditor of the company or the company’s parent company cannot become a director of that company.

Appointment and Removal of Audit Committee Members Within the Board of Directors

Appointment/removal

In the case of unlisted companies and listed companies with total assets of less than KRW100 billion, audit committee members are appointed and removed by the board of directors. A resolution to remove an audit committee member must be made by a two-thirds majority of the total number of directors. For listed companies with total assets of KRW100 billion or more, audit committee members are appointed by a simple resolution of the general meeting of shareholders and removed by a special resolution of the general meeting of shareholders.

Disqualification of audit committee members

A director must not have any disqualifications as defined by the KCC to serve as a member of the audit committee of a listed company with total assets of KRW100 billion or more but less than KRW2 trillion, regardless of whether the individual is an independent director. The KCC lists factors relating to the ability to manage the company and creditworthiness (such as being a minor) and factors that could compromise independence from the company (such as being an officer or employee of the company) as grounds for disqualification.

Appointment of Outside and Independent Directors

The KCC provides criteria for the disqualification of outside directors and independent directors, preventing individuals with close relationships with the company or its controlling shareholders from being appointed to these positions (see 3.4 Appointment and Removal of Directors/Officers).

Exclusion of Voting Rights for Directors With Special Interest

A director who has a special interest in a resolution of the board of directors cannot exercise his/her voting right in relation to that resolution. Here, a “special interest” refers to a director’s personal interest that conflicts with the interests of the company. Examples include a director who is the subject of a resolution for the approval of a director’s concurrent positions/employment, the approval of self-dealing or the approval of the appropriation of corporate opportunities.

Board of Director Approval for Conflict of Interest Matters

The KCC requires board approval for a director’s concurrent positions/employment, self-dealing and appropriation of corporate opportunities. While the approval for a director’s concurrent positions/employment requires a majority of directors present and a majority vote of those present, the approval for a director’s self-dealing and the appropriation of corporate opportunities requires the affirmative vote of at least two-thirds of the directors in office.

Duty of Care

As mandataries of the company, directors have a duty to process entrusted affairs with the “care of a good manager” in accordance with the tenets of the mandate. Korean courts apply the so-called business judgement rule. Under this rule, a director’s action is deemed to be within the scope of managerial discretion if the director:

• sufficiently collected, investigated and reviewed necessary information within a reasonably available range;
• reasonably believed the decision to be in the best interest of the company based on such information; and
• made a managerial judgment in good faith, provided that the content is not significantly unreasonable and falls within a range that a typical director could reasonably choose.

Sub-duties recognised under the duty of care include the duty to comply with laws, the duty of oversight and the duty of internal control.

Duty to comply with the law

Directors are obligated to comply with the various provisions of the KCC and other regulations that individually prescribe duties to be observed in the performance of their tasks, as well as regulations the company must follow in its business activities. Precedents maintain that illegal acts cannot be protected by the business judgement rule.

Duty of oversight and internal control

Directors have a duty to monitor whether the execution of duties by other directors or management is being conducted appropriately without violating laws or the AOI, and to take necessary measures to prevent improper acts. Furthermore, courts have recognised the duty to establish an internal control system, holding that “each director constituting the board has an obligation to ensure that a reasonable information and reporting system is established and functioning properly”. Courts have also held that even outside directors have an obligation to urge the establishment of an internal control system and to demand corrective measures without ignoring the situation when there are grounds to suspect the system is not operating properly.

Duty of Loyalty

Directors must faithfully perform their duties for the company and the shareholders in accordance with laws and the AOI.

In addition, directors bear duties such as the prohibition of self-dealing, the prohibition of competition, the prohibition of misappropriating corporate opportunities and the duty of confidentiality (see 3.5 Independence of Directors).

Directors are mandataries entrusted with the management of the company’s affairs. Therefore, the party to whom a director owes duties is, in principle, the company. However, the “corporate interest” that a director must protect and promote is not merely an increase in the net assets of the legal entity itself, but primarily encompasses the long-term interests of the shareholders.

Meanwhile, the 2025 amended KCC explicitly provides that directors must perform their duties in good faith “for the company and the shareholders”. Furthermore, considering the company’s stakeholders other than shareholders – such as creditors and employees – and implementing ESG management for the company’s long-term interests and sustainability is both permitted and required as part of a director’s fiduciary duty to the company. It is unlikely that the recent amendments were intended to require directors to place the interests of the shareholders above all, or at the expense of other stakeholders.

Removal of Directors

In the event of a director’s breach of duty, the general meeting of shareholders may remove the director. If the resolution for removal is rejected at the general meeting of shareholders despite a material fact involving misconduct or a violation of laws or the AOI by the director in connection with their duties, a shareholder holding 3% or more of the total issued and outstanding shares (or a shareholder of a listed company who has held 0.5% or more for at least six months; 0.25% for listed companies with total assets of KRW100 billion or more) may file a lawsuit for the removal of the director. When a lawsuit for removal is filed, the court may, upon the application of a party, suspend the director’s performance of duties via an injunction and appoint a temporary acting director.

Directors’ Liability for Damages to the Company

If a director, either intentionally or through negligence, acts in violation of laws or the AOI, or neglects their duties, the director is jointly and severally liable to the company for damages. If such an act was based on a resolution of the board of directors, directors who voted in favour of the resolution are also liable. A lawsuit to pursue a director’s liability to the company may be filed directly by the company or by a shareholder.

• Lawsuit by the company against a director: In a lawsuit filed by the company against a director, the auditor represents the company.
• Shareholder derivative Suit: A shareholder holding 1% or more of the total issued and outstanding shares may demand that the company file a lawsuit to pursue the director’s liability. If the company fails to file the suit within 30 days of the demand, the shareholder may immediately file the suit for the benefit of the company. For listed companies, a shareholder who has held 0.01% or more for at least six months may initiate a derivative suit.

Directors’ Liability for Damages to Third Parties (Including Shareholders)

The KCC recognises a director’s liability to third parties by providing that, if a director neglects their duties intentionally or due to gross negligence, the director is jointly and severally liable to third parties for damages. If a shareholder suffers direct personal damage due to a director’s neglect of duty, they may pursue a claim for damages against the director based on this KCC provision. However, a shareholder cannot claim compensation for “indirect damages” where a loss is primarily incurred by the company and consequently affects the shareholder’s economic interests. Meanwhile, with the 2025 KCC amendment strengthening and clarifying the director’s duty of loyalty, it has both theoretically and practically become more feasible for shareholders to hold directors accountable in cases where the shareholders suffered harm directly and not through the company.

Criminal Liability

If a director, in violation of their duties, obtains pecuniary benefits or causes a third party to obtain such benefits, thereby inflicting pecuniary damage on the company, the director may bear criminal liability for occupational breach of trust.

Injunction Against Illegal Acts

If a director performs an act in violation of laws or the AOI, and there is a concern that such an act may cause irreparable damage to the company, the auditor (or the audit committee) or a shareholder holding 1% or more of the total issued and outstanding shares may demand that the director cease such an act. For listed companies, the shareholding requirement is relaxed to 0.05% or more (0.025% for listed companies with total capital of KRW100 billion or more) held continuously for at least six months.

Limitation and Exemption of Directors’ Liability

A director’s liability to the company may be exempted by the unanimous consent of all shareholders. Furthermore, if provided for in the AOI, a company may exempt a director from liability for an amount exceeding six times (three times in the case of independent/outside directors) the amount of their compensation for the latest one year prior to the date of the act. Such exemption of liability under the AOI is not permitted in cases of:

• neglect of duty due to intent or gross negligence;
• violation of a non-compete clause;
• misappropriation of corporate opportunities; or
• self-dealing.

Directors’ and Officers’ (D&O) Liability Insurance

There is a growing trend among listed companies in Korea to subscribe to D&O liability insurance.

Determination Procedure for Directors’ Remuneration

The KCC requires that the remuneration of directors be determined by the AOI or by a resolution of the general meeting of shareholders. While it is permissible for the AOI or a general meeting of shareholders resolution to determine only the total amount or the ceiling of officers’ remuneration and delegate specific matters, such as the amount to be paid to individual directors, to the board of directors, a comprehensive delegation of matters concerning directors’ remuneration to the board of directors is not allowed. It is also not permitted to delegate the allocation of individual directors’ compensation to the representative director.

A remuneration agreement not based on AOI provisions or a general meeting of shareholders resolution is null and void, and the director in question does not hold a claim for remuneration.

Recently, Korean courts have restricted the voting rights of a shareholder who is also a director in relation to a general meeting of shareholders agenda item for the limit on directors’ remuneration, viewing such a shareholder as a “person with a special interest”.

Disclosure of Directors’ Remuneration

While the limit on directors’ remuneration is disclosed through the general meeting of shareholders, the KCC does not have provisions regarding the actual remuneration paid to directors. However, the Capital Markets Act requires listed companies to disclose the total remuneration paid to all directors in their annual business reports.

In certain cases, individual remuneration may be subject to public disclosure. For instance, if the remuneration of an individual officer exceeds KRW500 million, the individual remuneration, along with its calculation criteria and method, must be recorded in the public disclosure. Also, if an individual is among the top five highest-paid individuals in the company and his/her remuneration exceeds KRW500 million, his/her individual remuneration, calculation criteria and method must be recorded in the public disclosure regardless of whether the individual is an officer.

Relationship Between the Company and Shareholders

Shareholders bear liability only to the extent of the purchase price of the shares they have subscribed for and do not bear direct liability for the company’s debts. The company must treat shareholders equally based on the class and number of shares held. The KCC prescribes equal treatment according to shareholding for voting rights, claims for dividend distribution and claims for the distribution of residual assets. Furthermore, the 2025 amended KCC imposes a duty on directors to treat the interests of all shareholders fairly.

Rules and Requirements

The core laws and regulations governing the relationship between the company and its shareholders are the KCC and the Capital Markets Act.

Register of Shareholders

A company is required to keep a register of shareholders at its head office, and shareholders and corporate creditors are entitled to inspect or copy it during business hours.

Shareholders do not have the legal authority to directly instruct the company’s management to perform or refrain from specific business acts. However, shareholders participate in and supervise corporate management through the following means.

• Shareholder participation in management: Shareholders participate in corporate management through the general meeting of shareholders by exercising their voting rights, rights to demand the convening of a general meeting of shareholders and shareholder proposal rights.
• Shareholder supervision of management: Shareholders hold rights such as the right to demand a director to stop engaging in illegal acts, the right to appoint an inspector, and the right to inspect books and records. Furthermore, shareholders possess various litigation rights, including the right to file lawsuits to challenge the resolution of a general meeting of shareholder, shareholder derivative suits, lawsuits to nullify the issuance of new shares and lawsuits to nullify incorporation, mergers or divisions. Through these mechanisms, shareholders can effectively supervise corporate management.

Holding of Shareholder Meetings

Every stock company must hold an ordinary general meeting of shareholders at least once a year at a specified time after the end of each fiscal year, while extraordinary general meeting of shareholders may be held from time to time as necessary.

Convening Procedures and Notice

When convening a general meeting of shareholders, a written notice must be dispatched to each shareholder two weeks prior to the date of the meeting, or an electronic notice may be sent with the consent of each shareholder. However, for shareholders holding 1% or less of the total issued and outstanding shares, the notice may be replaced by public announcements in two or more daily newspapers at least twice each, or through Financial Supervisory Service’s Data Analysis, Retrieval and Transfer System (DART) or the KRX, as prescribed by the AOI. The notice must specify the date, time, venue and the agenda of the meeting; in principle, resolutions cannot be passed on items not specified in the notice.

Conduct of Meetings

Regarding the conduct of the general meeting of shareholders, the KCC provides no specific regulations other than those concerning the chairperson (who is appointed at the general meeting of shareholders if not provided for in the AOI). Typically, the meeting proceeds according to established practices. Generally, the representative director, representing the board of directors that proposed the agenda, explains the purpose of each item, responds to shareholder inquiries and then proceeds to a resolution.

Resolutions

Unless otherwise provided in the KCC or the AOI, the resolution of a general meeting of shareholders is adopted by a majority of the voting rights of the shareholders present and at least one-fourth of the total issued and outstanding shares (ordinary resolution).

A special resolution is required for matters such as: amendments to the AOI, stock splits, granting of stock options, comprehensive exchange or transfer of shares, transfer of business, post-incorporation acquisition of assets, removal of a director or auditor, issuance of shares below par value, capital reduction, third-party issuance of convertible bonds or bonds with warrants, dissolution, continuation of the company, mergers or divisions/merger-divisions. A special resolution requires the affirmative vote of at least two-thirds of the voting rights of the shareholders present and at least one-third of the total issued and outstanding shares.

Claims Against the Company

Key claims that a shareholder may bring against the company include the following:

• lawsuits to nullify or revoke resolutions – if there are procedural or substantive defects in a resolution of the general meeting of shareholders, a shareholder may file a lawsuit to challenge its validity;
• appraisal rights (right to request the purchase of shares) – shareholders who disagree with corporate decisions that will bring about material changes to their interests – such as mergers, merger-divisions or the transfer of business – may demand that the company purchase their shares at a fair price; and
• claims for dividend distribution – if a company fails to pay dividends despite a general meeting of shareholders resolution for dividend distribution, a shareholder may file a claim for the payment of such dividends.

Claims Against Directors

Regarding injunctions against illegal acts, shareholder derivative suits, and claims for damages, please refer to 3.8 Breach of Directors’ Duties and 3.9 Other Claims/Enforcement Against Directors/Officers.

Disclosure Obligations of Major Shareholders in Listed Companies

Large-scale shareholding reporting requirement (5% rule)

If the combined holdings of an individual and their joint holders reach 5% or more of the total outstanding shares, they must report the ownership percentage and purpose of holding (simple investment/general investment/influencing management) to the FSC and the KRX within five business days. Any subsequent change in ownership of 1% or more or a change in the purpose of holding must also be reported within five business days. In the event of a violation, the exercise of voting rights for the portion in violation will be restricted for a specified period.

Reporting requirements for executives and major shareholders (10% rule)

Executives or major shareholders who hold 10% or more of the total outstanding shares or exercise de facto management control must report their ownership status within five business days of attaining such status. Any changes in ownership must also be reported within five business days; however, reporting is waived if the change involves fewer than 1,000 shares and the transaction value is less than KRW10 million.

Stewardship Code and Disclosure of Voting Rights

Institutional investors (such as the NPS) participating in the Korea Stewardship Code must disclose detailed information regarding their shareholder activity policies and voting records, aimed at enhancing the corporate value of investee companies. With the 2026 amendment to the Capital Markets Act, disclosure obligations for institutional investors have been strengthened, requiring them to disclose not only their voting decisions (for/against) but also the specific reasoning behind them under reinforced practical guidelines.

Disclosure in Business Reports

Listed companies must provide an overview of the largest shareholder in their business reports. If the largest shareholder is a legal entity, the disclosure form is designed to reveal exactly who the majority owner of that entity is, tracing back to the ultimate individual beneficial owner.

In Korea, periodic financial and business reporting obligations primarily apply to listed companies, which must file annual, semi-annual and quarterly reports under the Capital Markets Act. The same regime also applies, in certain cases, to unlisted issuers, particularly where securities have been publicly offered or where the company has a broad investor base.

An annual business report must be filed within 90 days after the end of the fiscal year. Semi-annual and quarterly reports must be filed within 45 days after the end of the relevant reporting period. These reports typically cover the company’s financial condition, operating results, business activities and other material management information, and are made publicly available through DART.

Periodic reporting is only one part of the Korean disclosure framework. Companies subject to the business report filing regime must also make ad hoc disclosure of material events that may have a significant bearing on investment decisions. These include, for example, mergers, demergers, comprehensive share exchanges or transfers, transfers of material assets or businesses and the issuances of debentures.

Following the 2025 amendments, a company that newly becomes subject to the business report filing regime, including upon listing, must also file the quarterly or semi-annual report for the immediately preceding period.

For companies subject to the business report filing regime, governance matters are disclosed through periodic reports. The annual business report includes information on the company’s organisational and governance structure, including directors, statutory auditors, audit committees, the composition of the board and board committees, and the attendance and voting records of outside directors. The AOI are also filed as an attachment. These materials are publicly available through DART.

Unlisted companies are treated differently. Their AOI are not generally subject to ongoing public disclosure. However, the KCC requires them to be kept at the head office and branch offices, and shareholders and company creditors may inspect or copy them during business hours. Certain basic constitutional matters, such as the company’s purpose, method of public notice and share capital structure, may also be confirmed through the commercial register.

Separately, from 2026, the requirement to publish a corporate governance report, previously applicable only to certain companies, has been expanded to all KOSPI-listed companies under the Korea Exchange rules. The report is prepared on a “comply or explain” basis and addresses key governance matters, including shareholder rights, board composition and operation, audit bodies and internal control systems. It is intended to provide a more structured and comparable account of the company’s governance framework.

In Korea, companies are incorporated through registration with the competent registry office having jurisdiction over the location of the company’s head office. Registry offices form part of the court system and are administered under the judiciary, rather than as ordinary administrative agencies. A company comes into legal existence upon completion of its incorporation registration, and subsequent changes to key corporate particulars must also be registered.

Registrable matters include the company’s name, business purpose, head office, method of public notice, capital amount, total number and classes of shares, restrictions on share transfers, and information on corporate officers and organs, including representative directors, directors and auditors.

The principal registered particulars are publicly available. Any person may inspect the commercial register or obtain an official certificate of registered matters upon payment of the prescribed fee. Supporting documents filed with the registry are more restricted and are generally accessible only to persons with a legally recognised interest.

Failure to make a required registration may result in administrative fines under the KCC.

As a threshold matter, Korean AML reporting obligations are not imposed on companies generally. They apply mainly to designated reporting entities under the Act on Reporting and Using Specified Financial Transaction Information.

The two core reporting duties are suspicious transaction reporting and currency transaction reporting. A suspicious transaction report must be filed with the Korea Financial Intelligence Unit where there are reasonable grounds to suspect money laundering, terrorist financing or transactions involving criminal proceeds.

Korean law does not treat AML board oversight as a standalone governance topic for all companies. Instead, AML is addressed through internal controls, compliance procedures and supervision of employee compliance. For financial institutions, the board’s role is more explicit: it must approve and oversee internal control standards, risk management standards and related policies, and supervise the chief executive’s overall internal control responsibilities.

Directors’ personal exposure is usually analysed under general company law rather than under a standalone AML liability rule. If a director fails to establish or supervise an adequate control framework, especially where warning signs existed, this may constitute a breach of supervisory duties or the duty of care. The director may face liability to the company.

Under the Act on External Audit of Stock Companies, Etc. (the “External Audit Act”), an external audit is mandatory for listed companies, companies intending to list during the current or following business year, and other companies meeting statutory size thresholds. These thresholds are further specified in the Enforcement Decree by reference to factors such as assets, liabilities, sales, number of employees and, for certain limited companies, number of members.

The relationship between the company and the auditor is structured with an emphasis on independence and audit quality. Companies must appoint an auditor within the statutory period, and listed companies, large unlisted stock companies and financial companies are generally required to retain the same auditor for three consecutive business years. In specified cases, the Securities and Futures Commission may designate an auditor or require a replacement.

The company’s audit function also plays a substantive role. The statutory auditor, audit committee or auditor appointment committee participates in the selection process. The statutory auditor or audit committee is required to determine in writing the auditor’s remuneration, audit hours and staffing, and to confirm whether those agreed terms were observed. Taken together, these rules are designed to reduce management influence and preserve auditor independence.

Korean law does not treat geopolitical risk as a separate category of board-level risk under a specific statutory framework. There is no single rule that expressly requires boards to identify or manage geopolitical risk as such.

In practice, however, geopolitical risk is addressed through the board’s broader oversight responsibilities, including supervision of major business risks, compliance and internal control systems. Where geopolitical developments, such as international sanctions, trade restrictions or supply chain disruption, are material to the company’s business, they are typically considered at board or senior management level as part of enterprise risk management.

This practice is more clearly articulated in the financial sector. Under the Act on Corporate Governance of Financial Companies, boards are required to approve and oversee internal control and risk management standards and related policies, and certain institutions must operate dedicated risk management committees. In that context, sanctions compliance and cross-border regulatory risk are generally treated as core elements of the risk management framework.

Korea has not yet adopted a single, generally applicable regime requiring all companies to publish an integrated ESG report. The current disclosure framework is therefore multilayered. The most formalised element is the corporate governance report regime operated through the Korea Exchange for KOSPI-listed companies, while broader sustainability reporting remains largely separate.

In practice, the most established ESG-related reporting obligation is governance-focused. The KRX framework includes 15 core governance indicators covering matters such as shareholder rights, board composition and operation, audit bodies and internal control arrangements. These indicators do not amount to a comprehensive ESG reporting code, but they make governance disclosure more structured and comparable across listed issuers.

By contrast, broader environmental and social reporting has not yet become a fully mandatory, economy-wide disclosure regime. Nonetheless, many Korean companies continue to publish sustainability reports voluntarily, often by reference to internationally used frameworks such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD) and the UN Sustainable Development Goals (SDGs).

The most noticeable shift in Korea is that climate-related disclosure is moving ahead more quickly than the rest of the ESG agenda. On 26 February 2026, the Korea Sustainability Standards Board (KSSB) published the first set of Korean sustainability disclosure standards: KSSB Standard No 1 on general requirements and KSSB Standard No 2 on climate-related disclosures. This suggests that the next stage of Korean ESG reporting is likely to develop first around climate and financially material sustainability information, rather than through a broad, integrated ESG reporting regime.

That said, the regime is not yet fully mandatory. The standards are currently available for voluntary application, but they are framed as domestic sustainability disclosure standards aligned with the International Sustainability Standards Board (ISSB) framework. In practical terms, many companies are now in a transition phase. They may continue to publish conventional sustainability reports but are increasingly expected to prepare for more disciplined, investor-facing disclosure on governance, strategy, risk management, metrics and targets, particularly in relation to climate.

Accordingly, the most clearly evolving component of ESG in Korea is the environmental pillar, and more specifically climate. Governance disclosure is already relatively institutionalised through the KRX reporting regime, while broader sustainability reporting is beginning to move towards an ISSB-style, financially material disclosure model.

Korean law does not currently impose a general AI-specific board oversight regime. There is no statutory requirement for companies generally to appoint AI-specialist directors or establish a dedicated AI committee. AI-related oversight is instead addressed through a combination of the Framework Act on the Development of Artificial Intelligence and the Creation of a Foundation for Trust (the “AI Basic Act”), privacy rules on automated decision-making, and directors’ general duties to supervise risk and internal controls.

The position is more developed for financial companies. Under the Act on Corporate Governance of Financial Companies, boards must approve and oversee internal control standards, risk management standards and related policies, and supervise the representative director and other executives’ overall internal control responsibilities. Certain financial companies must also operate risk management, internal control and audit committees. AI algorithm risk, data bias and model risk may therefore fall within these existing control structures.

In addition, the accountability map regime introduced in 2024 requires responsibilities for internal control and risk management to be allocated among the executives and approved by the board. Where AI use creates material operational, regulatory or consumer protection risk, AI-related risk responsibilities may need to be reflected in that allocation.

Korea’s AI governance framework addresses AI use-related risks through a combination of public regulation and corporate internal controls. The main risks include explainability, bias and discrimination, privacy, safety, consumer protection, model risk and reputational harm. These risks are managed through the AI Basic Act, privacy rules on automated decision-making, the Act on Corporate Governance of Financial Companies and directors’ general oversight duties under the KCC.

The AI Basic Act provides the central framework for high-impact AI and generative AI, focusing on transparency, safety, risk management, user protection and human oversight. For AI systems that may materially affect rights or safety, these requirements are directly relevant to corporate risk management. In the financial sector, AI use is also addressed through internal control and risk management frameworks, including oversight of algorithmic risk, data bias, model risk and consumer protection.

A key recent development is that Korea’s AI governance regime has begun to move from policy-level discussion to statutory implementation, with the AI Basic Act forming the basis for further subordinate rules, guidance and public-sector governance structures.

Within companies, management typically leads AI strategy and day-to-day implementation. The board oversees AI use where it creates material business, regulatory, operational or reputational risk. In financial companies, risk management committees, internal control committees, where applicable, and audit committees may have more specific roles. Korean law does not generally require a dedicated AI committee, although companies may establish AI ethics, technology or similar committees voluntarily.

In Korea, liability exposure for boards and officers arising from AI use is not governed by a single AI-specific regime; instead, it is addressed through existing legal frameworks. The main areas of exposure include:

• breach of directors’ duty of supervision under the KCC, where adequate internal control systems for AI-related risks are not established or properly overseen;
• disclosure failures under the Capital Markets Act, particularly where AI-related risks, incidents or capabilities are misstated or not disclosed in a timely manner;
• data breaches or failures to implement appropriate safeguards under the Personal Information Protection Act;
• unfair practices, including algorithm-driven market misconduct or consumer protection issues; and
• liability for safety incidents under general tort principles.

From a governance perspective, director exposure is most likely to arise where the board fails to ensure that appropriate risk management and compliance frameworks are in place to address AI-related risks, such as data bias, model risk, privacy breaches and reputational harm.

The form of enforcement varies depending on the underlying breach. The FSC and the Financial Supervisory Service oversee disclosure and market conduct issues, while the Personal Information Protection Commission is responsible for data protection matters. The Korea Fair Trade Commission may address unfair practices, and the Ministry of Science and ICT oversees AI-specific obligations. Criminal matters may be pursued by prosecutors. Civil liability may be enforced by the company, shareholders, including through derivative actions, or affected third parties.

At present, Korea does not have a generally applicable rule requiring companies to include a separate AI section in annual reports, sustainability reports or prospectuses. There is also no uniform line-item disclosure requirement obliging issuers to describe AI strategy, governance, incidents or controls solely because AI is used in the business.

In practice, Korean disclosure remains materiality driven. If AI use is material to the company’s business model, regulatory profile, privacy or cybersecurity exposure, operational resilience or incident history, it should be addressed within the existing disclosure framework for business reports or offering documents. The same applies where omission of AI-related risks could render the disclosure misleading.

There are, however, AI-specific transparency obligations outside the capital markets disclosure regime. Under the AI Basic Act, certain AI-generated outputs must be identified as such, and high-impact and generative AI are subject to transparency and safety-related obligations. Under the Personal Information Protection Act, controllers using automated decision-making must disclose relevant standards and procedures and respond to data subject requests as required by law. These obligations are not equivalent to prospectus-style disclosure duties, but they form part of the broader Korean disclosure environment for AI use.