The Korean Commercial Code (KCC) recognises five types of companies:

• joint stock companies (jusik hoesa in Korean);
• limited companies (yuhan hoesa);
• limited liability companies (yuhan chaegim hoesa);
• general partnerships (hapmyeong hoesa); and
• limited partnerships (hapja hoesa).

The most common entity type is the joint stock company, accounting for about 95% of the companies in Korea as of July 2025.

Unless otherwise specified, the scope of review in this guide is limited to joint stock companies.

When foreign investors establish subsidiaries or joint ventures in Korea, the two most prevalent entity forms have traditionally been joint stock companies and limited companies. Recently, many foreign investors have also been choosing limited liability companies, which are modelled after (and thus comparable to) limited liability companies in the United States.

All three types of company limit the equity holders’ liability to the capital amounts they have invested in the relevant company.

When selecting the corporate form, foreign investors typically consider the following.

Corporate Formalities

More corporate formalities are required for a joint stock company than for a limited company or a limited liability company. For example, only a joint stock company is required to have a board of directors and a statutory auditor (unless its paid-in capital is less than KRW1 billion); this structure is optional for limited companies and limited liability companies. In addition, the shareholders of a joint stock company are generally not permitted to adopt resolutions by written consent, but instead must adopt resolutions at a general meeting of the shareholders. On the other hand, the members of a limited company or limited liability company may adopt resolutions by unanimous written consent.

External Audit of Financial Statements

A joint stock company and a limited company must have its financial statements audited by an external auditor and file such audited financial statements with the Financial Services Commission (FSC) of Korea if it has total assets or annual sales of at least KRW50 billion, or if it satisfies at least two of the following criteria:

• total assets of at least KRW12 billion;
• total liabilities of at least KRW7 billion;
• annual sales of at least KRW10 billion; or
• 100 employees (all applicable figures as of the end of the previous fiscal year).

Limited liability companies are not subject to these external audit and public disclosure requirements.

Business Activities, Public Offerings and Bonds

Other than certain limited exceptions, there are no restrictions on the types of businesses that may be conducted by all three types of entities. However, only a joint stock company is permitted to make a public offering or issue bonds or debentures. Furthermore, limited liability companies may not declare or pay interim dividends, while a joint stock company or a limited company is able to take such actions in accordance with its articles of incorporation (AOI).

Public Perceptions

Generally, joint stock companies are viewed as having more “prestige” in Korea; most of the major domestic companies are joint stock companies. Foreign parents often set up their Korean subsidiaries as limited companies; in fact, a number of well-known multinational companies formed their Korean subsidiaries as limited companies. Limited liability companies, introduced in 2012, are growing in number but have not been as widely adopted by domestic companies or foreign investors.

Tax Treatment

All three entity types are treated the same for Korean tax purposes. However, their tax treatment may differ in other jurisdictions: for instance, for US tax purposes, a limited company or a limited liability company may be treated as a partnership or a branch under the so-called check-the-box rule, while a joint stock company is ineligible for such treatment.

A joint stock company can issue common shares and class shares. Common shares carry voting and economic rights pursuant to the terms of the KCC and/or the AOI of the company. Class shares have special rights as set forth in the company’s AOI, which are different from the rights attached to common shares. Class shares include:

• shares entitled to preferred dividends;
• shares entitled to the distribution of residual assets;
• shares with or without limited voting rights;
• redeemable shares; and
• convertible shares.

In order for a joint stock company to issue class shares, the terms and the authorised number of each class of shares must be prescribed in the company’s AOI.

Shareholders of a Korean joint stock company have certain statutory rights pursuant to the provisions of the KCC, including:

• the right to receive dividends;
• in the event of a new share issuance, the right to subscribe for new shares in proportion to the number of shares held (ie, pre-emptive rights);
• the right to claim and receive the distribution of residual assets;
• the appraisal right for dissenting shareholders in the event of a business transfer, merger or similar corporate event;
• voting rights (except for any class of shares with no or limited voting rights);
• the right to propose that certain items be included on the agenda for a general meeting of the shareholders;
• the right to call an extraordinary general meeting of the shareholders; and
• the right to inspect the company’s books and records and receive copies thereof.

Some of these rights require specific shareholding thresholds. The company’s AOI may set forth additional shareholder rights based on the type of shares and the shareholding percentage.

Generally, there is no minimum capital requirement for joint stock companies, limited companies or limited liability companies, unless the business licence of such company provides for certain minimum capital requirements.

The KCC requires the par value per share of a joint stock company to be at least KRW100. Therefore, a joint stock company can be formed with the minimum capital of KRW100.

A joint stock company, a limited company and a limited liability company must each have at least one shareholder or member.

Generally, there are no residency or other eligibility requirements for such shareholders or members; however, there may be applicable laws and regulations restricting foreign persons or entities from acquiring or holding shares for companies in certain industries, such as telecommunications, broadcasting and the airline/aviation industry.

While the KCC provides for certain shareholder rights and company obligations, such provisions are mostly applicable to listed companies or other companies with a large shareholder base. Therefore, Korean private companies often have shareholders’ agreements or joint venture agreements setting forth the terms and conditions of their corporate governance and the relationship among the shareholders.

Shareholders’ agreements or joint venture agreements typically include provisions regarding:

• the shareholding structure, subsequent financing obligations and pre-emptive rights of shareholders;
• the board of directors (including composition, board nomination rights, procedural requirements, quorum for meetings and resolutions, and a list of matters requiring a super-majority resolution of the board of directors);
• the management team of the company (including composition and officer nomination rights);
• minority shareholders’ consent rights regarding key management and operational matters;
• the meeting of shareholders (including procedural requirements, quorum for meetings and resolutions, a list of matters requiring a special resolution of the meeting of shareholders, and a list of matters requiring the approval or consent of certain shareholders);
• transfer restrictions (including lock-up periods, permitted and/or prohibited transfers, rights of first offer or refusal, drag-along or tag-along rights and call or put options);
• shareholder information and inspection rights and other covenants, such as non-compete undertakings;
• the occurrence and resolution of deadlock events; and
• termination and the effect of termination (such as dissolution or the exercise of penalty call or put options).

Once duly executed and delivered by the parties, shareholders’ agreements or joint venture agreements constitute a valid and binding obligation that is enforceable against each of the parties to the applicable agreement. However, in the case of any breach of the terms or conditions of such agreement, the non-breaching party would only have a breach of contract claim against the breaching party, unless the provisions at issue also constitute a legal requirement under the KCC or other applicable laws, or are otherwise reflected in the company’s AOI.

Copies of private companies’ shareholders’ agreements or joint venture agreements are not publicly available.       

The KCC requires joint stock companies to convene an annual general meeting (AGM) of the shareholders within three months after the end of each fiscal year. At an AGM, shareholders vote on the approval of the financial statements for the previous fiscal year, the declaration of dividends (if any), the appointment of a director or a statutory auditor, or any amendment to the AOI. As the fiscal year of most joint stock companies ends on 31 December, joint stock companies typically hold an AGM within the first quarter of each calendar year.

Meanwhile, a joint stock company may convene an extraordinary general meeting (EGM) of the shareholders from time to time as necessary. There is no statutory obligation to convene an EGM meeting at any certain interval, and it is possible that an EGM may not be convened if there is no particular agenda to be resolved.

A notice of convocation must be sent to each shareholder at least two weeks prior to the date of an AGM or an EGM (or ten days in the case of a joint stock company with paid-in capital less than KRW1 billion). A shorter notice period can be applied with the consent of all shareholders.

The notice of convocation of a general meeting of the shareholders should state the date, time, place and agenda of the meeting, and if the agenda includes any significant corporate matter such as an amendment to the AOI, a capital reduction or a merger, the key terms of the agenda should also be stated in the notice of convocation.

Such notice does not have to be sent to those shareholders who have waived the notice requirement. Therefore, it is generally interpreted that, with the consent of all shareholders, a general meeting of the shareholders may be convened without the notice procedure.

Additionally, in lieu of delivering a notice of convocation to shareholders holding no more than 1% of the total number of issued and outstanding voting shares, a listed company may give a public notice of convocation of the general meeting of the shareholders in two or more daily newspapers or on the Data Analysis, Retrieval and Transfer System (commonly known as DART), as prescribed in the AOI.

In principle, the board of directors has the authority to call a general meeting of the shareholders. An auditor or the audit committee may also request the convocation of an EGM of the shareholders by submitting a written statement of the meeting agenda and the reason for convocation to the board of directors.

Shareholders with at least 3% of the total issued and outstanding shares may request the board to convene an EGM of the shareholders. For listed companies, shareholders with at least 1.5% of the total issued and outstanding shares for six consecutive months may also exercise such convocation rights. In this case, such shareholders should submit a written statement of the meeting agenda and the reason for convocation to the board of directors. If the board of directors fails to convene a general meeting after receipt of the foregoing request, the same shareholders may directly convene a meeting with the court’s permission.

All shareholders are entitled to receive a notice of the convocation of a general meeting and to ask questions about or participate in a discussion on whether to approve the agenda in the course of exercising their voting rights at the meeting.

Shareholders may also request access to or receive copies of the shareholders’ register, the AOI, the minutes of general meetings and other documents kept at the head office of the company.

Under the KCC, a shareholder may attend a general meeting of shareholders in person or through a proxy who has been duly authorised to exercise the shareholder’s voting rights. In any case, a general meeting should be held at a physical location, as the KCC does not recognise a general meeting in which all attendees are present online.

Notwithstanding the general rule above, pursuant to the amendment to the KCC promulgated on 22 July 2025 (the “2025 KCC Amendment”), beginning from 1 January 2027, listed companies will be permitted to hold virtual general meetings of shareholders concurrently with physical meetings by a resolution of the board of directors, unless otherwise required under the company’s AOI. In such cases, shareholders will be able to attend a general meeting either by appearing in person at the physical venue or by participating via electronic means of communication.

Under the KCC, only the concept of a quorum required for a resolution exists; a quorum for a general meeting of the shareholders is not recognised.

An ordinary resolution at a general meeting of the shareholders requires the affirmative vote of “a majority of the voting shares present at the meeting”, representing “at least one-quarter of the total number of issued and outstanding shares”.

In practice, the requirement for the affirmative vote of “at least one-quarter of the total number of issued and outstanding shares” tends to serve as a de facto quorum. However, such requirement may be waived solely in the case of the resolution on the appointment of auditors or audit committee members, if electronic voting is permitted. In such case, only the affirmative vote of a majority of the voting shares present at the meeting is required.

Resolutions adopted at a general meeting of the shareholders include ordinary resolutions, special resolutions and extraordinary special resolutions.

• Ordinary resolutions are passed by the affirmative vote of “a majority of the voting shares present at the meeting” representing “at least one-quarter of the total number of issued and outstanding shares”.
• Special resolutions require the affirmative vote of “at least two-thirds of the voting shares present at the meeting” representing “at least one-third of the total number of issued and outstanding shares”.
• Extraordinary special resolutions need the consent of all shareholders.

Statutory requirements under the KCC are the baseline threshold. Companies may adopt, through their AOI, more rigorous voting standards than the statutory requirements under the KCC, but they cannot adopt voting standards that are lower than the baseline threshold.

Agenda items requiring approval by an ordinary resolution at the general meeting of the shareholders include:

• the appointment of directors and auditors;
• the determination of remuneration for directors and auditors;
• the approval of yearly financial statements as of the end of each fiscal year;
• the distribution of dividends;
• the reduction of capital to compensate for deficit; and
• the reduction of legal reserves.

Agenda items requiring approval by a special resolution at the general meeting of the shareholders include:

• any amendment(s) to the AOI;
• the transfer of all or a material part of the business;
• the removal of directors or auditors;
• the reduction of capital (except for the purpose of compensating for deficit);
• any merger, split-off, split merger, comprehensive share exchange or comprehensive share transfer; and
• the grant of stock options.

Extraordinary special resolutions requiring the consent of all shareholders include resolutions to exempt a director from liability to the company and resolutions on organisational change to convert a joint stock company to a limited company.

A shareholder may cast their vote in person at a general meeting of the shareholders or designate a proxy to exercise their vote at such meeting.

Shareholders may also cast their vote themselves (without using a proxy) without attending the shareholder meeting in person, by way of electronic voting if the company has adopted an electronic voting system by board resolution, or in writing if the AOI allows the casting of votes in writing, in each case, without duplication with any other method of voting.

There is no restriction on the specific voting method at a shareholder meeting, which may be conducted by a show of hands, standing up, polling or other means so long as the method used is a reasonable one by which the intent of shareholders can be confirmed.

Refer to 2.5 Format of Meeting for additional detail on the related 2025 KCC Amendment.

At a general meeting of the shareholders, shareholders may only resolve on the matters set forth as the meeting agenda in the notice of convocation. Matters not listed in the notice are not allowed to be resolved at such meeting without the consent of all shareholders, even with the consent of all shareholders present. For example, a shareholder may not request the appointment of directors to be presented as an agenda item at a general meeting of the shareholders convened for the approval of financial statements; even if such agenda item is presented and resolved, such resolution at the general meeting of the shareholders is unlawful and may be revoked.

However, specific details for resolving on a matter already listed as part of the meeting agenda in the notice of convocation may be changed at the meeting (although it is not permitted to change the details of the notice to such an extent that they are no longer recognised as identical). For instance, at a meeting to appoint Candidate A as a director, it is allowed to change the ballot at the meeting to the appointment of Candidate B instead of Candidate A. The agenda for such meeting would be deemed an appointment of a director, not the appointment of a specific person as a director. An exception exists for listed companies, however, as the KCC separately requires that directors of a listed company must be appointed only from among the candidates notified in advance.

Even if a resolution is adopted by an affirmative vote that meets the quorum necessary for a resolution at a general meeting of the shareholders, a shareholder may file an action to revoke within two months from the date of resolution if:

• the procedures for convening such meeting or the method of adopting such resolution are in violation of any laws or the AOI, or are substantially unfair; or
• the details of such resolution are in violation of the AOI.

However, even in the case of such defects, the court may dismiss the claim if it finds the revocation is improper in light of the details of the resolution, the current status of the company and other circumstances. In addition, if the details of the resolution are in violation of laws and regulations, a shareholder may file suit seeking affirmation of the invalidity of the resolution of the general meeting of shareholders, without limitation of the filing period.

Shareholders may monitor the company’s business activities and decision-making based on the company’s disclosures, and may request the right to inspect and copy certain important documents from the company. Under certain conditions, a shareholder may also request the court to appoint an inspector to inspect the company’s business and property.

• Disclosure: Under Korean law, a company is required to comply with disclosure obligations applicable to listed companies (eg, ad hoc disclosure of key management matters, business reports and semi-annual/quarterly reports, reports on key matters and the disclosure of shares) and disclosure obligations applicable to companies belonging to a large business group under the Fair Trade Act (eg, disclosure of large-scale internal transactions, disclosure of the important matters of unlisted companies, and disclosure of the status of the business group). Institutional investors and shareholders’ organisations may monitor the company’s activities through such disclosure.
• Right to request inspection and copying of documents: Shareholders have the right to request the inspection and copying of the following documents from the company, and the company may not refuse unless it can prove that a shareholder’s request is unreasonable. If the company unfairly refuses inspection and copying of the following documents, the shareholder may file an application with the court for a preliminary injunction to access and copy the documents:
1. the shareholders’ registry (shareholders holding at least one share);
2. the minutes of the board meeting (shareholders holding at least one share);
3. the minutes of the general meeting of shareholders (shareholders holding at least one share);
4. the company’s accounting books (shareholders holding 3% or more of the total issued and outstanding shares or, in the case of a listed company, shareholders who have held 0.1% or more of the total issued and outstanding shares, or 0.05% or more for a large listed company, for the previous six months); and
5. financial statements, business reports and audit reports (shareholders holding at least one share).
• Right to request an inspector for the purpose of investigating business/property status: A shareholder holding 3% or more of the total issued and outstanding shares has the right to request the court to appoint an inspector in order to investigate the business and property status of the company, if such shareholder reasonably believes that there is any misconduct or material violation of laws or the AOI.

Influence

The company’s shareholders may seek to influence the company through non-legal and legal measures against the company or its directors.

• Non-legal measures include requests for conversations with the management or the board of directors, distributions of shareholders’ letters, media campaigns, etc.
• Legal measures – shareholders who hold a certain amount of shares may take measures including court actions/demand rights against the company and its directors. In addition, a shareholder holding a certain amount of shares may file a derivative suit against the company’s directors on behalf of the company or a derivative suit against the directors of a company’s subsidiary on behalf of such subsidiary. See 10. Shareholders’ Remedies for further details.

If shares are purchased not directly but under the name of a nominee, and the nominee’s name is entered in the shareholders’ registry, only the nominee may exercise shareholder rights vis-à-vis the company. Except for special circumstances, the company may not deny the exercise of shareholder rights by a shareholder whose name appears in the shareholders’ registry, nor can it acknowledge the exercise of such rights by a person whose name does not appear therein. Therefore, even when a company convenes a general meeting of shareholders, the notice of convocation is sent to the nominee, and the nominee exercises the voting rights.

A general meeting of shareholders must be held in a physical location, and resolutions are required to be adopted by shareholders (or agents) in person. However, pursuant to the 2025 KCC Amendment, beginning from 1 January 2027, listed companies will be allowed to hold virtual general meetings of shareholders concurrently with physical meetings, enabling shareholders to attend general meetings and participate in resolutions via electronic means of communication. Despite the 2025 KCC Amendment, adopting a written resolution without actually holding a general meeting of shareholders is not allowed.

However, as an exception, a company with total paid-in capital of less than KRW1 billion may adopt a written resolution in lieu of the resolution of the general meeting of shareholders, and such company will be deemed to have adopted a written resolution if all shareholders have consented to the agenda of the resolution in writing.

Unless otherwise provided in the KCC, a company may issue authorised but unissued shares at such times and upon such terms as the board of directors of the company may determine. In such issuance, all shareholders who are listed on the shareholders’ register as of the record date (“allotment to shareholders”) have pre-emptive rights and are entitled to subscribe for any newly issued shares in proportion to their existing shareholdings, and the company must offer them the new shares on uniform terms.

The company must notify the shareholders who are entitled to subscribe for newly issued shares of the deadline for subscription at least two weeks in advance. If a shareholder fails to subscribe on or before such deadline, that shareholder’s pre-emptive rights will lapse.

If certain shareholders forfeit their right to subscribe to newly issued shares, non-listed companies may allot the forfeited shares to a third party through a board resolution. Pursuant to the Financial Investment Services and Capital Markets Act (FSCMA), listed companies must, in principle, withdraw the forfeited shares but may allot the forfeited shares to a third party under limited conditions (including conditions regarding share price).

Notwithstanding the foregoing rule, a company may issue new shares to persons other than existing shareholders in accordance with the provisions set forth in the company’s AOI (“allotment to a third party”), so long as such allotment is limited to cases where it is necessary to achieve the company’s managerial objectives, such as the introduction of new technology or the improvement of the company’s financial structure.

Under the KCC, a company must notify its shareholders or make public notice of the conditions and other details of new shares issued by way of allotment to a third party no less than two weeks prior to the relevant subscription payment date. Listed companies may (pursuant to the FSCMA) substitute such notification or public notice by disclosing the material fact in a report publicly filed with the listing authorities.

In principle, shares are freely transferable. The KCC provides for a free transfer of shares so that shareholders may recoup their share capital.

Under the KCC, shares can be transferred by way of transfer of the relevant share certificates. Generally, no transfer of shares is valid or in effect until such share certificates are transferred. In some limited cases, shareholders may validly transfer shares without share certificates if the company has failed to issue share certificates within six months from the date of incorporation or the payment due date for the subscription price for such shares.

The AOI may provide that board approval is required with respect to a share transfer. In the absence of such requisite board approval, any transfer of shares will be deemed null and void against the company. If the board of directors does not approve a share transfer, the transferring shareholder may request the company to either purchase the shares or designate a transferee acceptable to the company, and the company must accede to such request.

Shareholders are entitled to grant security interests over their shares. Security interests on shares may be granted by way of creating a pledge on such shares, pursuant to the provisions of the KCC, or by creating a security transfer (yangdo-dambo in Korean, which means a transfer of the ownership of shares to a creditor as collateral).

A statutory pledge on shares may be created as a summary pledge or a registered pledge. A summary pledge is effected by mutual agreement of the parties and the transfer of a share certificate. A registered pledge requires the company to reflect the name and address of the pledgee on the register of shareholders and the pledgee’s name on the share certificate, at the request of the pledgee.

Any person who, alone or acting together with specially related persons, holds 5% or more of the total issued and outstanding shares of a listed company must report their shareholding information to the FSC and the relevant securities exchange, until their aggregate holding falls below 5%. Initially, the report must be made within five business days from the date when such person first becomes a 5% holder. Thereafter, each time the number of shares held by them changes by 1% or more of the total issued and outstanding shares of the company or the purpose of the shareholding changes, the person must report the change to the FSC and the relevant securities exchange within five business days from the date of such change.

In addition, directors and officers (whether registered or not) and major shareholders of a listed company (ie, a holder of, directly or indirectly, 10% or more of the total voting interests or a person who exercises de facto influence over material business decisions of the company) must report to the Securities and Futures Commission (SFC) and the relevant securities exchange the number of shares beneficially owned by them within five business days after they become a director, officer or major shareholder. They must also report any change in the number of shares held by them to the SFC and the relevant exchange within five business days from the date of such change.

Under the amended FSCMA, effective as of 24 July 2024, an officer or a major shareholder (ie, an insider) of a listed company who intends to engage in a large-scale transaction (ie, trading of at least 1% of the total number of issued and outstanding shares, or in an amount of at least KRW5 billion on a combined basis for the past six months) of certain securities (eg, common shares, non-voting preferred shares, convertible bonds, bonds with warrants and exchangeable bonds) issued by the listed company has a pre-transaction disclosure obligation. The insider must report their transaction plan to the SFC and the relevant securities exchange, specifying the purpose, amount and period of the transaction at least 30 days prior to the expected trading date. However, financial investors (including foreign investors), transactions that are not likely to involve the use of material, non-public information, and transactions arising from external factors (eg, inheritance, stock dividends, M&A transactions involving a change in the largest shareholder, and mergers/spin-offs) are not subject to this pre-transaction disclosure requirement.

A company may cancel its shares by way of capital reduction or the acquisition of its own shares within the scope of distributable profits and subsequent cancellation.

• Capital reduction: The KCC requires a special resolution of shareholders at a general shareholders’ meeting approving such acquisition to be obtained. The special resolution must be adopted by the affirmative votes of no less than two-thirds of the shareholders present at the meeting, which should represent no less than one-third of the total number of the issued and outstanding shares of the company. The KCC also requires a company intending to reduce its stated capital to undertake procedures to protect its creditors. Notwithstanding the foregoing, in case of capital reduction to cover deficits (ie, capital reduction without consideration), the KCC requires that general resolution of shareholders at a meeting approving such acquisition to be obtained, and procedures to protect creditors are not required.
• Cancellation of treasury shares: A company may, by resolution of the board of directors, cancel its own shares acquired within the scope of distributable profits (see 4.2 Buybacks for detail). In this case, procedures to protect creditors are not required, and there is no change in the company’s capital despite the cancellation of shares.

Under the Korean law, a company may acquire its own shares through the following two methods.

• Acquisition of own shares within the scope of distributable profits: A company may acquire its own shares within the scope of distributable profits calculated under the KCC by a resolution of the general meeting of shareholders or the board of directors (if the company is a listed company or if the AOI stipulates that dividends may be distributed by a resolution of the board of directors). In such case, the company’s own shares shall be acquired (i) at the market price on the Korea Exchange (KRX), (ii) under equal terms and conditions in proportion to the number of shares held by the shareholders by giving notice or public notice to all shareholders, or (iii) through a tender offer.
• Acquisition of own shares for a specific purpose: A company may acquire its own shares for a specific purpose as set forth in the KCC, and such acquisition of treasury stock may be made regardless of whether or not distributable profits exist. Specific purposes include, among others, cases where a shareholder exercises appraisal rights, where a company acquires treasury shares as a result of a merger with (or transfer of the entire business of) another company, or where it is necessary to dispose of fractional shares.

The company may pay dividends if it has distributable income and dividend payment is approved at the general meeting of shareholders, or by the board of directors if the board of directors approves the financial statements of the company.

Distributable income means the amount available from the net assets in the balance sheet of the company as at the end of the immediately preceding financial year, after deducting the paid-in capital, the statutory capital reserve, surplus earnings to be cumulated as the statutory capital reserve as at the end of the current financial year, and unrealised profit. Under the KCC, dividend payments are permitted strictly within the scope of the distributable income as shareholders have a junior claim to the claims of creditors.

Once dividend payment is approved by a resolution of the shareholders or the board of directors, dividends must be paid within one month after the date of such resolution, unless the date of payment is determined otherwise in such resolution.

The approval of a general meeting of shareholders is required in order to appoint (by an ordinary resolution) or remove (by a special resolution) a director to/from the board of directors of a company. Although the board of directors typically calls a general meeting of shareholders to appoint or remove a director, holders of at least a certain percentage of shares have the right to call a general meeting and propose to elect or remove a director at such meeting.

On the other hand, if the dismissal of a director is rejected at the general meeting of shareholders despite the director’s misconduct or serious violation of laws and regulations or the company’s AOI, the holders of at least 3% or more of the total issued and outstanding shares of a listed company (or, in the case of a listed company, at least 0.5% of the total issued and outstanding shares for at least six months, or 0.25% if the company’s total capital is KRW100 million) may request the court to dismiss the director within one month from the date of the general meeting of shareholders.

Under the KCC, a company must elect its director(s) by way of cumulative voting if any shareholder holding at least 3% of the total number of issued and outstanding shares of the company (or in the case of a listed company, any shareholder holding at least 1% of the total number of issued and outstanding shares) makes a request for such measure. Under cumulative voting, each shareholder is given a number of votes equal to the number of shares they hold multiplied by the number of directors to be elected. Shareholders can allocate their votes in any manner they choose, concentrating them on a single candidate or distributing them among several candidates.

However, the KCC also allows companies to exclude cumulative voting by including an opt-out provision in their AOI, and in practice, most listed companies in Korea have made use of this option to preclude cumulative voting. If a listed company seeks to amend its AOI to either adopt or opt out of cumulative voting, such an amendment requires approval by a special resolution of the general meeting of shareholders. In this context, any shareholder who holds more than 3% of the issued and outstanding shares is restricted from exercising voting rights for the portion of their shares that exceeds the 3% threshold.

Currently, several bills to further amend the KCC have been submitted to the National Assembly, seeking to make cumulative voting mandatory for the election of two or more directors in large listed companies.

Any shareholder has the right to bring an action in court for revocation or nullification of a board resolution, so long as such person holds at least one share. The court will then decide whether to revoke or nullify the resolution, based on the applicable law.

Holders of at least 1% of the total issued and outstanding shares have the right to demand, on behalf of the company, that a director refrain from taking certain actions or cease to take certain actions that are in violation of laws and regulations or the AOI of the company, if such actions would result in irreparable harm to the company. In the case of a listed company, shareholders meeting the following thresholds also have the same right:

• 0.05% of the total shares continuously held for at least six consecutive months; or
• 0.025% of the total shares continuously held for at least six consecutive months if the paid-in capital of the immediately preceding financial year is at least KRW100 billion.

Shareholders do not have the power to require a director to actively take certain actions. However, if a director commits an unlawful act resulting in damage to the company, shareholders may either sue (or demand that the company sue) the director or adopt a resolution to remove the director (following which resolution the removal takes effect immediately).

In principle, the provisions of the KCC applicable to directors apply mutatis mutandis to auditors. Therefore, shareholders have the right to propose to the board the appointment or removal of an auditor and to adopt a special resolution to remove an auditor, subject to the same shareholding thresholds as applied to the shareholder rights with respect to directors.

A shareholder who holds more than 3% of the total number of issued and outstanding voting shares at the time of appointment of an auditor is not entitled to cast votes in excess of that 3%.

The largest shareholder of a listed company is subject to tighter restrictions on voting rights – ie, a 3% limit – which may be aggregated with shares held by a certain group of its specially related parties.

Listed companies with total assets of KRW2 trillion or more as of the end of the most recent fiscal year must establish an audit committee instead of appointing an auditor. In such cases, the following special rules apply to the appointment and removal of audit committee members:

• the election of one director who will serve as a member of the audit committee must be conducted separately from the election of other directors to ensure the independence of members of the audit committee of listed companies; and
• the KCC restricts all shareholders from casting votes in respect of their shares in excess of 3% of total issued shares as an agenda item when appointing or removing audit committee members, provided that the largest shareholder is also restricted from casting votes in respect of their shares in excess of 3% (aggregated with shares held by its related parties) as an agenda item when appointing or removing audit committee members who are not outside directors. Furthermore, pursuant to the 2025 KCC Amendment, effective as of 23 July 2026, the rule limiting the combined voting rights of the largest shareholder and their related parties to 3% will be extended to the election of outside directors who will serve as audit committee members.

In principle, a company’s director is not obliged to report any corporate governance arrangements or other corporate information to any individual shareholder. For listed companies, particularly, reporting of undisclosed internal information to certain shareholders may raise issues such as the principle of shareholder equality, violation of the fair disclosure obligation or the use of undisclosed material information.

Despite the foregoing general rule, KOSPI-listed companies with total assets of KRW500 billion or more based on the consolidated financial statements as of the previous fiscal year end (and starting from 2026, all KOSPI-listed companies) must disclose their corporate governance reports by 31 May each year, and financial companies must disclose their annual governance reports on their websites, 20 days prior to the date of the ordinary general meeting of shareholders.

In principle, a controlling company does not have any duties or liabilities to the shareholders of a company it controls. However, under specific circumstances, a controlling company may be held jointly and severally liable with directors of the controlled company for damages to the shareholders of the controlled company, if such controlling company participates in illegal actions of the controlled company through actions such as using its influence to instruct directors of the controlled company to perform specific acts.

If there are concerns that the company may be insolvent (ie, unable to pay its debts without significant difficulty), holders of at least 10% of the company’s total issued and outstanding shares have the right to petition the court for rehabilitation of the company, pursuant to the Debtor Rehabilitation and Bankruptcy Act.

Appraisal Right

A shareholder holding at least one share has the right to request the company to purchase its shares if such holder dissents from any of the following resolutions:

• a transfer of all or a material portion of the business of the company;
• entering into, altering or rescinding a contract for leasing the whole business, for giving authority to manage such business, or for sharing with another person all profits and losses of the company, or other similar contracts;
• assuming all or a material portion of the business of another company, which significantly affects the company’s business;
• a comprehensive share swap or transfer;
• a merger;
• a spin-off merger;
• a vertical spin-off of a listed company; or
• a horizontal spin-off of a listed company in which the shares issued by the company newly incorporated as a result of the spin-off are not listed on the securities market.

Court Actions/Demand Right

A shareholder holding at least one share has the right to bring an action in court and/or to demand the company to take or not take certain actions, including the right to:

• petition the court for revocation or nullification of a resolution passed at a general meeting of shareholders;
• petition the court to nullify the issuance of new shares;
• demand the company to suspend the issuance of new shares;
• petition the court to nullify the incorporation of the company;
• petition the court to nullify a merger, a consolidation, a corporate split, a split merger or any reduction in paid-in capital;
• demand the company to suspend any unfair issuance of convertible bonds or bonds with warrants; and
• petition the court for retrial of the confirmed final decision, in the event that a derivative suit is brought and the plaintiff and defendant colluded to have a decision rendered for the purpose of injuring the company’s rights.

Furthermore, holders of at least 1% of the total issued and outstanding shares have the following rights:

• to demand, on behalf of the company, that a director not take certain actions or ceases to take certain actions that are in violation of the law or the AOI of the company, if such actions would result in irreparable harm to the company; and
• to bring an action in court and/or to demand that the company bring an action in court against:
1. promoters;
2. directors;
3. statutory auditors;
4. those who have colluded with the company to subscribe to shares at a considerably unfair price;
5. shareholders who have received profits from the company; or
6. liquidators.

Shareholders of a listed company may also exercise the right to demand that a director not take certain actions or ceases to take certain actions that are in violation of the law or the AOI of the company if they satisfy the following shareholding thresholds:

• 0.05% of the total issued and outstanding shares continuously held for at least six consecutive months; or
• 0.025% if the paid-in capital of the immediately preceding financial year is KRW100 billion or more.

Shareholders of a listed company may also exercise the right to bring an action in court and/or to demand that the company bring an action in court against the entities listed above if such shareholders hold 0.01% of the total issued and outstanding shares for at least six consecutive months.

Holders of at least 1% of the total issued and outstanding shares have the right to demand, on behalf of the company, that a director refrain from taking certain actions or cease to take certain actions that are in violation of the law or the AOI of the company, if such actions would result in irreparable harm to the company. Shareholders of a listed company may exercise the same right if they hold at least 0.05% of the total issued and outstanding shares for at least six consecutive months, or 0.025% if the paid-in capital of the company in the immediately preceding financial year is KRW100 billion or more. Such demand right may be exercised by way of communications to the director or bringing an action in court.

A shareholder may file a claim against a director or the company for any damages incurred by such shareholder as a result of such director’s neglect of their duties to the company if such neglect results from “wilful misconduct or gross negligence”, even where such negligence does not constitute a tort against the shareholder under the Civil Code. This liability is joint and several for all directors involved; in the event of any action taken pursuant to a resolution of the board of directors, the directors who voted for such resolution will be jointly and severally liable.

If a director has intentionally or negligently acted in violation of laws and regulations or the AOI, or has neglected their duties, all directors shall be held liable, jointly and severally, for damages incurred by the company as a result of their actions.

Holders of at least 1% of the total issued and outstanding shares have the right to bring an action in court on behalf of the company against directors (ie, a derivative suit). In the case of a listed company, continuous holders of at least 0.01% of the total issued and outstanding shares for at least six consecutive months have the same right in addition to the holders of at least 1% of the shares. Prior to exercising the right to institute such derivative suit, the relevant shareholders must first deliver to the company a written notice demanding the filing of an action against directors. If the company does not file an action against directors within 30 days of receiving such notice, the shareholders may bring an action on behalf of the company.

However, if the company may suffer irreparable harm due to the lapse of the 30-day period, the relevant shareholders may file the lawsuit immediately. So long as the shareholders have satisfied the requisite shareholding threshold at the time of filing the lawsuit, they may cease to maintain the shareholding threshold after filing the lawsuit. The company may join the derivative suit filed by the shareholders.

Furthermore, shareholders of the parent company have the right to bring a derivative suit against the directors of a direct subsidiary (ie, a company of which more than 50% of the shares are held by the parent company) or indirect subsidiary (ie, a company of which more than 50% of the shares are held by the parent company and a direct subsidiary in aggregate), so long as such shareholders hold at least 1% of the total issued and outstanding shares of the parent company (if the parent company is listed, holders of at least 0.5% of the total issued and outstanding shares for at least six consecutive months also have this right).

Legal Framework for Shareholder Activism in Korea

Shareholder activism is generally subject to the provisions of the KCC, the FSCMA and the KRX regulations. The government has been reinforcing laws and regulations to improve transparency in large business groups’ investments structures as well as their corporate management, and to strengthen shareholders’ rights in individual companies.

Rights Under the KCC

Activist shareholders generally rely on the specific rights afforded to minority shareholders under the KCC, including the right to:

• call a general meeting of shareholders;
• propose the agenda of such meeting;
• request cumulative voting with regard to the appointment of directors;
• request an injunction (suspension) against a director’s misconduct;
• institute a derivative suit; and
• inspect the company’s books and records.

The KCC has a number of “special provisions” applicable to listed companies that relax the shareholding ratio requirement for minority shareholders to exercise their rights. To prevent abuse of these provisions, the KCC generally requires a minimum holding period as well (eg, six months).

FSCMA Disclosure Requirements

On the other hand, shareholding disclosure requirements under the FSCMA may serve to check shareholder activism. Under the FSCMA, a shareholder who comes to own at least 5% of a listed company must report its shareholding status and the purpose of ownership to the FSC and the KRX within a specified period. Thereafter, such shareholder must also file a detailed account of any changes in its shareholding ratio by at least 1% of the total issued and outstanding shares, any changes in its purpose of shareholding, or any other material matters.

A shareholder who holds shares without the “intent to influence corporate management” will be subject to more relaxed regulations regarding the content and timing of the report.

Recent Changes to the KCC

The following changes under the 2025 KCC Amendments are expected to have a significant impact on shareholder activism:

• From 23 July 2026, this 3% aggregate voting cap in large listed companies will apply to all cases of election or removal of audit committee members, regardless of whether they are outside directors.
• Directors owe a duty of loyalty to all shareholders and must treat their interests fairly. If a conflict occurs between the interests of the company or controlling shareholders, on the one hand, and those of minority shareholders, on the other hand, directors can still be held liable for breaching their duty of loyalty to shareholders.
• From 1 January 2027, certain listed companies, as may separately be classified by a Presidential Decree based on factors such as asset size, will be required to hold virtual general meetings of shareholders. This will enhance minority shareholders’ accessibility to general meetings of shareholders.

The key aims of activist shareholders are to enhance the corporate value and thereby the shareholder value. To that end, activist shareholders tend to propose the following matters to the management, or actively oppose the agenda proposed by the management:

• recommending director and officer candidates and campaigning for the appointment of directors (especially an outside director who will serve as an audit committee member and thus elected separately from other directors) who would represent the interests of minority shareholders;
• challenging excessive compensation for directors or their management misconduct and requesting improvement thereof;
• matters relating to shareholder return policies, including reasonable determination of the size of dividends, the acquisition of treasury shares, and the optimisation of capital structure; and/or
• disposal of idle assets serving non-core/non-business purposes, or corporate restructuring through mergers and acquisitions.

Strategies used by activist shareholders in Korea are similar to those used in other countries and depend on their objectives or the circumstances of the relevant companies. Activist shareholders may communicate their request informally in a letter to the board of directors or ask for a conversation with the management; on the other hand, official or legal procedures include exercising shareholder rights to propose a shareholder meeting agenda and/or to call for a shareholder meeting, and soliciting the votes of other shareholders by proxies.

The right to propose a shareholder meeting agenda is the most frequently employed strategy among the above options. If the company rejects the inclusion of the agenda proposed by the activist shareholder, the shareholder often files a preliminary injunction in court for the inclusion of such proposed agenda.

Shareholder activism in Korea mostly appeared in major conglomerates until the mid-2010s but has been expanding in recent years, with a number of shareholder activism cases targeting mid-cap companies as well as small and medium enterprises. In particular, Korea’s state-run National Pension Service (NPS) announced the introduction of the Korean Stewardship Code in July 2018, signalling the potential shift to more active assertion of their shareholder rights. In addition, the amendment to the KCC in 2020 expressly stipulates that shareholders of listed companies may selectively exercise minority shareholders’ rights under the special provisions for listed companies as well as under general provisions, and strengthens minority shareholder rights through providing for a separate election system for audit committee members as well as multi-tier derivative action. Furthermore, in 2025, the new administration and the ruling party are pursuing a range of policy initiatives – including amendments to the KCC and the FSCMA – to address the so-called “Korea discount” on shares of Korean companies and to revitalise Korea’s stock market. Consequently, it is expected that shareholder activism, demanding enhancement of corporate value through increased dividends, cancellation of treasury shares, and corporate governance reforms, will gain momentum.

Key examples of shareholder activism in Korea in recent years include the following:

• Some activist shareholders actively request that the management acquire or cancel treasury shares. For example, activist funds, both domestic and foreign, including City of London Investment Management and Anda Asset Management, united to propose an agenda for dividend increases and an additional share buyback programme through shareholder proposals at Samsung C&T’s regular shareholders’ meeting in 2024, which was rejected at the general meeting of shareholders.
• Another notable objective relating to companies with a related parties transaction issue – which may damage corporate value – is to oppose such affiliate transactions. In 2022, Align Partners argued in an open shareholders’ letter that SM Entertainment entered into an unfair agreement with another company controlled by SM Entertainment’s largest shareholder (an individual), causing a “tunnelling” effect transferring SM Entertainment’s profits to the largest shareholder, and that such agreement should be terminated. SM Entertainment accepted the request and terminated the agreement at issue.
• Activist shareholders also seek to appoint their preferred candidates to serve on the board of directors. For instance: (i) KCGI proposed an agenda to place its preferred outside director on Hanjin KAL’s board of directors in 2019 and also proposed an agenda to appoint inside, outside and other non-executive directors in 2020 (together with other shareholders with whom KCGI entered into a joint equity agreement), but the proposal was rejected at the 2020 annual general meeting of shareholders; and (ii) in 2024, Truston Asset Management made a shareholder proposal to appoint two outside directors and one inside director to the board of directors of Taekwang Industrial Co., Ltd., and the proposal was accepted at the 2024 annual general meeting of shareholders.

Shareholder Activist Funds

The recent increase in the number of asset managers and assets managed by asset managers has led to a balloon effect, resulting in a rise in the market for shareholder activist funds. With the emergence of new asset managers, funds advocating shareholder activism have emerged, such as those employing strategies of investing in the shares of undervalued listed companies in order to obtain investment returns through eliminating the factors leading to undervaluation of a relevant company. These activist funds seek to improve the governance structure and increase dividend amounts through active exercise of their minority shareholders’ rights.

National Pension Service

The NPS enacted its internal shareholder activism guidelines known as the Korean Stewardship Code, which became effective on 27 December 2019, establishing detailed standards and processes for shareholder activism. With these guidelines, the NPS has taken a more active stance as a shareholder and, for certain portfolio companies selected by its fund management committee, to exercise its shareholder rights to the fullest extent permitted under applicable laws and regulations.

Minority Shareholder Associations

Recently, a new form of shareholder activism is on the rise, where minority shareholders use certification-based shareholder activism platforms such as “Act” to form “minority shareholder associations” to exercise their shareholder rights, particularly in small-sized listed companies.

While it is difficult to ascertain the exact proportion of public activist demands that have been met, a number of activist demands have led to significant changes in Korean corporate governance in recent years.

For instance, a group of activists successfully carried out a public campaign opposing a large listed company’s corporate restructuring in a shareholder ballot. In other instances, some listed companies voluntarily accepted the activist shareholders’ proposal to diversify the composition of the board of directors to include foreign and/or female outside directors, or to expand the shareholder return policies.

Furthermore, activist shareholders have a better chance of successfully appointing their director designee to the audit committee, due to the special provisions in law applicable to large listed companies. See 6.3 Rights to Appoint and Remove Auditors for further details.

Korean companies have limited options in responding to an activist shareholder. Each share must generally carry one vote under Korean law, and poison pills and multiple voting shares are not available to Korean companies, with limited exceptions, as discussed below. Companies may consider increasing the shareholding stake of a friendly third party by way of issuing new shares or transferring available treasury shares to such third party. However, the court may invalidate the new issuance of shares to a third party if such issuance does not serve any reasonable business purpose but appears solely to be for the purpose of defending against shareholder activism. Additionally, as a result of the 2025 KCC Amendments’ expansion of the fiduciary duties to shareholders, the above-mentioned transactions may be subject to heightened scrutiny by the Korean courts. Companies are expected to carefully review whether any of such transactions is in the interests of their shareholders as a whole, beyond the interests of the company and/or the board of directors’ determination of its reasonable business purpose.

Fundamentally, companies should keep track of changes in shareholding to identify early warning signs. Activist shareholders will try to set shareholders against the board and management, so it is important that the company maintains active and open communications with major institutional investors, asset managers and other significant shareholders.