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A Study on Amendments of Commercial Act related to Improvement of Corporate Governance Structure

  • Legal Theory & Practice Review
  • Abbr : LTPR
  • 2017, 5(1), pp.121-151
  • Publisher : The Korea Society for Legal Theory and Practice Inc.
  • Research Area : Social Science > Law

Lee, Kyung-Min 1

1한려대학교

Candidate

ABSTRACT

Ministry of Justice announced that it would enact the amendments of Commercial Act in the framework to improve the corporate governance structure and democratization of economy in Sep. 2013. The amendments included the separate election of auditors, obligation of cumulative voting and introduction of multiple derivative suit. However, the amendments were abandoned due to the objection from economy world and the ruling party. While 53 big enterprises invested 77.4 billion KRW to MIR and K-SPORTS Foundations which have been investigated at present, only 2 of them determined the investment through the proper resolution in the board of directors’ meeting but the resolution was a mere formality. Some indicate that such serious situation as it is now would not happen if Commercial Act was amended in 2013 and so the system could properly supervise and check the major shareholders and board of directors. As even political circles raise the necessity on the democratization of economy by improving the corporate governance structure along with the concern on the harmful consequences from collusive links between politics and businessmen, the politicians around Democrats submitted the amendments of Commercial Act. The amendments include separate election of auditors, obligation of cumulative voting and electronics voting, introduction of multiple derivative suit and granting the authority to recommend the candidates as non-executive directors to employee stock ownership association. Independent election of auditors is based on the reflection that the functions to be performed by the auditing committee became powerless in the management of enterprise. In the present circumstances which checks and surveillance against largest shareholders of a company are not sufficiently executed, the cumulative voting may secure the independence of auditors and strengthen the protection of rights of minority shareholders. Furthermore, the independent election of auditors has the positive intention as the approach to check the despotism of largest shareholders in the board of directors’ meetings and protect the rights of minority shareholders. However, as we observed in SK or KT&G cases in the past, there is no adequate approach to protect domestic enterprises from the unfair management intervention from hazardous hedge fund. Accordingly, it may have negative impact to domestic enterprises to make independent election of auditors and cumulative voting compulsory. Electronic voting has positive impact to simplify the procedure in the general shareholders’ meetings, facilitate the participation of shareholders, activate the general shareholders’ meetings and encourage minority shareholders to participate in the decision making procedure. Moreover, in these circumstances which a number of holding companies has been increasing every year and business activities have been implemented by organizing the business entities, if affiliates are closely related to holding companies in the aspect of economic and proprietary interests as if those affiliates are part of holding companies, the introduction of representative action may contribute to protect shareholders of holding companies.

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