The government submitted the draft amendment to the
Commercial Code to parliament on September 20 2007. We
highlight some of the key aspects of the Amendment.
The Amendment allows the establishment of a limited
partnership (hap-ja-jo-hap in Korean) consisting of a
general partner (up-mu-jip-haeng-jo-hap-won in Korean)
and a limited partner (yu-han-chaek-im-jo-hap-won in
Korean). Further, the individual owners in a limited liability
company (yu-han-chaek-im-hoe-sa) will have the benefit
of limited personal liability. At the same time, they will
enjoy private autonomy in terms of the establishment,
management and constitution of various corporate organs.
Companies will face less stringent regulatory requirements when
issuing shares and/or bonds. The changes under the Draft
Amendment eliminate a minimum capital requirement of
W50,000,000 for start-ups, allowing companies to issue no face
value shares. They remove restrictions on the number of bonds
that can be extended to companies (that is, less than four
times their net asset value) and lay down a legal basis for the
issuance of multiple bonds (participating bonds for example).
Companies will be allowed to issue different types of shares.
These will have different rights. Voting rights, the right to
transfer of shares, and the right to redemption and/or
conversion of shares will all vary.
The controlling shareholder(s), that is, those who own 95%
or more of the company, will be able to buy out the shares held
by the minority shareholders at a fair price. The minority
shareholders will be able to sell their respective shares to
the controlling shareholder(s). The changes to the Draft
Amendment will facilitate the adoption of an electronic voting
system at shareholders' meetings. There will also be an
electronic registration system, which will eliminate the need
to keep track of physical certificates of bonds and stock.
These developments promote the efficiency of bond/stock
The maximum liability of a director of a company will be
limited to six times (or, three times in the case of an
independent director) their annual salary for the preceding
year, except in the case of wilful misconduct or gross
negligence. Companies will have an option to keep the duties of
executive such as CEOs and CFOs separate from the duties of a
board of directors. The aim of this is to allow the executives
and the board of directors to focus on their respective
Companies will be able to use a portion of their reserves,
in excess of 150% of their share capital, for distribution
purposes. Shareholders must validate a resolution on this at a