The Securities Class Action Act (SCAA), which is the first class action act recognized and implemented in Korea, took effect on January 1 2005. The SCAA permits initiation of class action by shareholders against companies listed on the Korea Stock Exchange or registered on the Kosdaq in connection with, among others, accounting fraud, fraudulent disclosure, stock-price manipulation and insider trading. The SCAA aims to: (i) effectively remedy loss incurred by a group of (minority) shareholders in the course of securities transactions; (ii) alleviate the shareholders' burden of suing on a cause of action as individuals; and (iii) promote transparency in corporate management.
Shareholders may initiate a class action suit under the SCAA if the financial loss is incurred in the course of securities transactions, provided that the company has total assets of at least W2 trillion ($1.9 billion) at the end of fiscal year before January 1 2005. For companies with total assets of less than W2 trillion, the SCAA will apply from January 1 2007 (other than claims relating to stock-price manipulation).
For the purposes of initiating securities class action suits, the class must be composed of 50 or more members holding at least 0.01% in aggregate of the issued and outstanding shares of the subject company.