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 trading.
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 roles.
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 shareholders' meeting.