Annual General Meetings in South Korea: A Legal Guide for Compliance Professionals

Managing Annual General Meetings in South Korea requires careful attention to corporate governance rules and shareholder rights. This guide walks legal and compliance teams through the essential requirements, from notice periods to filing obligations, helping multinational companies maintain proper governance standards in their Korean entities.

When must companies hold their AGM?

Korean law requires companies to hold an ordinary general meeting once a year. The exact timing depends on your company’s Articles of Incorporation rather than a fixed statutory deadline. Many companies schedule their AGM within three months of the fiscal year-end. This isn’t legally mandated unless your internal documents specify otherwise.

The flexibility allows companies to align their meeting schedule with internal reporting cycles. However, you must carefully review your Articles to identify the actual deadline your company must meet.

Can the AGM be postponed?

Postponement depends entirely on what your Articles of Incorporation allow. Your governing documents may explicitly permit rescheduling. Without such provisions, or where they set a specific date without mentioning postponement, any delay makes the meeting overdue.

Korean commercial law doesn’t impose automatic statutory penalties for holding an overdue meeting. Nevertheless, related regulatory provisions may still fine directors. Compliance with your own Articles becomes critical.

Who has the authority to convene the meeting?

The Board of Directors typically holds the primary authority to call the AGM. This can vary based on your company structure. For incorporated associations, directors must convene a regular general meeting at least annually.

Shareholders also have rights here. Those holding at least 3% of total issued shares may request the Board to convene an extraordinary meeting. For listed companies, the threshold drops to 1.5% held continuously for six months. The Board must respond promptly. Otherwise, requesting shareholders can seek court approval to convene the meeting themselves.

What notice requirements apply?

Companies must provide at least 14 days’ written or electronic notice to shareholders before the AGM. The notice must include the date, time, place, and agenda. For significant matters, you must clearly state the key points in the notice. These matters include amendments to the Articles, capital reductions, or mergers.

Some corporate governance best practices recommend a 28-day notice period. Most companies follow the statutory 14-day minimum. Companies with capital under one billion won may shorten this to 10 days with shareholder consent.

Listed companies have additional options. They may provide notice to shareholders holding less than 1% of voting shares through public disclosure. This can happen in at least two daily newspapers or on the Data Analysis, Retrieval and Transfer System, if the Articles specify.

Directors must also submit key financial documents to the company’s auditor at least six weeks before the AGM. The external auditor must complete their report within four weeks prior to the meeting.

How can the meeting take place?

AGMs must happen in person at a physical location under Korean commercial law. The Articles of Incorporation may provide otherwise. The law doesn’t permit entirely online meetings. Shareholders must physically attend to participate in decision-making. Resolutions adopted without such attendance aren’t legally valid.

During the COVID-19 pandemic, some companies provided online broadcasts. These served informational purposes only. Shareholders viewing the meeting online aren’t deemed to have attended. They cannot vote through the broadcast.

Written resolutions work only for companies with capital under one billion won. The Articles must expressly allow them. In such cases, all shareholders must sign a written resolution. This has the same effect as one passed at a physical meeting.

Shareholders unable to attend may appoint a proxy to exercise their voting rights. The proxy must submit appropriate documentation. Board meetings may happen via audio or video conference. However, AGMs remain bound by the physical attendance requirement.

What are the voting requirements?

Quorum and voting thresholds depend on the type of resolution. For ordinary resolutions, you need the affirmative vote of a majority of voting rights of shareholders present. Those present must represent at least one-quarter of total issued shares.

Special resolutions require higher thresholds. You need at least two-thirds of voting rights of shareholders present. They must represent at least one-third of total issued shares. These apply to matters such as amendments to the Articles or corporate restructuring.

Each shareholder has one vote per share. Treasury shares and certain related company holdings don’t carry voting rights. Shareholders may vote by proxy, in writing, or electronically. The company’s Articles must permit this. It also requires Board resolution approval.

How does proxy voting work?

Shareholders may appoint a proxy to attend and vote on their behalf at the AGM. The proxy may be either another shareholder or a third party. To appoint a proxy, the shareholder must provide documentation proving the proxy’s authority. This is typically a signed proxy form.

There’s no universally mandated form. Companies often provide a standardised proxy form with the notice of convocation. Where no specific format exists in the Articles, a simple written authorisation generally works. It should contain the shareholder’s name, the proxy’s name, and the scope of authority.

What agenda items typically appear?

Typical AGM agenda items include the appointment of directors and auditors. They also cover determination of their remuneration, approval of yearly financial statements, distribution of dividends, and capital or reserve reductions.

Items requiring special resolution approval include amendments to the Articles. These also cover transfer of all or a material part of the business, removal of directors or auditors, capital reduction (except for deficit compensation), mergers, split-offs, and stock option grants.

Extraordinary special resolutions requiring consent of all shareholders include resolutions to exempt a director from liability to the company. They also include organisational changes to convert a joint stock company to a limited company.

The company’s Articles and relevant regulations determine these agenda items. The Board typically proposes them. However, shareholders also have the right to propose additional agenda items for the AGM.

What are the financial statement requirements?

Companies must follow a structured process for preparing and approving financial statements in connection with the AGM. Accounting must align with generally accepted fair and proper accounting practices.

The Board must prepare and approve a balance sheet, income statement, and other prescribed financial documents for each fiscal year. A business report covering key operational matters must also receive preparation and approval.

Where the company has an auditor, it must submit the financial statements and business report to them six weeks prior to the AGM. The AGM must receive the financial statements for formal approval. The business report requires reporting but not voting.

Some companies may approve financial statements through a Board resolution instead of at the AGM. The Articles must allow this. Certain conditions must also apply. These include confirmation from an external auditor and consent from all auditors or audit committee members.

Do all companies require external audits?

Audit requirements depend on company type and size. Limited companies must undergo external audit if they have total assets or annual sales revenue of at least 50 billion won. They must also audit if they meet multiple thresholds related to assets, liabilities, revenue, employees, or members.

Joint-stock companies face broader audit obligations. An external audit becomes necessary if the company lists or intends to list. It’s also necessary with total assets or annual sales revenue of at least 50 billion won, or when meeting at least two of several size-related thresholds.

Listed joint-stock companies with two trillion won or more in total assets must establish an audit committee. Specific independence requirements apply.

Where a company undergoes audit, auditors must issue an audit report within four weeks of receiving the required documents. The report must evaluate whether the financial statements properly reflect the company’s financial condition. It must also confirm compliance with statutes and the Articles.

When do corporate changes take effect?

The effective date of corporate changes decided at the AGM is the date of the resolution as recorded in the AGM minutes. This date carries legal binding force. It serves as the official reference for when the change takes effect. Retroactive effect isn’t permitted. Officer appointments or removals cannot receive backdating.

How do dividend decisions work?

The decision to pay dividends requires approval either by resolution of the general meeting of shareholders or by Board resolution. Board approval works only if the Board has approved the financial statements according to permitted procedures. In both cases, the dividend decision must follow approval of the annual financial statements.

Dividends may come only from net assets. You must first deduct paid-in capital, accumulated reserves, amounts to be newly allocated to earned surplus reserve, and any unrealised profits. Dividends cannot exceed these limits. Creditors may demand refunds if they do.

Korean commercial law recognises several forms of dividends. These include cash dividends (the default method), stock dividends (limited to half the total dividend), interim dividends (if the Articles permit), and dividends in kind.

Dividends must reach shareholders within one month from the date of resolution. The resolution may specify a later date. Commercial law doesn’t impose obligations to report dividend decisions to government authorities. However, tax purposes require reporting.

What signing requirements apply to AGM documents?

Signing requirements depend on the type of document. They also depend on whether corporate changes or official filings occur. Where the AGM approves corporate changes, such as officer appointments or removals, the AGM minutes and related resolutions need hand signatures. Documents submitted to the court or registry typically require a wet-ink signature.

Where the AGM doesn’t result in corporate changes or filings, companies may use electronic signatures, including via platforms like DocuSign. These work for internal records and non-regulatory matters. However, official registration filings requiring certified or notarised documents don’t accept electronic signatures.

Korean corporate practice commonly involves the use of seals. The company seal often appears across page joins for official documents. Documents such as powers of attorney may require the registered personal seal of a director or representative.

How long must AGM records remain accessible?

Companies must retain financial statements, business reports, and audit reports at the principal office for five years. Copies must also exist at branch offices for three years. This period begins one week before the AGM. Retention requirements don’t explicitly list the minutes themselves. Nevertheless, companies treat them as essential corporate records. They commonly archive them alongside other documentation.

Any shareholder or creditor may inspect the retained records. They can request copies or extracts during business hours upon payment of a reasonable fee. Additionally, shareholders holding at least 3% of issued shares can request access to the company’s books of account and related documents. They must state the grounds for inspection.

What filing obligations follow the AGM?

Korean commercial law doesn’t require filing financial statements with a government authority in relation to their approval at the AGM. Approval and disclosure happen internally or via publication, not through regulatory submission.

However, companies must make the balance sheet publicly available once shareholders approve it at the AGM. This commonly happens through publication in a daily newspaper. It can also happen by posting on the company’s website, depending on what the Articles state.

Companies must notify changes to corporate structures or directorships within 14 days of the effective date of the resolution. This statutory deadline applies to several types of changes. These include appointment or resignation of directors, auditors, or representative directors. It also applies to amendments to registered details and structural changes that shareholders adopt through resolution.

What happens with non-compliance?

Financial statements don’t require government filing. Nevertheless, certain obligations still apply, particularly regarding public disclosure and shareholder access. Once shareholders approve the balance sheet at the AGM, the company must promptly make it public as the Articles specify.

Non-compliance with the public disclosure obligation can trigger an administrative fine of up to five million won. This penalty applies regardless of whether the company otherwise enjoys exemption from external audit or filing.

Failure to retain required documents or grant access to them can expose the company to legal challenges. Shareholders or creditors may bring these challenges, particularly where denial of access obstructs shareholder rights or raises suspicion of mismanagement.

Where companies face external audit legislation, failure to meet audit and filing deadlines may lead to regulatory sanctions. Authorities may issue corrective orders or public warnings.

Where can I find the applicable legal framework?

The primary legal framework exists in the Commercial Act. It governs company structure, shareholder rights, and directors’ duties. The Act on External Audit of Stock Companies covers audit and financial disclosure rules. The Financial Investment Services and Capital Markets Act applies to listed companies and financial institutions.

All of these exist in English through the Korea Legislation Research Institute. This provides accessible reference materials for international compliance teams working on Korean corporate governance matters.

What’s next?

Managing an Annual General Meeting in South Korea requires detailed planning and full legal awareness. For more insights into processes in other jurisdictions, explore our article AGM in South Africa: Key Rules for Legal and Compliance Teams.

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