Korean Commercial Code: Board Election Reforms

For years, most of South Korea’s largest companies quietly switched off one shareholder protection: cumulative voting. The Korean Commercial Code (the Commercial Act) let them opt out, and most did. That option is gone. A second wave of amendments changes that. The country’s biggest listed companies must now keep cumulative voting switched on. They must also elect more audit committee members independently of the board. Both changes are already in force. If you manage a Korean entity, the practical questions matter: what shifted, who is affected, and what to do before the next election season?

How did board elections work before?

Start with the change to the Korean Commercial Code (the Commercial Act) behind all this. The National Assembly, South Korea’s legislature, passed the Second Amendment on 25 August 2025. The government promulgated it on 9 September 2025.

Before then, most boards ran on straight voting. Each share carried one vote per seat, and shareholders voted on every director separately. That maths rewards whoever holds the most shares. Controlling families, in practice, decided nearly every seat.

Cumulative voting was meant to counter that imbalance. It already existed in Korean law, yet companies could simply switch it off. A clause in the articles of incorporation did the job, and the large players almost all used one. Of 334 companies with assets above KRW 5 trillion at the end of 2024, only 13 kept the option open. Just one actually applied it.

What does mandatory cumulative voting change?

The Second Amendment strips out that opt-out for large listed companies, meaning those with total assets of KRW 2 trillion or more, roughly USD 1.4 billion. These firms can no longer exclude cumulative voting. Where several board seats are filled at once, it applies whenever a shareholder asks for it.

How does it work in practice? Each shareholder receives votes equal to their shares multiplied by the number of open seats. Say you hold 100 shares and five seats are up. That gives you 500 votes. Those votes can back several candidates, or land entirely on one.

Think of it as a stack of poker chips. You can place one chip behind each name, or push the whole pile onto a single candidate. That freedom is what shifts power. A minority holder can now concentrate votes and lift a preferred nominee onto the board, while controlling shareholders lose their automatic sweep of every seat.

For legal and governance teams, the practical shift is planning. Board slates that once passed unopposed now face genuine contest. Nomination timing, candidate quality, and shareholder outreach all move up the priority list well before the meeting itself.

Why does the audit committee reform matter?

The second change is quieter, but just as sharp. Large listed companies must now elect at least two members of the audit committee separately from the main board slate, up from one.

A little history explains why that counts. Korea introduced the separate election of a single audit member in 2020, paired with the 3% rule. That rule caps a large shareholder’s votes at 3% when audit members are chosen. The goal was to loosen the controlling shareholder’s grip on oversight.

It never quite worked. Companies often filled audit seats with directors already elected outside the capped process, so the ceiling rarely bit. A parallel 2025 reform tightened the 3% rule from 23 July 2026, applying it to every audit member election. Requiring two separately elected members sharpens the effect again.

Put both together and the maths turns striking. On a typical three-person audit committee, outside investors could realistically win a majority. For controlling shareholders, that is an uncomfortable loss of grip over the very body meant to scrutinise them.

Who exactly is caught by the new rules?

The reach is deliberately narrow, then deep. Only large listed companies fall inside the mandatory scope, so smaller listed firms and private companies sit outside the two headline changes for now. Size is measured by total assets, at the KRW 2 trillion threshold.

That still pulls in a wide field of multinational interest. Many Korean members of global groups are large, listed, and squarely within range. If your organisation holds or advises on such an entity, these are your elections to plan for, not a distant domestic matter.

The direction of travel matters too. Korea has moved through three Commercial Code reform waves in quick succession, and a further round on treasury shares is already in preparation. Treating this as a one-off would be a mistake. The sensible reading is a sustained tightening of governance rules, with more to come.

Is the Korean Commercial Code reform already in force?

Yes. The Korean Commercial Code changes are already live, and the timeline deserves care. The cumulative voting rule applied from the first shareholder meeting to elect directors held after promulgation. In practice, that means the 2026 season onward.

The two-member audit rule took effect one year after promulgation, on 10 September 2026. Both reforms are therefore live today. The first full election season under the complete set of rules will be spring 2027.

There is a subtlety worth flagging for anyone tracking dates. The two provisions did not switch on together. Cumulative voting bit first, at the earliest post-promulgation election, while the audit committee expansion waited a full year. Reading the source coverage from 2025, which often pointed only to 2027, can therefore mislead. Both rules already govern how your next Korean board is elected.

That timing carries a clear warning. Any company still holding an opt-out clause in its articles needs to remove it. Preparation for 2027 is not a next-year task. It begins now.

How has the business community responded?

Not warmly. Many companies fear the reforms leave them open to activist campaigns and hostile bids. The worry is that sharper minority influence could unsettle otherwise stable boards.

The Korea Chamber of Commerce and Industry surveyed 300 listed companies in July 2025, and the mood was plain:

• 76.7% said the changes could harm corporate growth and distort the market.
• 74.0% believed applying both measures at once could threaten management control.

More specific concerns came through too:

• Sourcing and vetting suitable candidates (37.9%).
• Dual-role members slowing board decisions (16.5%).
• Leaks from members tied to competitors (5.8%).

What should you do before the next election season?

The rules are settled, so the useful work is preparation. A sensible plan under the Korean Commercial Code rests on three moves, plus one piece of housekeeping.

First, know your shareholders. Pull the shareholder register and map who holds what. Sort holders by size, type, behaviour, and location, then judge who could actually swing an election.

Second, engage before anyone else does. Open honest conversations about governance and board composition. Prioritise the holders with real influence, and shape the message around what each one values.

Third, strengthen the board itself. A skills matrix and a proper board evaluation surface gaps that are easy to miss. Transparent nomination and evaluation then show investors the board earns its seats on merit.

Finally, the housekeeping. Check the articles of incorporation for any surviving cumulative voting exclusion and amend it. This matters most for foreign groups with large Korean subsidiaries, where old clauses can sit forgotten until an election forces the issue.

What’s next?

Managing a board and audit committee election requires detailed planning and full legal awareness. For more insights into processes in other jurisdictions, explore our article: AGM in Turkey: Deadlines, Quorum & Filings.

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