DR & AJU Public Sector Relations Group's latest issue of its specialized legislative journal, the Policy & Business Report, is now available in digital format.
National Assembly steps up efforts to amend the Commercial Act … a wave of treasury stock cancellation bills proposed.
Earlier this month, the National Assembly passed an amendment to the Commercial Act that expands the fiduciary duty of corporate directors to include shareholders. Following this move, the ruling party is accelerating efforts to mandate the cancellation of treasury stocks, raising concerns among business circles.
On July 22, Rep. Hyun Jung KIM of the Democratic Party of Korea, as the primary sponsor, proposed an amendment to the Commercial Act, which makes it a principle to cancel treasury stocks immediately upon acquisition. Specifically, the bill mandates the immediate cancellation of newly acquired treasury stocks, and requires treasury stocks held before the enforcement of this bill to be cancelled within six months. This follows an earlier bill submitted by Rep. Kim on July 15, which allowed cancellation within a period set by the Presidential Decree, up to four years. However, after facing criticism from retail investors about its excessive flexibility, Rep. Kim reintroduced a strengthened version of the bill with stricter requirements.
As momentum builds towards the potential introduction of mandatory treasury stock cancellation, following last year’s tightening of disclosure requirements related to treasury stocks for listed companies, some businesses have already begun taking pre-emptive measures, such as “self-disposing” treasury shares held by affiliates or issuing private bonds using treasury stocks as collateral.
In addition to Rep. Kim’s proposal, other lawmakers, including Rep. Nam Geun KIM and Rep. Byoung Dug MIN of the Democratic Party of Korea, as well as Rep. Gyu Geun CHA of the Rebuilding Korea Party, have submitted similar bills mandating the cancellation of treasury stocks.
Amid the ruling party’s legislative push, companies have expressed growing concerns over heightened vulnerability to hostile takeovers. In particular, since treasury stocks are often considered as the only measure to defend corporate control in Korea, where there are no other legal tools like dual-class shares, poison pills or golden shares, businesses are expressing heightened concern.
Meanwhile, the opposition party has introduced legislation aimed at establishing corporate defense mechanisms requested by business circles, such as poison pill (shareholder rights plans). On July 21, Rep. Eun Seok CHOI of the People Power Party, as the primary sponsor, proposed an amendment to the Commercial Act that includes the introduction of a poison pill system, permission for issuing dual-class shares, and the establishment of veto shares.
With the Democratic Party of Korea signaling its intent to discuss and pass the treasury stock cancellation amendment during the regular National Assembly session in September, heated debates between the ruling and opposition parties are expected to follow.
As the first-ever Korean law firm to issue specialized legislative journals, DR & AJU Public Sector Relations Group has been publishing the monthly Policy & Business Report since August 2019. The July 2025 issue of the P&B Report conducted a full inspection of legislation proposed to the National Assembly Subcommittee, Standing Committee, and Plenary Session from the opening of the 22nd National Assembly on June 15, 2025, to July 14, 2025, and selected and analyzed legislation with significant impact on corporate activities. In the case of major legislation, key mentions of legislators, members of the Standing Committee, and government officials are included.
*DR & AJU Public Sector Relations Group provides P&B Report subscription services. Please contact us at Ic@draju.com for further inquiries.
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