Listed Companies' Independent Directors Face Stricter 3% Shareholding Rule Under Revised Commercial Act

South Korea has implemented a revised Commercial Act that introduces stricter regulations for independent directors of listed companies. The updated law aims to bolster corporate governance by enhancing the independence and accountability of these key figures.

A significant change under the revised act is the introduction of a "combined 3% rule." This rule stipulates that the total shareholding of all independent directors within a company cannot exceed 3% of the company's total outstanding shares. This measure is designed to prevent potential conflicts of interest and ensure that independent directors prioritize the interests of all shareholders rather than a select few.

The strengthened regulations are expected to promote greater transparency and fairness in the management of publicly traded companies. By limiting the combined stake of independent directors, the law seeks to reinforce their impartial role in overseeing company operations and decision-making processes.

This legislative update reflects a broader effort in South Korea to improve the quality of corporate governance and protect investor rights. The government hopes that these enhanced rules will lead to more robust and ethical business practices among listed firms.