Our Expert in South Korea
The landscape of corporate governance in South Korea shifted decisively during the first half of 2026, as a package of Commercial Act amendments expanded directors’ fiduciary duties, imposed new treasury-stock disposal constraints, and broadened mandatory corporate governance reporting across the KOSPI market. For general counsel, company secretaries and CFOs at listed companies, the reforms translate into concrete board-level tasks, updated minutes protocols, revised disclosure drafts, certified English translations, and a uniform May 31 annual filing deadline, that demand immediate attention. This guide converts the legislative text into a practical compliance playbook, complete with a 90-day action plan, sample resolution language, and a reporting-obligations comparison table designed to move straight from screen to boardroom agenda.
South Korea’s 2026 Commercial Act amendments represent the most significant governance overhaul in more than a decade. The reforms codify an explicit duty of loyalty to shareholders, tighten the rules governing treasury stock and the 3 % disposal threshold, require separately elected audit committee members for large listed companies, and mandate that all KOSPI-listed companies file a corporate governance report by May 31 each year. Companies with total assets of KRW 2 trillion or more must additionally prepare English-language disclosures.
Boards that have not yet begun compliance preparations face an accelerating set of deadlines. The practical effect for in-house teams is a compressed window in which governance structures, disclosure processes, and board documentation standards must all be brought into alignment with the new statutory requirements. Early indications suggest that the Financial Services Commission (FSC) and the Korea Exchange (KRX) will take an active enforcement stance, particularly on the new disclosure obligations.
The five immediate actions every KOSPI-listed board should prioritise are:
The Commercial Act amendments 2026 emerged from a sustained legislative push to close the so-called “Korea discount”, the persistent gap between the market valuation of Korean conglomerates and their international peers, by strengthening minority-shareholder protections and aligning Korean governance standards with OECD benchmarks. The amendments were promulgated in two tranches: a first package of core governance provisions took effect in February 2026, and a second, primarily procedural set of disclosure and reporting rules followed in mid-2026, implemented through coordinated revisions to the KRX Disclosure Regulations and the FSC’s supervisory guidelines.
The scope of the reform is broad. It touches every KOSPI-listed company, regardless of market capitalisation, and introduces additional obligations for companies above specified asset thresholds. Pre-IPO companies preparing for a KOSPI listing should treat the 2026 standards as the baseline for their governance structures from the outset, since compliance will be assessed at the point of listing application.
The amendments introduce or substantially revise several operative provisions of the Commercial Act and the related provisions governing listed companies:
| Date | Event | Key provision |
|---|---|---|
| February 2026 | First tranche of Commercial Act amendments takes effect | Expanded fiduciary duties; treasury stock disposal rules; cumulative voting protections |
| May 2026 | Revised KRX Disclosure Regulations effective | English-language disclosure requirement for companies with assets ≥ KRW 2 trillion; uniform May 31 governance-report deadline |
| Mid-2026 | FSC supervisory guidelines updated | Corporate governance report scope expanded to all KOSPI-listed companies |
| September 2026 (transitional) | Deadline for separate audit committee member elections at qualifying companies | At least two separately elected audit committee members required |
| January 1, 2027 | Hybrid shareholder meeting requirement takes effect | Large listed companies must offer electronic attendance option |
The expansion of fiduciary duties of directors in Korea is the centrepiece of the 2026 reforms and the provision most likely to generate litigation in the medium term. Before the amendments, the Commercial Act imposed a general duty of care and a duty of loyalty to “the company.” Courts had, in practice, interpreted this broadly enough to consider shareholder interests in some circumstances, but the statutory text left room for directors to argue that their obligations ran exclusively to the corporate entity.
Under the amended Act, the duty of loyalty is now expressly stated to encompass the interests of shareholders. Industry observers expect this change to lower the threshold for derivative suits, because claimant shareholders will no longer need to demonstrate that a breach of duty to the company indirectly harmed them; they can point directly to the statutory text requiring directors to consider shareholder interests. The likely practical effect will be heightened scrutiny of related-party transactions, intra-group pricing decisions, and capital allocation choices, areas where controlling-shareholder influence has historically attracted criticism.
The standard of care remains a reasonableness standard, but the burden-of-proof dynamics shift in meaningful ways. Where a board decision involves a related-party transaction or a treasury-stock disposal, the amended framework places greater emphasis on procedural fairness, documented deliberation, independent valuations, and the absence of conflicted directors from the vote, as the foundation of a business-judgement defence. Directors who can demonstrate robust process are in a far stronger position than those who relied on informal or undocumented decision-making.
The corporate governance reforms in South Korea demand a corresponding upgrade in board-documentation practices. Every resolution touching related-party transactions, capital allocation, or treasury stock should be supported by minutes that record the following elements:
Sample minute language: “The Board, having reviewed the independent valuation report dated [date] and having confirmed the recusal of Director [name] due to a declared conflict of interest, resolved that the proposed transaction is in the best interests of the Company and its shareholders, having regard to [specific factors considered].”
Director liability and compliance risks under the 2026 amendments cluster around three scenarios: approval of related-party transactions without adequate procedural safeguards; disposal of treasury stock in breach of the new shareholder-approval requirements; and failure to file a compliant corporate governance report by the statutory deadline. In each case, the primary defence available to individual directors is evidence of good-faith reliance on a robust board process, documented minutes, independent advice, and compliance with statutory procedures.
In-house counsel should review existing D&O insurance policies to confirm coverage extends to claims arising under the expanded statutory duties. Policies written before February 2026 may contain exclusions or definitions that do not capture the new shareholder-interest duty. A coverage gap analysis, conducted with the insurer and an independent insurance adviser, is a prudent early step.
The 2026 reforms substantially widen the population of companies required to prepare and file corporate governance disclosure on KOSPI. Prior to the amendments, mandatory corporate governance reporting applied primarily to larger listed companies. Under the revised KRX Disclosure Regulations, implemented through coordinated action by the FSC and the Korea Exchange, the obligation now extends to all KOSPI-listed companies.
The deadline for submission of the annual corporate governance report is uniformly set at May 31 of each year, replacing the previously staggered schedule that applied to different categories of companies. This uniform deadline simplifies the regulatory calendar but compresses preparation time for companies that were not previously in scope and must build their governance-reporting infrastructure from scratch.
The content of the corporate governance report must cover: board composition and the independence of directors; the operation and composition of board committees (audit, nomination, remuneration); shareholder rights and engagement policies; related-party transaction policies and their implementation during the reporting period; and the company’s approach to risk management and internal controls. The KCGS best-practice guidelines provide a recommended framework and disclosure template that many companies use as a starting point.
Starting in May 2026, all KOSPI-listed companies with total assets of KRW 2 trillion or more are required to provide English-language disclosures for specified filings, including annual reports and corporate governance reports. The requirement is designed to improve accessibility for foreign institutional investors and to align Korean disclosure standards with those of major international exchanges.
The compliance process follows a defined sequence: confirm whether the company falls within scope by reference to the most recent audited financial statements; engage a certified translation provider; prepare the Korean-language filings first and allow sufficient lead time for translation; and submit the English versions alongside the Korean originals via the KRX electronic disclosure system. Companies approaching the KRW 2 trillion threshold should plan proactively, as the asset test is applied annually and a change in status mid-cycle can create a compressed timeline.
The KRX corporate governance report form requires structured responses across several categories. Recommended disclosure elements include:
| Entity Type | Governance Report Obligation | Deadline / Special Notes |
|---|---|---|
| KOSPI-listed companies (assets ≥ reporting threshold) | Mandatory, expanded 2026 scope | May 31 annually; English disclosures required if assets ≥ KRW 2 trillion |
| KOSPI-listed small / mid-cap companies (below threshold) | Newly included under expanded coverage | May 31 annually; timing contingent on KRX transitional rules |
| Foreign companies listed on KOSPI | Subject to disclosure changes including English-language obligations | English disclosures required; certified translation process applies |
Translating the 2026 governance reporting deadlines into operational steps requires a structured approach. The following 90-day action plan assigns responsibilities to specific corporate functions and maps each task to a deliverable and a completion window. Boards that began preparation in early 2026 will be well advanced; those starting now should compress the early phases and prioritise the highest-risk items.
Days 1–30: Foundation and Scope Assessment
Days 31–60: Drafting and Review
Days 61–90: Approval and Filing
A model agenda for the board meeting at which the governance report is approved should include the following items:
Sample resolution: “RESOLVED that the Board, having reviewed the 2026 Corporate Governance Report prepared in accordance with the revised KRX Disclosure Regulations and the recommendations of the Korea Corporate Governance Service, hereby approves the Report and authorises the Company Secretary to file it with the Korea Exchange by the statutory deadline of May 31, 2026.”
Ready-to-adapt templates accelerate the compliance process and reduce the risk of omissions. The following examples are designed to be customised to each company’s circumstances and reviewed by qualified corporate advisory counsel before filing.
(a) Board resolution approving the corporate governance report
“The Board of Directors of [Company Name], at its meeting held on [date], having considered the draft Corporate Governance Report for the fiscal year ending [date] and the recommendation of the Governance Committee, RESOLVED to approve the Report in the form presented and to authorise its submission to the Korea Exchange via the electronic disclosure system on or before May 31, [year].”
(b) Directors’ declaration of compliance with fiduciary duties
“Each director of [Company Name] confirms that, to the best of his or her knowledge and belief, the decisions of the Board during the reporting period were made in good faith, in the best interests of the Company and its shareholders, and on the basis of adequate information, in accordance with the directors’ duties of care and loyalty under the Commercial Act as amended.”
(c) Sample disclosure paragraph for related-party transactions
“During the reporting period, the Company entered into [number] material transactions with related parties as defined under the Commercial Act. Each transaction was reviewed by the Audit Committee, supported by an independent valuation where the transaction value exceeded [threshold], and approved by the Board with the recusal of any conflicted directors. Full details of each transaction, including counterparty, value, and approval process, are set out in Appendix [X] to this Report.”
For companies subject to the English-language disclosure obligation, the filing workflow proceeds in two parallel tracks: the Korean-language report is prepared first and submitted for board approval, while the certified translation is prepared concurrently. Both versions are filed simultaneously via the KRX electronic disclosure system. Companies should build a minimum of three weeks of translation lead time into their project plan.
To ensure accuracy and completeness, the governance report should pass through a three-tier sign-off process before board approval:
Non-compliance with the 2026 corporate governance requirements in South Korea carries a spectrum of consequences. The KRX may impose administrative sanctions, including public censure and, in severe or repeated cases, designation for delisting review. The FSC retains authority to levy regulatory fines for failures to comply with disclosure obligations. Beyond regulatory penalties, the expanded fiduciary duties create new grounds for shareholder derivative suits, and courts may be more willing to find personal liability where directors failed to implement adequate governance processes.
Practical risk scenarios that in-house teams should model include: late filing of the corporate governance report (reputational damage and regulatory inquiry); failure to obtain shareholder approval for treasury-stock disposals that trigger the 3 % threshold (transaction voidability risk); and inadequate board documentation that undermines a business-judgement defence in a derivative suit. Mitigation measures include maintaining contemporaneous board minutes, obtaining independent valuations for material related-party transactions, procuring fairness opinions where appropriate, and conducting an annual D&O insurance coverage review.
The 2026 Commercial Act amendments have reset the baseline for corporate governance in South Korea. Boards that act decisively now, rather than treating compliance as a year-end exercise, will be best positioned to avoid enforcement risk and to benefit from the improved market perception that robust governance signals to institutional investors. The five actions that should appear on every board agenda in the current quarter are:
For companies navigating these reforms for the first time, or for those seeking a second opinion on existing compliance arrangements, engaging experienced corporate advisory counsel is a practical and cost-effective step. A tailored governance-report template, a board-documentation audit, and a filing-readiness review can be completed well within the 90-day action-plan window outlined above.
This article was produced by Global Law Experts. For specialist advice on this topic, contact Mark Benton at Ahnse Law Offices, a member of the Global Law Experts network.
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