Corporate Lawyers South Korea 2026: Directors' Duties, Treasury‑share & Pillar Two Top‑up Tax

South Korea’s corporate governance landscape shifted materially in 2026 as a wave of Commercial Act amendments, passed in February and July 2025, took effect alongside the country’s first‑ever domestic Pillar Two top‑up tax. For corporate lawyers in South Korea, the convergence of stricter directors’ fiduciary duties, new treasury‑share cancellation procedures, expanded independent director requirements and a minimum effective tax rate regime creates an unusually dense compliance calendar. This guide provides boards, general counsel teams and CFOs with a structured roadmap: the legal changes that matter, the deadlines that cannot slip, and the practical board actions needed to stay compliant.

Executive Summary and Key Takeaways for Corporate Lawyers in South Korea

Three reform streams demand immediate attention from every company with a Korean presence, whether listed on the Korea Exchange, structured as a private chusik hoesa, or operating through a foreign branch.

• Directors’ duties have been sharpened. The 2025 Commercial Act amendments 2026 codify an expanded duty of care standard, introduce explicit conflict‑of‑interest disclosure requirements and heighten personal liability exposure. Boards that have not yet updated their decision‑making protocols and minute‑taking practices face measurable legal risk.
• Treasury‑share rules now require active management. New provisions tighten the circumstances under which a company may hold, dispose of or cancel treasury shares, with mandatory creditor‑protection steps and registry filings that carry prescribed deadlines.
• The Pillar Two top‑up tax Korea regime is live. Since 1 January 2026, multinational groups with consolidated revenue of EUR 750 million or more must comply with Korea’s qualified domestic minimum top‑up tax (QDMTT) and, where applicable, the income inclusion rule (IIR). First filings are due with the National Tax Service in 2027, but the data‑gathering and modelling work must begin now.

Action now: (1) Convene a special board meeting to adopt updated governance policies reflecting the amended Commercial Act. (2) Audit all treasury‑share holdings and initiate cancellation or disposal filings where required. (3) Commission a Pillar Two effective‑tax‑rate model run and assign ownership between the GC and CFO.

Background: 2025–26 Commercial Act Amendments, What Changed and Why It Matters

South Korea’s Commercial Act (Sangbeop) is the principal statute governing company formation, governance, shareholder rights and corporate transactions. Two amendment packages passed through the National Assembly in 2025, the first promulgated in February 2025 and the second in July 2025, with staggered effective dates running into mid‑2026. The amendments represent the most significant overhaul of Korean corporate governance rules in over a decade, driven in part by the government’s “Corporate Value‑Up” programme aimed at closing the persistent discount on Korean equities.

Key Statutory Changes Affecting Directors

• Codified duty of care and loyalty. The amendments insert clearer statutory language on the duty of care owed by directors to the company (and, in limited circumstances, to shareholders), moving beyond the previous reliance on general civil law principles.
• Conflict‑of‑interest disclosure. Directors must now disclose material personal interests in any transaction before the board and abstain from voting. Failure to disclose triggers personal liability and potential voidability of the transaction.
• Treasury‑share restrictions. Revised provisions limit the purposes for which treasury shares may be held and impose mandatory cancellation or disposal timelines in specified circumstances.
• Hybrid shareholder meetings. Companies may now conduct general meetings of shareholders using electronic means, subject to notice, identity‑verification and quorum‑integrity requirements.
• Independent director thresholds. Listed companies meeting prescribed asset or revenue criteria must appoint a minimum proportion of independent directors, with strengthened qualification and disqualification criteria.

Timeline of Enactment and Effective Dates

The staggered timeline means corporate counsel in South Korea are managing overlapping compliance workstreams. Industry observers expect the Financial Services Commission (FSC) to issue additional subordinate regulations and interpretive guidance before each effective date, so boards should monitor the Official Gazette and the FSC’s regulatory pre‑announcement portal.

Directors’ Fiduciary Duties Under the Updated Commercial Act, Legal Tests, Liability and Board Practice

The 2026 amendments transform directors’ fiduciary duties Korea from a largely judge‑made body of law into a more codified statutory framework. Three changes stand out.

First, the statutory duty of care now expressly requires directors to act with the diligence of a “prudent manager” in the specific context of the company’s industry, scale and risk profile. This replaces the former generic civil‑law standard and aligns Korean law more closely with OECD corporate governance principles.

Second, the duty of loyalty has been supplemented by a mandatory conflict‑of‑interest disclosure obligation. Where a director, or a related party of the director, has a material interest in a proposed transaction, the director must disclose the nature and extent of that interest to the board before the resolution is put. The director must abstain from voting and may not participate in quorum calculations for that resolution. Non‑compliance renders the transaction voidable at the suit of the company or a shareholder holding the prescribed minimum stake, and exposes the director to personal damages liability.

Third, the business judgment rule receives indirect statutory recognition. While the amendments do not use the term “business judgment rule” explicitly, they provide that a director who acts on the basis of adequate information, in good faith and without personal conflict shall not be held liable solely because the decision produces an adverse outcome. This is consistent with the approach taken by the Korean Supreme Court in prior rulings, but its codification gives boards greater certainty when documenting decision processes.

Practical Board Controls to Limit Liability

• Detailed minutes. Record the information considered, the advice received, the alternatives discussed and the reasons for the decision. Minutes should be contemporaneous and signed.
• Independent advice. For material transactions, M&A, related‑party dealings, significant capital expenditure, obtain and minute external legal or financial advice.
• Conflict register. Maintain a standing register of directors’ interests, updated quarterly and reviewed at each board meeting.
• Delegation framework. Where the board delegates authority to management or committees, document the scope, reporting lines and escalation triggers in board‑approved policies.

Sample Board Resolution Language for Approving Complex Transactions

Sample wording, for discussion only. Adapt to the company’s articles of incorporation and specific transaction facts.

Example 1, approval of a related‑party transaction:

“RESOLVED that, having received and considered the independent valuation report dated [date], the disclosure of interest by Director [name], and the recommendation of the Audit Committee, the Board hereby approves the proposed [transaction description] on the terms set out in the draft agreement tabled at this meeting, on the basis that the transaction is on arm’s‑length terms and in the best interests of the Company.”

Example 2, approval of treasury‑share disposal:

“RESOLVED that the Company dispose of [number] treasury shares by way of [on‑market sale / off‑market transfer to employee stock ownership plan] at a price not less than the volume‑weighted average price for the [20] trading days preceding the date of this resolution, and that the Chief Financial Officer be authorised to execute all filings with the Commercial Registry and the Korea Exchange as required under Articles [X] and [Y] of the Commercial Act.”

Treasury‑Share Cancellation Korea: Rules and Practical Procedure

The second amendment package introduces a materially different regime for treasury shares. Companies that acquired their own shares, whether through market purchases, share buy‑backs or as a result of corporate reorganisations, now face prescribed holding limits and, in certain cases, mandatory cancellation obligations.

The core change is that treasury shares held beyond the statutory retention period without a stated purpose (such as use in an employee stock option plan or a pending merger) must be cancelled. The amendments also restrict the voting and economic rights attaching to treasury shares, ensuring they cannot be used to entrench management or distort shareholder votes.

Impact on Capital Maintenance and Creditor Protection

Treasury‑share cancellation reduces the company’s issued share capital. The creditor‑protection mechanism mirrors the existing capital‑reduction process: the company must notify known creditors individually and publish a general notice, then observe the objection period before completing the cancellation. If a creditor objects and the company cannot demonstrate adequate solvency, the cancellation may be blocked or the company required to provide security.

Sample Shareholder Resolution and Board Minute Checklist

Sample wording, for discussion only.

• Shareholder resolution: “RESOLVED as a special resolution that the Company cancel [number] treasury shares of par value KRW [amount] each, reducing the issued share capital from KRW [amount] to KRW [amount], and that the Board be authorised to take all steps necessary to give effect to this resolution, including the creditor notification and registry filing required under the Commercial Act.”
• Board minute checklist: Confirm the number and class of shares to be cancelled; record the financial impact; note CFO’s solvency confirmation; authorise creditor notice; set deadline for registry filing; note KRX disclosure obligation (if listed).

Independent Directors, Hybrid Shareholder Meetings and Corporate Governance Compliance

The independent director requirements introduced by the 2025 amendments extend the existing framework that previously applied mainly to large listed companies. Under the revised rules, listed companies with total assets exceeding the prescribed threshold must ensure that independent directors constitute at least one‑quarter of the board, rising to a majority for companies above the higher threshold. The qualification criteria have also been tightened: former employees, major shareholders and their relatives, and professional advisers who received fees above a specified amount in the preceding three years are disqualified.

Hybrid shareholder meetings are now expressly permitted. Companies may conduct general meetings with shareholders attending both in person and by electronic means, provided that the notice of meeting specifies the electronic platform, identity‑verification procedures are in place, and real‑time participation (including voting and question‑asking) is technically assured. Proxy‑voting rules apply equally to electronic attendees. The likely practical effect will be greater foreign shareholder participation, particularly for companies with a substantial international investor base.

Draft Amendments to Board Charter and Nomination Committee Terms

• Insert a definition of “independent director” that mirrors the amended statutory criteria.
• Add a standing agenda item for annual confirmation of each independent director’s continuing qualification.
• Amend the nomination committee terms of reference to require an independence assessment before shortlisting candidates.
• Update the general meeting notice template to include hybrid‑meeting logistics, platform details and data‑protection disclosures.
• Revise quorum provisions to confirm that electronic attendance counts toward quorum.
• Include a fallback protocol in case of technical failure during a hybrid meeting (adjournment procedure, re‑notification requirements).

Pillar Two Top‑Up Tax Korea: Legal and Transaction Planning Implications

Korea enacted its domestic Pillar Two top‑up tax through amendments to the International Tax Adjustment Act, effective for fiscal years beginning on or after 1 January 2026. The regime implements the OECD/G20 Inclusive Framework’s Global Anti‑Base Erosion (GloBE) rules, ensuring that large multinational groups pay a minimum effective tax rate of 15 % in every jurisdiction where they operate.

Three mechanisms are relevant. First, the qualified domestic minimum top‑up tax (QDMTT) allows Korea to collect any top‑up tax attributable to Korean constituent entities before another jurisdiction applies the IIR or the under‑taxed profits rule (UTPR). Second, where a Korean ultimate parent entity (UPE) or intermediate parent entity holds interests in low‑taxed foreign constituent entities, the IIR requires the Korean parent to include the top‑up tax amount in its Korean tax return. Third, the UTPR serves as a backstop, allocating residual top‑up tax to jurisdictions (including Korea) where the group has substance.

For a detailed overview of the broader South Korea 2026 tax changes for foreign companies, see the companion guide on this site. Companies should also review the withholding tax on services, South Korea rules, as the interplay between withholding taxes and GloBE effective‑tax‑rate calculations can produce unexpected outcomes.

M&A Implications, Purchase Price Allocation, Indemnities, Reps and Warranties

The Pillar Two top‑up tax Korea regime creates new risks in M&A transactions that corporate lawyers in South Korea must address at the drafting stage:

• Tax indemnities. Sellers should expect buyers to request specific indemnities covering any top‑up tax exposure arising from pre‑completion periods. Indemnity language must distinguish between QDMTT, IIR and UTPR liabilities, as the liable entity may differ.
• Representations and warranties. Buyers should seek reps that the target group has collected the data necessary for GloBE calculations, that no jurisdictional ETR falls below 15 %, and that all transitional safe‑harbour elections have been validly made.
• Purchase price adjustments. Where a Pillar Two liability crystallises between signing and closing, the SPA should allocate the economic burden. Locked‑box structures may need a specific carve‑out for top‑up tax accruals.
• Post‑closing restructures. Intra‑group reorganisations designed to integrate an acquired business may inadvertently trigger top‑up tax in a previously safe jurisdiction. Model the GloBE impact before finalising the integration plan.

Example Data and Modelling Checklist for In‑House Teams

• Identify all constituent entities in the group and their jurisdictions.
• Gather financial accounting data on a jurisdictional basis (GloBE income, covered taxes, substance‑based carve‑outs).
• Run a preliminary effective‑tax‑rate calculation for each jurisdiction.
• Assess eligibility for transitional safe harbours (CbCR safe harbour, de minimis exclusion).
• Assign ownership of the GloBE Information Return (GIR) preparation, typically the group tax function in consultation with external advisers.
• Brief the board on expected top‑up tax exposure and its impact on the group’s effective tax rate, with quarterly updates.

Takeover Law 2026 and M&A Compliance

While the Commercial Act amendments do not fundamentally restructure Korea’s mandatory tender offer regime, they interact with existing Financial Investment Services and Capital Markets Act (FSCMA) rules in ways that boards must understand. The FSC continues to require a mandatory tender offer when an acquirer (together with specially related persons) crosses the prescribed shareholding threshold in a listed company through off‑market purchases. The 2026 amendments reinforce board duties during an approach: directors must act in the interests of all shareholders, disclose any conflicts, and refrain from defensive measures that lack prior shareholder approval.

Early indications suggest that the FSC may tighten disclosure timelines for substantial shareholding reports during 2026. Boards and their advisers should track the FSC’s regulatory calendar and plan for compressed filing windows. For broader context on South Korea tax changes, the companion overview covers withholding, corporate income tax and treaty developments.

Board Compliance Checklist: Immediate Actions and 90‑Day Roadmap

The following checklist consolidates the key actions arising from the 2026 reforms into a single, prioritised plan. Assign each item an owner and a target date; escalate unresolved items to the next board meeting.

Further Reading and Authoritative Resources

Boards, GCs and CFOs working through the 2026 compliance agenda should consult the official sources listed below for statutory text, regulatory guidance and filing templates. For a detailed analysis of the wider tax reform package, see the South Korea 2026 tax changes for foreign companies guide on this site. Companies seeking qualified corporate counsel can browse the Global Law Experts lawyer directory for South Korea‑based specialists.

Sources

1. Korea Law Information Center (KLRI), Commercial Act
2. Official Gazette / Enforcement Decree, Commercial Act Amendments
3. Ministry of Economy and Finance (Republic of Korea)
4. National Tax Service (NTS), Pillar Two and Domestic Top‑Up Tax Guidance
5. OECD, Pillar Two GloBE Model Rules and Implementation Documents
6. Korea Exchange (KRX), Listing Regulations and Disclosure Rules