● **”Corporate Law Overhaul Sparks Debate”**

Summary of Key Issues in Commercial Law Amendment and Shareholders’ Fiduciary Duty

1. Key Contents and Background of the Commercial Law Amendment

The biggest point of the Commercial Law Amendment is the strengthening of directors’ fiduciary duty to shareholders.
The role of directors has evolved beyond simple business judgment to considering the interests of shareholders.
In other words, when conflicts of interest arise between shareholders in decisions regarding investment, dividends, and retention, directors must fulfill their fiduciary duty.
This article details the meaning of the Commercial Law Amendment, the difference between the duty of due care and the duty of loyalty, and actual cases in chronological order.

2. Directors’ Duty of Due Care vs. Duty of Loyalty

Directors have a duty of due care when making business judgments, which prioritizes the overall interests of the company.
However, when there are differences in interests between shareholders (e.g., dividends vs. investment vs. retention), the duty of loyalty applies.
The duty of loyalty is not merely a matter of business judgment but an obligation that directors must observe to protect the interests of all shareholders in situations where conflicts of interest arise between controlling shareholders and minority shareholders.
In this case, directors bear the burden of proving direct responsibility if they violate their duty of loyalty.
That is, in the event of a lawsuit, they must prove that “I made the right judgment.”

3. Analysis of Cases of Conflicts of Interest Among Shareholders

A. Material Division Cases
  In the case of LG Chem, the controlling shareholder listed only some business divisions (e.g., battery business) through a material division,
  and existing shareholders suffered unexpected losses.
  This becomes subject to the duty of loyalty due to the conflict of interest among shareholders.

B. Manipulation of Valuation in Merger Processes
  When companies A and B merge, if the controlling shareholder inflates the value of one company,
  distortions occur in the actual corporate value, and minority shareholders suffer losses.
  This case can also be seen as a case where directors failed to fulfill their duty of loyalty.

C. Management Control Premium Issues
  As in the case of Hanyang Securities, if the controlling shareholder ignores the rights and interests of minority shareholders and claims a management control premium,
  selling shares at a price higher than the market capitalization,
  it leads to the detriment of the interests of all shareholders.
  In such cases, the burden on directors to prove whether they have violated their duty of loyalty increases.

4. Legal Risks and Countermeasures from the Director’s Perspective

It is natural for directors to worry about litigation risks when making business judgments.
Shareholders bear the burden of proof when violating the duty of due care,
but in the case of the duty of loyalty, if a conflict of interest arises between the controlling shareholder and general minority shareholders, the director must directly prove that they judged fairly.
As a result, after the Commercial Law Amendment, directors need to thoroughly review situations where conflicting interests exist before signing off
and prepare countermeasures such as documenting to prove that the transaction is legitimate.

5. Positive Implications and Investment Prospects of the Commercial Law Amendment

If the Commercial Law Amendment is passed, the protection of minority shareholders is likely to be strengthened.
This increases trust among shareholders and lays the foundation for more transparent business judgments.
As a result, the Korean stock market can be made more attractive for investment.
It is necessary to pay attention to the impact of issues related to management, investment, mergers, commercial law, and shareholders on the overall economy in the future.

Summary

The Commercial Law Amendment aims to protect minority shareholders and prevent conflicts of interest by strengthening directors’ fiduciary duty to shareholders.
It clarifies the difference between the duty of due care and the duty of loyalty and explains it with actual cases such as material division, mergers, and management control premiums.
Directors must thoroughly review conflicts of interest before making business judgments and prove that the transaction is legitimate.
These changes are expected to increase the credibility of the stock market and enhance overall investment attractiveness.

[Related Articles…]
    Analysis of Key Issues in Commercial Law Amendment
    Role of Fiduciary Duty in Merger Process

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