South Korea Tightens Corporate Governance Disclosure Rules to Protect Minority Shareholders

Key Takeaways

• Corporate Governance Rules Updated: South Korea's FSC and KRX announced revised disclosure guidelines on November 6 to strengthen minority shareholder protections across the KOSPI market.
• Board Election Scrutiny: Listed companies must disclose changes to director numbers and appointment periods, including their effects on cumulative voting requirements under the revised Commercial Act.
• Stronger Dilution Disclosures: Companies pursuing duplicate listings or potentially dilutive capital increases must provide details of shareholder protection measures, transaction terms and communications with minority shareholders.
• Earlier Shareholder Information: The guidelines encourage business report filings at least two weeks before annual general meetings and require disclosure of whether dividend information was available before the six-week shareholder proposal deadline.
• Expanded Treasury Stock Reporting: Companies must disclose three years of treasury stock acquisitions, cancellations and holdings under the updated guidelines, which will be incorporated into reporting practices beginning in 2027.

Deep Dive

South Korean financial authorities say some listed companies have been suspected of changing the number of directors they appoint or adjusting election schedules to avoid new voting rules intended to strengthen minority shareholder representation. The Financial Services Commission (FSC) and Korea Exchange (KRX) announced revisions to corporate governance disclosure guidelines on November 6, requiring companies to provide more information about board appointments, potentially dilutive share issuances and shareholder returns.

The changes follow the expansion of mandatory corporate governance reporting to all companies listed on South Korea's KOSPI market in 2026. The reporting framework, introduced voluntarily in 2017, covered 826 companies at the end of October.

The revisions seek to address concerns about how companies implement shareholder protections and whether investors receive sufficient information to exercise their rights. Several provisions focus on decisions that can affect minority shareholders before they have an opportunity to intervene.

Greater Scrutiny of Board Elections

Amendments to South Korea's Commercial Act enacted in September 2025 require listed companies with assets of at least 2 trillion won to adopt cumulative voting when electing two or more directors. The system allows shareholders to concentrate their votes on preferred candidates, improving the possibility that minority investors can secure representation on corporate boards.

The FSC and KRX said some companies have recently been suspected of reducing the number of directors being elected or changing appointment schedules to avoid the cumulative voting requirement.

Under the revised guidelines, companies must disclose whether they have adopted cumulative voting, any changes to the number of directors or their appointment periods, and the reasons for those changes. They must also explain how the changes affect the application of cumulative voting.

The requirements do not prohibit companies from adjusting their board election arrangements. They require companies to explain those decisions, allowing shareholders to examine whether changes have affected the voting protections established under the revised law.

More Detailed Reporting on Share Issuances

The authorities are also expanding disclosure requirements for duplicate listings and paid-in capital increases, transactions that can dilute existing shareholders' interests. Companies pursuing either transaction must disclose their shareholder protection measures and provide details of how they communicated with minority shareholders during the decision-making process. Additional information will be required when a capital increase raises concerns about dilution.

Companies must disclose whether shares will be allocated to third parties, the size of the issuance, the discount rate and the intended use of the proceeds. They must also indicate whether controlling shareholders will acquire shares.

These details can help investors assess how a proposed transaction may affect their ownership interests, particularly when new shares are issued to selected investors or when existing shareholders do not participate in an offering.

The FSC and KRX want companies to provide enough information for shareholders to evaluate the terms of these transactions and the measures taken to protect their interests.

More Time to Review Corporate Reports

The revised guidelines also address the timing of disclosures before annual general meetings. Most listed companies currently submit their business reports approximately one week before their scheduled meetings, according to the FSC and KRX. That leaves shareholders limited time to review the information before voting. The authorities are encouraging companies to file their reports at least two weeks before their annual general meetings.

The guidelines will require companies to disclose the dates on which their business reports were submitted or provide an explanation. The two-week target is not being introduced as a new mandatory filing deadline.

Financial authorities will review how companies respond before considering whether submission at least two weeks before an annual general meeting should become a key indicator in corporate governance reporting. The revisions also address the availability of dividend information before shareholders' statutory proposal deadlines.

Under the Commercial Act, shareholder proposals must be submitted at least six weeks before an annual general meeting. Companies, however, generally send meeting notices approximately two weeks before the meeting and file business reports about one week beforehand.

That schedule can leave shareholders seeking changes to dividend policies without the necessary information before their opportunity to submit proposals expires.

Under the revised guidelines, companies must disclose whether information about dividends, including final dividends and dividend amounts, was made available during the period when shareholders could still submit proposals. The requirement is intended to make clear whether shareholders had access to relevant information while they retained the ability to act on it.

Three Years of Treasury Stock Disclosures

The FSC and KRX are extending the reporting period for treasury stock transactions to give investors a more complete picture of companies' shareholder return policies. Companies will be required to disclose acquisitions, cancellations and holdings of treasury shares over the most recent three-year period, rather than reporting only on the current reporting year.

The longer reporting period will allow investors to examine changes in treasury stock activity and assess how companies have managed shares they have repurchased. It will also make it easier to distinguish between shares acquired and subsequently cancelled and those retained by the company, information relevant to evaluating shareholder return policies.

Implementation Beginning in 2027

The FSC and KRX will begin offering individual consultations, training and information sessions to disclosure officers at listed companies in November 2026. The assistance is intended to prepare companies to incorporate the revised guidelines into their corporate governance reporting practices beginning with the 2027 reporting year.

The changes come as South Korea completes the expansion of corporate governance disclosure requirements across the KOSPI market, extending a framework that began as a voluntary reporting system nine years earlier.

For shareholders, the revisions should provide more information about board appointments, capital increases, dividends and treasury stock activity. The timing of those disclosures will be equally important, particularly where investors must act before statutory deadlines.

The authorities have also left open the possibility of further changes to reporting expectations after reviewing companies' compliance with the new guidance on earlier business report submissions.

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