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Third Commercial Act Amendment Requiring Treasury Share Cancellation: Will It Pass by Year-End?
The Democratic Party of Korea, the ruling party, has officially announced its plan to legislate the mandatory cancellation of treasury shares within this year. Consequently, discussions on the issue have been gaining significant momentum.
In July, the National Assembly, led by the ruling party, passed the first amendment to the Commercial Act, which expands directors’ duty of loyalty to apply to all shareholders. It also approved the second amendment to the Commercial Act, mandating the adoption of cumulative voting system and broadening the separate election of audit committee members. The third amendment to the Commercial Act, centered on the mandatory cancellation of treasury shares, is also expected to proceed through the legislative process by December during the regular session of the National Assembly.
Meanwhile, on November 24, Gi Hyoung OH, a member of the National Assembly from the Democratic Party of Korea, introduced a proposed amendment to the Commercial Act as the bill’s principal sponsor. Under the amendment, newly acquired treasury shares would be required to be cancelled within one year, and any plans for the disposal of treasury shares would need to obtain annual approval at general shareholders’ meetings. This amendment also strengthens the responsibilities of the board of directors by imposing an administrative fine of up to KRW 50 million on individual directors for any violations.
The business community has expressed concerns about the third amendment to the Commercial Act, arguing that the mandatory cancellation of treasury shares would place a significant burden on corporate operations. On the other hand, the government and the ruling party have maintained that such reforms are necessary to enhance the capital market. Although the ruling party aims to pass the amendment within this year, the enactment is expected to be delayed until early next year, as the opposition parties are highly likely to launch a filibuster in December’s regular session of the National Assembly to block judicial reform bills.
As the first-ever Korean law firm to issue specialized legislative journals, D&A Public Sector Relations Group has been publishing the monthly Policy & Business Report since August 2019. The October-November 2025 issue of the P&B Report conducted a full inspection of legislation proposed to the National Assembly Subcommittee, Standing Committee, and Plenary Session from the opening of the 22nd National Assembly on September 15, 2025, to November 14, 2025, and selected and analyzed legislation with significant impact on corporate activities. In the case of major legislation, key mentions of legislators, members of the Standing Committee, and government officials are included.
*D&A Public Sector Relations Group provides P&B Report subscription services. Please contact us at lc@draju.com for further inquiries.
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