South Korea’s National Assembly has approved a major revision to the Commercial Act that requires publicly traded companies to cancel treasury stock within a set time frame after acquisition. The new law was passed in a plenary session after a filibuster by opposition lawmakers was ended and a vote was held.

Under the revision, companies that acquire their own shares must generally cancel those treasury shares within one year. Shares already held by a company at the time the law takes effect must be canceled within one year and six months. If a company chooses to retain shares for specific, reasonable purposes — such as employee compensation or an employee stock ownership plan — it must prepare a plan signed by all board members and approved each year at a shareholders’ meeting to justify holding them.

For companies subject to limits on foreign investment — such as those regulated under telecommunications and related laws — there is a provision that allows retention of shares up to three years from the law’s effective date, to avoid breaching foreign ownership caps.

The revisions include clearer language that treasury stock does not carry voting rights, subscription rights, or dividend rights, and procedures for cancellation may be carried out by a board resolution.

Supporters of the amendment argue that forcing companies to cancel treasury shares will reduce the number of outstanding shares, improve earnings per share (EPS), and increase shareholder value — potentially helping to narrow South Korea’s “valuation discount” relative to global markets. Opponents, including business groups and the main opposition party, have warned that the changes could weaken defenses against hostile takeover attempts and reduce corporate flexibility.

#NationalAssembly
#CommercialActAmendment
#TreasuryShareCancellation
#PlenarySession
#Filibuster
#JudicialReform
#DistortionOfLawCrime
#CapitalMarket
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