Offering of new issues to be limited

Starting next year, offering of new issues to those other than existing shareholders will be strictly restricted. Also, all company directors, excluding outside directors, will be allowed to ask representative director to report about company works to the director`s meeting.

These are some of the highlights that will be included in the revised commercial law that the Justice Ministry drafted for approval by the National Assembly. It is expected to be implemented from next year.

Under the revised law, offering of new issues to investors other than shareholders will be possible only when it is necessary for the purpose of company management such as introduction of new technology and improvement of financial structure. And the criteria has to be mentioned in the certificate of incorporation.

In this connection, the prevailing expedient succession of wealth by chaebol groups through new issues, CBs and BWs is expected to be blocked.

Also, the revised law has made it possible for civic groups to demand payment of legal costs to the relevant company if it wins in a representative lawsuit on behalf of small shareholders.

However, the Justice Ministry has postponed the legalization of compulsory adoption of the controversial collective voting system, leaving it as a subject for a long-term review.

Collective voting is a system in which small shareholders allow a certain shareholder to represent them to vote for nomination of directors at a shareholders` meeting.

Lee Myung-Gun gun43@donga.com