Commercial Law Changes Causing Stir

The economic circle and the People`s Solidarity for Participatory Democracy (PSPD) are struggling with each other over the amendment of the Commercial Law that includes the double derivative suit system and the executive officer system.

The economic circle is making the fullest efforts to define the amendment on the Commercial Law that the Ministry of Justice announced in June as the enterprise version of the private school law and to erase the poison pill.

Meanwhile, the PSPD set out to draft an amendment bill of its own, saying, “The existing amendment bill is one that acts against reform, impeding the improvement of the corporate governance.”

Different hopes on the amendment of the Commercial Law-

The Federation of Korean Industries (FKI) has been publishing weekly reports that specify the shortcomings of the amendment bill since July 27.

The manager of the Enterprise Policy Team of the FKI, Yang Se-yeong, says, “When the Ministry of Justice proposes the amendment bill on the Commercial Law, we will draw out the overall problems of the bill and report them to the National Assembly."

The Korea Chamber of Commerce and Industry also plans to visit the political parties and convey their opposition soon in order to prevent the amendment bill from being passed in the regular National Assembly session in September.

At the same time, the economic bodies also plan to request the political sector to insert a device into the amendment bill on the Commercial Law which will protect management rights from hostile M&As.

The PSPD is sorting out the measure to make possible a multiple derivative suit by lifting some of the conditions for a lawsuit in the current double derivative suit system.

Regarding this matter, the PSPD plans to meet the assemblymen who are the members of related standing committees in person and present the directions for the amendment of Commercial Law.

The core issues are the double derivative suit system and executive officer system-

The double derivative suit is a system that enables the mother company that invested above 50% in the subsidiary to file a suit directly against the directors of the subsidiary.

"If this system is adopted, business management will face enormous confusion since it will make possible not only the lawsuits between the mother company and its subsidiary, but also the triple and quadruple lawsuits against sub-subsidiaries," the managing director of the FKI, Lee Seung-cheol, asserts.

The director of the Economic Reform Center of the PSPD Kim Sang-jo refuted the argument, saying, “It can become a useless system with only the name because the ‘above 50%’ regulation is too strict. Irresponsible exercise of management right should be checked by easing the conditions required for a lawsuit."

The executive officer system is creating controversy since it demands charges against non-registered executives who are practically responsible for the performances.

While the economic sector asserts that the system contains "impure intentions" to separate the ownership and the management by means of law, the PSPD refutes the argument, saying that the system, the adoption of which is optional for the enterprises now, should be turned into a compulsory one.

buddy@donga.com