Dual-Class Shareholdings in Korea: Korean Corporate Law Updates

Prior to the recent amendment to the Special Measures for the Promotion of Venture Businesses Act, Korea was an outlier in the developed world with regard to Dual-Class Shareholdings. Most developed economies allow Dual- Class Shares for IPOs and for unlisted countries. Korea prohibited Dual-Class Shareholding for both listed and unlisted companies.

Korean Commercial Code Art. 369(1)

The Korean Commercial Code mandates that a shareholder may, only, receive one vote for each share. This so called “One-Share One-Vote Principle” was confirmed by the Supreme Court of Korea when it ruled that any restrictions placed on voting rights is a breach of this clause. (Supreme Court Decision 2009Da51820, November 26, 2009, etc.). Thus, Dual-Class Shareholding until this year was prohibited in Korea.

Amendment to Korean Venture Business Act

An amendment to the Special Measures for the Promotion of Venture Businesses Act authorizes, after November 17, 2023, that an unlisted venture business may have Dual-Class Shares. The Amendment excludes IPOs. The Amendment, in short, allows, in the limited situation of unlisted venture businesses Dual-Class Shares including: Dual Class Voting Shares; Golden Shares; and Tenure Voting Shares.

We expect that Korea shall consider Dual-Class Shares for IPOs in the near future.

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