The recent implementation of the third amendment to South Korea's corporate law, effective from the 6th of this month, mandates that listed companies must extinguish newly acquired treasury stocks within one year and existing stocks within one and a half years. However, this regulation includes provisions allowing companies to retain or dispose of treasury stocks with shareholder approval for operational purposes such as executive compensation or financial restructuring. As the annual shareholder meeting season approaches in March, some companies with significant treasury stock holdings appear to be scheming to evade these requirements.

A case in point is HyunDai Pharmaceutical, a company listed on the KOSPI, which recently engaged in a stock swap worth 42 billion KRW with other pharmaceutical firms, arguing it was a 'strategic alliance' to justify its avoidance of the treasury stock cancellation obligation. Likewise, Suprema HQ, listed on the KOSDAQ, initially planned to donate over 520,000 treasury stocks to a welfare foundation but canceled the plan after intervention from financial authorities, which suspected the intent was to preserve friendly shares. The purpose of the amended corporate law is to prevent treasury stocks from being used as a means to protect management control, which could harm the interests of general shareholders, indicating the dire need for firm regulatory responses against these circumventions.

In response to the second phase of the corporate law amendments scheduled for September, there are also signals of large corporations striving to fortify their boards. Several publicly traded companies under Hanwha Group have proposed extending directors' terms from two to three years at the March shareholder meeting. Firms like Celltrion, Hyosung, HS Hyosung, and Ottogi have also announced plans to lower the maximum number of directors. While these firms claim that their intentions are to enhance short-term decision-making structures, there is suspicion that they may be aiming to weaken the effectiveness of the amended corporate law. The second-phase amendment targets reducing thresholds for independent directors and audit committee members to improve the so-called 'rubber-stamp board'; thus, decreasing the number of directors or extending their terms could raise barriers for candidate recommendations from general shareholders.