CONTENTS
- 1. Attorney Handling Commercial Act Matters | The Third Commercial Act Amendment Centered on Mandatory Cancellation of Treasury Stock
- - The Core Changes of the Third Commercial Act Amendment
- 2. Attorney Handling Commercial Act Matters | Deadlines for Treating Existing Treasury Stock, Requiring a Company-by-Company Response
- - Matters That Must Be Reviewed at the March Annual General Meeting of Shareholders
- 3. Attorney Handling Commercial Act Matters | Treasury Stock Acquired for a Specific Purpose, a Key Issue in the Legislative Process
- - Treasury Stock Contributed to an In-House Workers' Welfare Fund, the Possibility of a New Legal Controversy
- 4. Attorney Handling Commercial Act Matters | Response Strategies Companies Should Prepare After the Commercial Act Amendment
- - Why the Assistance of an Attorney Handling Commercial Act Matters Is Needed
1. Attorney Handling Commercial Act Matters | The Third Commercial Act Amendment Centered on Mandatory Cancellation of Treasury Stock
An attorney handling Commercial Act matters is a corporate law practitioner who advises on and responds to Commercial Act legal issues arising across the full range of corporate activities, including company incorporation, governance, the general meeting of shareholders, board operations, mergers and acquisitions (M&A), and disputes over management control.
For companies facing the annual general meeting of shareholders in March 2026, the most significant legal variable is the third Commercial Act amendment, the core of which is the mandatory cancellation of treasury stock.
This amendment is not a mere procedural change, and it warrants attention because it may affect a company's capital policy and the overall structure of its shareholder returns.
The amended Commercial Act (Act No. 21448), which passed the National Assembly on February 25, 2026, was promulgated and took effect on March 6.
The core of this amendment is that it requires, as a general rule, that companies cancel the treasury stock they hold, and it substantially strengthens the procedures for holding and disposing of treasury stock.
In particular, because the effective date of the amended Commercial Act coincides precisely with the preparation period for the March annual general meeting, its impact on corporate practice is expected to be considerable.
In practice, many companies face a situation requiring various legal reviews, including the composition of agenda items for the annual general meeting, the disclosure of business reports, and plans for the treatment of treasury stock.
Amid these changes, companies need not stop at grasping the contents of the legislative amendment, but require a comprehensive review extending to the composition of agenda items for the annual general meeting, treasury stock treatment strategies, and disclosure responses.
The Core Changes of the Third Commercial Act Amendment
An attorney handling Commercial Act matters views the core of this third Commercial Act amendment as defining the character of treasury stock as "unissued shares" and requiring, as a general rule, that it be canceled.
Previously, there were many instances in which companies, after acquiring treasury stock, held it for a long period or used it in various ways.
However, considering the possibility that such a structure could lead to distortion of corporate governance or infringement of shareholder rights, the amended Commercial Act reorganized the system in a direction that restricts the holding of treasury stock itself.
In particular, under the amended Commercial Act, treasury stock held by a company is, regardless of the reason for its acquisition, subject to cancellation as a general rule.
However, an important feature of this legislation is that it allows treasury stock to be canceled by a resolution of the board of directors alone, even without going through the procedure for a reduction of capital.
This may be interpreted as reflecting a legislative intent to improve the practice of long-term holding of treasury stock while reducing the procedural burden on companies.
2. Attorney Handling Commercial Act Matters | Deadlines for Treating Existing Treasury Stock, Requiring a Company-by-Company Response
This amended Commercial Act also sets certain deadlines for the disposal or cancellation of treasury stock already held.
Representatively, treasury stock directly acquired must be canceled by September 5, 2027, and treasury stock subject to a pledge or related to exchangeable or redeemable bonds is also required to be disposed of within certain periods, respectively.
In addition, treasury stock indirectly acquired through a trust company must be treated within one year from the date the company receives it back.
However, for certain industries subject to restrictions on foreign ownership, such as aviation, broadcasting, and telecommunications, holding is exceptionally permitted until March 5, 2029.
Ultimately, from a company's perspective, it is necessary to accurately ascertain the acquisition method and legal character of the treasury stock it already holds and to establish a cancellation or disposal plan in advance.
Matters That Must Be Reviewed at the March Annual General Meeting of Shareholders
This amended Commercial Act may, in particular, directly affect the composition of agenda items for the annual general meeting of shareholders.
If a company holding treasury stock has a plan to dispose of it in the future, it must submit the plan for holding and disposing of the treasury stock as an agenda item at the annual general meeting and obtain shareholder approval.
If the company is unable to address that agenda item at the annual general meeting, a situation may arise in which it must subsequently convene a separate extraordinary general meeting of shareholders.
In addition, after the amended Commercial Act takes effect, the structure under which shareholder approval is required for the acquisition and disposal of treasury stock has been strengthened.
Accordingly, companies need to review the following matters together in the course of preparing for the annual general meeting.
In particular, because a listed company must, under the Financial Investment Services and Capital Markets Act and related regulations, attach a treasury stock report to its business report and semiannual report for disclosure, it must also confirm the consistency between the agenda items for the annual general meeting and the disclosure contents.
3. Attorney Handling Commercial Act Matters | Treasury Stock Acquired for a Specific Purpose, a Key Issue in the Legislative Process
In the course of this Commercial Act amendment, whether treasury stock acquired for a specific purpose, such as a merger, division, or stock exchange, is also subject to cancellation became a key issue.
Some raised concerns that, if treasury stock acquired for a specific purpose were also included as subject to cancellation, the burden on companies could become excessive.
In particular, the fact that a company must go through the procedure for a reduction of capital and the procedure for protecting creditors was pointed out as a practical burden.
However, in the course of the National Assembly's deliberations, the proviso to Article 343(1) of the Commercial Act was revised, so that it provides that treasury stock may be canceled by a resolution of the board of directors regardless of the reason for its acquisition.
This may be viewed as a legislative adjustment intended to allow companies to cancel treasury stock more promptly without distinguishing whether the treasury stock was acquired for a specific purpose.
Treasury Stock Contributed to an In-House Workers' Welfare Fund, the Possibility of a New Legal Controversy
Another point worth noting is the issue of contributing treasury stock to an in-house workers' welfare fund.
Under the Financial Investment Services and Capital Markets Act and related regulations, contributing treasury stock to an in-house workers' welfare fund has been permitted, but in this Commercial Act amendment, that matter was not included among the exceptions to the disposal of treasury stock.
In the legislative process, there was discussion as to whether to recognize this as an exception, but it was ultimately excluded on the ground that it could conflict with the system of the amended Commercial Act, which defines treasury stock as "unissued shares."
Accordingly, where a company contributes treasury stock to an in-house workers' welfare fund going forward, the possibility of a legal dispute over whether it violates the Commercial Act is also being raised.
4. Attorney Handling Commercial Act Matters | Response Strategies Companies Should Prepare After the Commercial Act Amendment
This third Commercial Act amendment calls for a more strategic response, in that it is a change that may affect a company's capital policy, governance, and overall shareholder return strategy.
In particular, companies need to develop response strategies centered on the following matters.
- Reviewing the current status of existing treasury stock holdings and the acquisition structure
- Managing the schedule for the cancellation and disposal of treasury stock
- Reviewing the composition of agenda items for the annual general meeting of shareholders
- Confirming the consistency of the business report and the disclosure contents
- Realigning the capital policy and the shareholder return policy
Why the Assistance of an Attorney Handling Commercial Act Matters Is Needed
An attorney handling Commercial Act matters can review legal risks and present response strategies for the full range of Commercial Act decision-making, including a company's treatment of treasury stock, the composition of agenda items for the annual general meeting of shareholders, amendments to the articles of incorporation, and disclosure responses.
The attorneys handling Commercial Act matters at Daeryun Law Firm LLP support companies in making stable management decisions by reviewing in advance the legal risks that may arise after the amended Commercial Act takes effect, through analysis of a company's treasury stock holding structure, review of agenda items for the annual general meeting of shareholders, establishment of response strategies for the Commercial Act amendment, and corporate governance advisory.
In particular, when there is a legal change that affects corporate governance and the structure of shareholder rights, as with this third Commercial Act amendment, it is important to carry out legal review in parallel from the stage of preparing for the annual general meeting of shareholders.
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