[THE INVESTOR] A revised Commercial Act that would strengthen measures to keep major shareholders in check was proposed on July 4 with the backing of 120 lawmakers.

South Korea’s National Assembly consists of 300 seats.

If approved, individuals who hold more than 1 percent stake in a company will be able to file a suit against a subsidiary’s management whose malpractice caused irrevocable damage to the concerned companies. 

The revision also stipulates that the board members who serve as auditors should be selected independently, and that electronic voting system be made mandatory to allow small shareholders to exercise their votes.

The revision also addresses the outside director system. The revision would prevent former executives of a company from being named as outside directors for five years after retirement, and limit outside directors’ term to six years.

In addition, companies will have to include one outside director nominated by employee shareholder groups.

The revision was proposed by Rep. Kim Chong-in, the interim leader of the main opposition The Minjoo Party of Korea, with the backing of 119 lawmakers.

Those backing the revision include 107 Minjoo lawmakers, 12 from the People’s Party including Reps. Park Jie-won and Chun Jung-bae. The list also includes Rep. Lee Seok-hyun of the conservative Saenuri Party.

By Choi He-suk (cheesuk@heraldcorp.com)