Beginning August 1, 2016, Korea's revised law on the
corporate governance of financial companies took effect. On the
same day, the FSC announced its year-long review of controlling
shareholders of Korean financial companies under the revised law on
corporate governance of financial companies, including owners of
On April 28, 2016, the FSC had announced that it had drafted
"The Proposed Regulations Regarding the Supervision of
Corporate Governance of Financial Companies" (the
"Proposed Regulations") as a follow-up measure to the
Corporate Governance Act, and the related draft Enforcement
In the previous regime, corporate governance regulations were
complicated and differed depending on the type of the financial
business involved. To tackle this issue, the FSC proposed a
statutory reform of corporate governance of financial institutions.
In July 2015, The Act on Corporate Governance of Financial
Companies (the "Corporate Governance Act") was passed by
the National Assembly with the purpose of establishing consistent
and systemized regulations.
Earlier this year, on March 17, 2016, the FSC then announced the
draft Enforcement Decree of the Corporate Governance Act, which
provides further clarification on how the Corporate Governance Act
should be applied to financial companies. The Enforcement Decree of
the Corporate Governance Act passed through the cabinet at the end
of July 2016.
Key Details of the Current Proposed
While the Proposed Regulations do not include any provisions
that deviate from what has already been announced in the Corporate
Governance Act and the draft Enforcement Decree, some key details
1. Standards for determining whether financial companies'
officers and employees may hold concurrent positions in other
2. Standards for internal rules and annual reports regarding
corporate governance matters;
3. Standards on establishing and operating internal control
4. Standards for risk management;
5. Specific requirements for the approval of a change of major
shareholders, depending on the type of shareholder; and
6. Practical procedures for approving a change of major
shareholders, and qualification requirements for the largest
Newly Added Key
Details that were newly added to the Proposed Regulations
1. A financial company will be required to submit a report of an
audit committee's work within one month of the end of every
semi-annual period to the Financial Supervisory Service (the
2. In preparing the annual report on the remuneration system, a
financial company will be required to specify details on the
remuneration and performance bonus of officers and certain
3. A financial company must report the establishment of or
amendment to its internal control policy to the FSS, and must also
install an internal control committee comprised of its: (i)
representative director (who will take on the chairman role); (ii)
compliance officer; (iii) risk management officer; and (iv) officer
in charge of the internal control system.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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