ACT ON THE IMPROVEMENT OF MANAGERIAL STRUCTURE AND PRIVATIZATION OF PUBLIC ENTERPRISES
Act No. 5379, Aug. 29, 1997
Amended by Act No. 5505, Jan. 13, 1998
Act No. 5689, Jan. 26, 1999
Act No. 5690, Jan. 29, 1999
Act No. 6607, Jan. 14, 2002
Act No. 6836, Dec. 30, 2002
Act No. 8050, Oct. 4, 2006
Act No. 8635, Aug. 3, 2007
Act No. 8852, Feb. 29, 2008
Act No. 9401, Jan. 30, 2009
Act No. 11845, May 28, 2013
Act No. 17131, Mar. 31, 2020
The purpose of this Act is to contribute to the advancement of sound corporate culture and the equilibrated growth of the national economy by introducing an accountable management system, under which professional managers shall take full accountability for management, to public enterprises to improve the efficiency of business management and promoting expedited privatization, while preventing the concentration of economic power in the course of the promotion of privatization.
| Article 2 (Enterprises Governed by this Act) |
The following corporations (hereinafter referred to as "designated corporation") shall be governed by this Act: <Amended on Jan. 26, 1999; Jan. 14, 2002>
| 2. | The Korea Telecommunications Corporation, converted into a stock company under the Commercial Act pursuant to the now repealed Korea Telecommunications Corporation Act; |
| 4. | The Korea Heavy Industry and Construction Co. Ltd.; |
| 5. | The Incheon International Airport Corporation established pursuant to the Incheon International Airport Corporation Act; |
| Article 3 (Relationship to Other Statutes) |
| (1) | This Act shall prevail over other statutes when it applies to matters concerning the organization and shareholder rights of designated corporations and the sale of their stocks for privatization. |
| (2) | Deleted. <Mar. 31, 2020> |
| (3) | The designated corporations (except the Korea Gas Corporation) shall be governed by the provisions applicable to stock companies of the Commercial Act, except as provided in this Act. |
| (1) | The president shall be appointed by a general meeting of shareholders. |
| (2) | The term of office for the president shall be three years, and the president shall not be removed from office during his/her term of office without good cause, except as provided in Article 13 (3). |
| (3) | The president shall be deemed the representative director for purposes of applying the Commercial Act. |
| (1) | Directors shall be classified into standing and non-standing directors and appointed by a general meeting of shareholders. |
| (2) | The full number of standing directors, including the president, shall be less than 50/100 of the full number of directors. |
| (3) | The term of office for each director shall be three years, while the term of office for a non-standing director appointed as a successor to fill a vacancy for non-standing director shall be the remaining term of office for the predecessor. <Amended on Mar. 31, 2020> |
| (4) | A staggered system shall be established and operated to appoint 1/3 of the full number of non-standing directors each year. |
| Article 6 (Board of Directors) |
| (1) | The president shall, by virtue of his/her authority or upon a request from 1/4 of incumbent directors or more, convene and preside over meetings of the board of directors. |
| (2) | If the president is unable to participate in a resolution of the board of directors in accordance with this Act or unable to perform his/her duties as the chairperson of meetings of the board of directors due to any unavoidable reason, the director designated by the articles of incorporation shall act for the president. |
| Article 7 (Remuneration for President and Standing Directors) |
| (1) | The board of directors shall establish guidelines for remuneration for the president and standing directors and the payment method thereof through its resolution and shall report its resolution to a general meeting of shareholders. |
| (2) | Guidelines for remuneration under paragraph (1) shall be established to reflect business performance of the relevant designated corporation in determining the remuneration. |
| (3) | Neither the president nor standing directors shall participate in a resolution of the board of directors under paragraph (1). |
| Article 8 (Recommendation of Candidates for Directors) |
| (1) | When the president intends to recommend a candidate for standing director, he/she shall obtain consent from the board of directors. In such cases, no standing director, except the president, may participate in a resolution of the board of directors. |
| (2) | Candidates for non-standing directors shall be recommended by shareholders or the council of shareholders, as provided by the articles of incorporation. |
| Article 9 (Qualification Requirements for Non-Standing Directors) |
| (1) | To be qualified as a non-standing director, a person shall have specialized knowledge and experiences in economy, business administration, law, related technology, or other relevant area. |
| (2) | Notwithstanding paragraph (1), any person who has a significant interest in a designated corporation is not qualified as a non-standing director of the corporation. |
| (3) | The scope of persons who have a significant interest under paragraph (2) shall be provided by the articles of incorporation. |
| Article 10 (Non-Standing Directors' Right to Demand Materials) |
Any non-standing director may request the president to furnish him/her with materials necessary for his/her performance of duties. In such cases, the president shall comply with such request, except in extenuating circumstances.
| Article 11 (Committee on Recommendation of President) |
| (1) | Each designated corporation shall have a committee on recommendation of its president (hereinafter referred to as the "Committee") to recommend candidates for president. |
| (2) | The committee shall be comprised of some of non-standing directors, one former or incumbent president prescribed by the articles of incorporation, and some non-governmental committee members commissioned by the board of directors (excluding executive officers and employees of the designated corporation and public officials). In such cases, the full number of members who participate in the Committee as non-standing members shall be a majority of the full number of the Committee members. |
| (3) | The number of non-standing directors who become members of the Committee pursuant to paragraph (2) shall not be more than 1/2 of the full number of non-standing directors. |
| (4) | The chairperson of the Committee shall be appointed from among non-standing directors. In such cases, neither the president nor standing directors may participate in a resolution of the board of directors. |
| (5) | The Committee shall adopt resolutions by an affirmative vote of a majority of the incumbent Committee members, excluding the chairperson of the Committee. In such cases, the chairperson of the Committee shall have no right to vote. |
| (6) | Necessary matters concerning the organization and operation of the Committee and other relevant matters shall be prescribed by Presidential Decree, except as provided in this Act. |
| Article 12 (Appointment of President) |
| (1) | The president shall be appointed from among persons who have much knowledge about business administration and economy or considerable experience in business administration and who are qualified as the Chief Executive Officer. |
| (2) | Each designated corporation shall give public notice through major daily newspapers to invite candidates for president and, in addition to such notice, may conduct inquiries into candidates who are regarded as qualified or may request a specialized organization to conduct such inquiries vicariously. |
| (3) | The Committee shall examine the persons who were invited pursuant to paragraph (2), in accordance with the guidelines determined by the board of directors for the examination of candidates for president. |
| (4) | In selecting candidates for president, the committee shall negotiate with the persons who will be recommended as candidates for president about terms and conditions of an agreement in connection with business goals determined by the board of directors and may amend the terms and conditions determined by the board of directors in the course of negotiations, if deemed necessary. |
| (5) | The Committee shall submit a draft agreement to a general meeting of shareholders at the same time as it recommends a candidate for president to a general meeting of shareholders in accordance with the results of the examination under paragraph (3) and the negotiations under paragraph (4). |
| (6) | No standing director, including president, may participate in a meeting of the board of directors held to determine the guidelines for the examination of candidates for president pursuant to paragraph (3), and the president may not participate in a meeting of the board of directors held to determine terms and conditions of an agreement on business goals, etc. pursuant to paragraph (4). In such cases, the chairperson of the Committee shall preside over a meeting of the board of directors. |
| Article 13 (Agreement with President) |
| (1) | When a draft agreement submitted pursuant to Article 12 (5) is approved at a general meeting of shareholders, a designated corporation shall enter into the agreement with the president. In such cases, the chairperson of the Committee shall sign the agreement as the representative of the designated corporation. |
| (2) | The board of directors may evaluate whether an agreement entered into with the president pursuant to paragraph (1) has been performed or may request a specialized organization to conduct such evaluation. In such cases, neither the president nor standing directors may participate in a resolution adopted by the board of directors for such purpose. |
| (3) | The board of directors may recommend a general meeting of shareholders to remove the president from his/her office, if it finds, as a result of the evaluation under paragraph (2), that his/her performance is not satisfactory in light of business goals. In such cases, neither the president nor standing directors may participate in a resolution adopted by the board of directors for such purpose. |
| Article 14 (Organization of Council of Shareholders) |
| (1) | Any designated corporation may organize and operate a council of shareholders with some shareholders in cases prescribed by Presidential Decree as deemed necessary for the efficient operation of general meetings of shareholders. |
| (2) | Necessary matters concerning the qualification of members of a council of shareholders and the operation of the council and other relevant matters shall be provided by the articles of incorporation. |
| Article 15 (Special Exception to Audit by Board of Audit and Inspection of Korea) |
| Article 16 (Government's Exercise of Shareholders' Rights) |
| (1) | The shareholders' rights of stocks issued by a designated corporation and owned by the Government shall be exercised by the competent Minister, subject to prior consultation with the Minister of Economy and Finance. <Amended on Feb. 29, 2008> |
| (2) | Necessary matters concerning the consultation under paragraph (1) shall be prescribed by Presidential Decree. |
| Article 17 (Exercise of Minority Shareholders' Rights, etc.) |
Even where stock certificates issued by a designated corporation have not been listed on the stock market prescribed by Presidential Decree, Article 542-6 of the Commercial Act shall apply mutatis mutandis to the exercise of minority shareholders’ rights and proposals of shareholders. <Amended on May 28, 2013; Mar. 31, 2020>
| Article 18 (Limitations on Holdings of Stocks by Same Person) |
| (1) | One shareholder and persons who have a special relationship prescribed by Presidential Decree with the shareholder (hereinafter referred to as "the same person") are not allowed to hold stocks in excess of the ratio specified by the articles of incorporation within the limit of 15/100 of the total number of outstanding voting stocks of a designated corporation or have de facto control over the corporation. <Amended on Jan. 29, 1999> |
| (2) | Where the same person holds stocks in excess of the limit prescribed in paragraph (1) or has de facto control, the same person shall dispose of the excess stocks without delay. In such cases, the extent of excisable voting rights of stocks before disposal of such excess stocks shall be restricted to the limit prescribed in paragraph (1). |
| (3) | Cases where the same person holds stocks or has de facto control, as referred to in paragraphs (1) and (2), mean cases where the same person holds stocks in his/her own name or any other person's name or exercises voting rights in collusion with someone. |
| Article 19 (Limitations on Holdings of Stocks by Foreigners) |
| (1) | Limitations may be placed by the articles of incorporation on the acquisition by foreigners or foreign corporations of stocks of a designated corporation in addition to the limits under Article 18 (1). |
| (2) | Article 18 (2) shall apply mutatis mutandis to any foreigner or foreign corporation that holds stocks in excess of limits prescribed by the articles of incorporation pursuant to paragraph (1) or has de facto control. <Newly Inserted on Jan. 29, 1999> |
| Article 20 (Methods of Selling Stocks) |
| (1) | Stocks held by the Government, any government-invested institution, or the Korea Development Bank established pursuant to the Korea Development Bank Act (hereinafter referred to as the "Government, etc.") may be sold by entrusting a financial institution, an investment trader or broker, or any similar institution specified by Presidential Decree with the sale of stocks or retaining such institution as an agent for the sale of stocks. <Amended on Aug. 3, 2007> |
| (2) | In selling stocks held by the Government, etc., the Minister of Economy and Finance may place limitations on the qualifications of persons who are eligible for purchasing such stocks and the number of stocks allowed for purchasing, if he/she concludes that it is necessary for the mitigation of an impact on the stock market, the wide distribution of stocks, or the improvement of competitiveness in international markets of the designated corporation involved. <Amended on Jan. 29, 1999; Feb. 29, 2008> |
| (3) | The Government, etc. may sell stocks of a designated corporation preferentially to the employee stock ownership association of the corporation within the extent not exceeding the limit under Article 18 (1) upon the demand from members of the employee stock ownership association. |
| Article 21 (Exclusion from Application) |
| (1) | If any designated corporation under subparagraph 1 through 3 of Article 2 satisfies the following requirements, the corporation shall no longer be governed by this Act on and after the date of the first general meeting of shareholders held after satisfying the requirements: |
| 1. | The ratio of voting stocks held by the Government, etc. does not exceed the limit prescribed in Article 18 (1); |
| 2. | The ratio of voting stocks held by the same person, who is not the Government, etc. is greater than the ratio of such stocks held by the Government, etc. |
| (2) | Any person who acquires stocks of the Korea Heavy Industry and Constructions Company, Ltd. through a public tender of sale of stocks held by the Government, etc. shall not be governed by Articles 18 and 19, while one and the same person and the following persons shall no longer be governed by this Act on and after the date of the first general meeting of shareholders held after the ratio of voting stocks held by the same person and the following persons reaches or exceeds 51/100 of the total number of outstanding voting stocks: |
| 1. | Persons who intend to jointly participate in capital or management under an agreement; |
| 2. | Persons who have a special relationship prescribed by Presidential Decree pursuant to Article 18 (1) with those under subparagraph 1. |
| (3) | Article 18 shall not apply to cases where the Korea Development Bank, the Export-Import Bank of Korea, or the Industrial Bank of Korea is provided with contributions in kind by the Government under the State Property Act. <Amended on Jan. 30, 2009> |
[This Article Newly Inserted on Jan. 29, 1999]
ADDENDA <Act No. 5379, Aug. 28, 1997>
Article 1 (Enforcement Date)
This Act shall enter into force on October 1, 1997.
Article 2 Deleted. <by Act No. 5690, Jan. 29, 1999>
Article 3 (Recommendation of First Non-Standing Directors)
| (1) | The competent Ministry for each designated corporation shall form an ad hoc committee for the recommendation of non-standing directors to have the committee select persons recommendable for first non-standing directors (hereinafter referred to as "selectees as non-standing directors"). |
| (2) | Members of the ad hoc committee for the recommendation of non-standing directors under paragraph (1) shall be comprised of the representative of shareholders, non-governmental members who have specialized knowledge about the area relating to the relevant designated corporation, and public officials from competent central administrative agencies. |
| (3) | Necessary matters concerning the organization and operation of an ad hoc committee for the recommendation of non-standing directors shall be prescribed by Presidential Decree. |
| (4) | An ad hoc committee for the recommendation of non-standing directors shall recommend selectees as non-standing directors to a general meeting of shareholders as candidates for non-standing directors. |
| (5) | An ad hoc committee for the recommendation of non-standing directors shall, when it recommends selectees as non-standing directors as candidates for non-standing directors pursuant to Article 5 (3), divide the full number of non-standing directors into three equal parts and recommend non-standing directors for the terms of one year, two years, and three years, respectively. In such cases, if it is impossible to divide the full number of non-standing directors into three equal parts, more directors for the longer term shall be recommended than those for the shorter term. |
Article 4 (Appointment of First President)
| (1) | An ad hoc committee for the recommendation of the president shall be organized for the recommendation of candidates for president who shall be first appointed by a general meeting of shareholders after this Act enters into force. |
| (2) | Articles 11 and 12 shall apply mutatis mutandis to the organization and operation of an ad hoc committee for the recommendation of the president under paragraph (1) and the appointment of the first president. In such cases, "non-standing directors" shall be construed as "selectees as non-standing directors," and "board of directors" as "meeting of selectees as non-standing directors". |
Article 5 (Special Cases concerning Existing Executive Officers of Designated Corporations)
| (1) | The term of office for the chairperson of each designated corporation at the time when this Act enters into force shall be deemed to expire simultaneously when this Act enters into force. |
| (2) | The president, directors, and auditors of each designated corporation at the time when this Act enters into force are deemed the president, directors, and auditors under this Act, but the term of office for each of them ends when the president, directors, and auditors are newly appointed by a general meeting of shareholders under this Act. |
Articles 6 and 7 Deleted. <by Act No. 5690, Jan. 29, 1999>
ADDENDA <Act No. 5505, Jan. 13, 1998>
ADDENDA <Act No. 5689, Jan. 26, 1999>
Article 1 (Enforcement Date)
This Act shall enter into force on February 1, 1999. (Proviso Omitted.)
Articles 2 through 10 Omitted.
ADDENDA <Act No. 5690, Jan. 29, 1999>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation.
Article 2 (Special Cases concerning Limitations on Holdings of Stocks)
| (1) | Article 18 (2) shall not apply to any person who holds stocks of a designated corporation in excess of the limit prescribed in the amended provisions of paragraph (1) of the aforesaid Article at the time when this Act enters into force. |
| (2) | No person specified in paragraph (1) shall acquire stocks of a designated corporation additionally after this Act enters into force in excess of the ratio of stocks held by him/her at the time when this Act enters into force. |
ADDENDA <Act No. 6607, Jan. 14, 2002>
Article 1 (Enforcement Date)
This Act shall enter into force on March 2, 2002. (Proviso Omitted.)
Articles 2 through 9 Omitted.
ADDENDA <Act No. 6836, Dec. 30, 2002>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2003.
Articles 2 through 7 Omitted.
ADDENDA <Act No. 8050, Oct. 4, 2006>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 2007. (Proviso Omitted.)
Articles 2 through 12 Omitted.
ADDENDA <Act No. 8635, Aug. 3, 2007>
Article 1 (Enforcement Date)
This Act shall enter into force one year and six months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 44 Omitted.
ADDENDA <Act No. 8852, Feb. 29, 2008>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)
Articles 2 through 7 Omitted.
ADDENDA <Act No. 9401, Jan. 30, 2009>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 11 Omitted.
ADDENDA <Act No. 11845, May 28, 2013>
Article 1 (Enforcement Date)
This Act shall enter into force three months after the date of its promulgation. (Proviso Omitted.)
Articles 2 through 17 Omitted.
ADDENDUM <Act No. 17131, Mar. 31, 2020>
This Act shall enter into force on the date of its promulgation.