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STATUTES

THE REPUBLIC OF KOREA

Volume

ACT ON GOVERNANCE STRUCTURE OF FINANCIAL COMPANIES

Act No. 13453, Jul. 31, 2015

Amended by Act No. 13613, Dec. 22, 2015

Act No. 14219, Mar. 29, 2016

Act No. 14271, May 29, 2016

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to ensure the sound management of financial companies and the stability of financial markets and to protect depositors, investors, insurance policy-holders, and other financial consumers by prescribing basic matters concerning the governance structures of financial companies, including requirements for qualification for executive officers of financial companies, the organization and management of the board of directors, and the internal control system.

Article 2 (Definitions)

The terms used in this Act shall be defined as follows:

1. "Financial company" means any of the following companies:

Article 1 ~ 2

(a) A bank established with authorization granted under the Banking Act;

(b) A financial investment business entity or a merchant bank under the Financial Investment Services and Capital Markets Act;

(d) A mutual savings bank under the Mutual Savings Banks Act;

(e) A specialized credit financial business company under the Specialized Credit Finance Business Act;

(f) A financial holding company under the Financial Holding Companies Act;

(g) Companies specified by Presidential Decree as engaging in financial business under any other Act;

2. "Executive officer" means a director, auditor, executive director (limited to the cases where an executive director appointed under the Commercial Act exists), or operating officer;

3. "Director" means an inside director, an outside director, or any other

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director who is not engaged in regular business (eafter referred to as "non-standing director");

4. "Outside director" means a person appointed under Article 17 as a director who is not engaged in regular business;

5. "Operating officer" means a person who is not a director but executes business affairs of a financial company with a title recognizable as a person having authority to execute such affairs, such as honorary chairperson, chairperson, vice chairperson, president, vice president, deputy vice president, executive director, managing director, or director;

6. "Large shareholder" means a shareholder who falls within either of the following categories:

(a) A person who holds the greatest number of outstanding voting shares (or equities; hereafter the same shall apply) of a financial company, when all shares (including depository receipts related to the shares) held by the person and persons who have a special relationship specified by Presidential Decree (hereafter referred to as "related persons") on the person's own account, irrespective of in whose name the shares are held, are aggregated (hereafter referred to as "the largest shareholder");

(b) A person

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who falls within either of the following subcategories (hereafter referred to as "major shareholder"):

(i) A person who holds at least 10/100 of the total number of outstanding voting shares (including depository receipts related to the shares) of a financial company on his/her own account, irrespective of in whose name the shares are held;

(ii) A person specified by Presidential Decree as a shareholder who exercises de facto control over important matters concerning the management of a financial company by appointing and dismissing executive officers (excluding operating officers) or by any other means;

7. "Finance-related statutes" means finance-related statutes specified by Presidential Decree and equivalent finance-related statutes of foreign countries.

Article 3 (Scope of Application)

This Act shall not apply to any of the following persons:

1. An overseas local corporation (or an overseas branch) of a financial company;

2. A person specified by Presidential Decree, from among concurrently-run financial investment business entities under Article 8 (9) of the Financial Investment Services and Capital Markets Act (hereafter referred to as "concurrently-run financial investment business entities");

Article 3

3. An offshore investment advisory business entity or an offshore discretionary investment business entity under Article 100 (1) of the Financial Investment Services and Capital Markets Act.

(2) Articles 5 and 7 and Chapters IV and VII shall apply to domestic branches of a person who engages in financial business established in a foreign country in accordance with statutes of the foreign country (hereafter referred to as "foreign financial company"), and in such cases, the representative of a domestic branch of a foreign financial company and other persons specified by Presidential Decree shall be deemed executive officers of the financial company under this Act.

(3) The following provisions shall not apply to a financial company specified by Presidential Decree, taking into consideration the size of assets, the financial business in which the financial company engages, etc.:

1. Provisions concerning the composition and management of the board of directors under Article 12 (1), the main sentence of Article 12 (2), and Article 14;

2. Provisions concerning the establishment of a committee within the board of directors under Article 16 (1) and (2);

3. Provisions concerning the risk management committee under Article 21;

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4. Provisions concerning the remuneration committee, remuneration system, etc. under Article 22;

5. Provisions concerning the exercise of minority shareholders' rights under Article 33 (referring to minority partners' rights, in cases of an insurance company in the form of a mutual company under subparagraph 7 of Article 2 of the Insurance Business Act).

Article 4 (Relationship to Other Acts)

(1) Except as otherwise expressly provided for in any other finance-related statute, the provisions of this Act shall apply to governance structure of financial companies.

(2) Except as otherwise expressly provided for in this Act, the Commercial Act shall apply to governance structure of financial companies.

CHAPTER II EXECUTIVE OFFICERS

SECTION 1 Qualifications for Executive Officers

Article 5 (Qualifications for Executive Officers)

(1) The following persons shall be disqualified from being executive officers of a financial company:

1. A minor, a

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person under adult guardianship, or a person under limited guardianship;

2. A person declared bankrupt but not yet reinstated;

3. A person in whose case five years have not passed yet since imprisonment without labor or heavier punishment to which he/she was sentenced was completely executed (or is deemed to have been completely executed) or was remitted;

4. A person who was sentenced to the suspension of imprisonment without labor or heavier punishment, and is still in the period of suspension;

5.A person in whose case five years have not passed yet since a fine or heavier punishment to which he/she was sentenced under this Act or any other finance-related statute was completely executed (or is deemed to have been completely executed) or was remitted;

6. A person who serves and served as an executive officer or an employee of a financial company in which case five years have not yet passed since any of the following measures was taken against the company (limited to persons specified by Presidential Decree as directly liable for the cause of such measures or those reasonably responsible for such measures):

(a) Revocation of permission or authorization for, or registration,

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etc. of, business under a finance-related statute;

(b) A measure of timely correction under Article 19 (1) of the Act on the Structural Improvement of the Financial Industry;

(c) An administrative disposition under Article 14 (2) of the Act on the Structural Improvement of the Financial Industry;

7. A person in whose case the period specified by Presidential Decree within the maximum of five years for each category of sanctions has not yet passed since a sanction (including a notice equivalent to the relevant measure, in cases of an executive officer or an employee who has already retired or resigned from office) was taken against him/her under any finance-related statute for his/her conduct as an executive officer or an employee;

8. A person specified by Presidential Decree, by whom public interest and sound management of the relevant financial company or credit order are likely to be undermined.

(2) If a person appointed as an executive officer of a financial company falls within any category of paragraph (1) 1 through 8, the person shall forfeit his/her position: Provided, That a person who falls within the category specified in paragraph (1) 7 shall not forfeit his/her position in cases specified by Presidential Decree.

Article 5

Article 6 (Qualifications for Outside Directors)

(1) The following persons shall be disqualified from being an outside director of a financial company: Provided, That a person may be qualified as an outside director, if the person becomes a specially related person of the largest shareholder under subparagraph 1 when he/she becomes an outside director:

1. The largest shareholder or a specially related person of the largest shareholder (referring to an executive officer or an employee of a corporation, if the largest shareholder or the specially related person of the largest shareholder is a corporation);

2. A major shareholder of the spouse or a lineal ascendant or descendant of a major shareholder (referring to an executive officer or an employee of a corporation, if the major shareholder is a corporation);

3. A person who serves as a full-time executive officer or employee or a non-standing director of the relevant financial company or its subsidiary (referring to a subsidiary defined by subparagraph 3 of Article 2 of the Monopoly Regulation and Fair Trade Act; hereafter the same shall apply) or who served as a full-time executive officer or employee or a non-standing director during the preceding three years;

4. The spouse or a lineal ascendant or descendant of an executive officer

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of the relevant financial company;

5. A full-time executive officer or employee of the company for which an executive officer or employee of the relevant financial company serves as a non-standing director;

6. A person who serves as a full-time executive officer or employee of a corporation that has an important business relationship defined by Presidential Decree or a competitive or cooperative business relationship with the relevant financial company or who served as a full-time executive officer or employee of such corporation during the preceding two years;

7. A person who has served as an outside director of the relevant financial company for at least six years or who has served as an outside director of the relevant financial company or its subsidiaries for at least nine years in total;

8. A person specified by Presidential Decree, on any other ground, as a person who has difficulties in performing his/her duties faithfully as an outside director of the financial company or who is likely to influence the management of the relevant financial company.

(2) If a person who has become an outside director of a financial company falls within any category of paragraph (1), the person shall forfeit his/her position.

(3) An outside

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director of a financial company shall be a person specified by Presidential Decree, from among persons who have abundant expertise or practical experience in finance, economy, business administration, law, accounting, etc.

Article 7 (Reporting, etc. on Conformity with Qualifications for Executive Officers)

(1) When a financial company intends to appoint a person as an executive officer, it shall verify whether the person meets the qualifications under Article 5 or 6.

(2) When a financial company appoints a person as an executive officer, it shall give public notice of the appointment and whether the person meets the qualifications on its website, etc. and report the appointment to the Financial Services Commission, without delay, as prescribed and publicly notified by the Financial Services Commission.

(3) When a financial company dismisses an executive officer from office (including resignation), it shall give public notice of the dismissal on its website, etc. and report the dismissal to the Financial Services Commission, as prescribed and publicly notified by the Financial Services Commission.

SECTION 2 Major Operating Officer

Article 8 (Appointment, Dismissal, etc. of Major Operating Officer)

Article 7 ~ 8

(1) The operating officer in charge of strategic planning, financial management, risk management, and other major affairs specified by Presidential Decree as affairs equivalent to the aforesaid affairs (hereafter referred to as "major operating officer") shall be appointed or dismissed by a resolution of the board of directors.

(2) The term of office of a major operating officer shall not exceed three years, except as otherwise provided for in the relevant articles of incorporation.

(3) The provisions concerning delegation in the Civil Act shall apply mutatis mutandis to the relationship between a major operating officer and the relevant financial company.

Article 9 (Reporting by Major Operating Officer to Board of Directors)

Whenever requested by the board of directors, a major operating officer shall appear before the board of the directors and report business affairs as requested.

SECTION 3 Concurrent Office of Executive Officers, etc.

Article 10 (Restriction on Concurrent Office)

(1) No full-time executive officer of a financial company shall be engaged

Article 9 ~ 10

in regular business of any other profit-making corporation: Provided, a full-time executive officer of a financial company may be engaged in regular business of such corporation in any of the following cases:

1. Where a full-time executive officer is appointed as a custodian under Article 74 of the Debtor Rehabilitation and Bankruptcy Act;

2. Where a full-time executive officer is appointed as a management supervisor under Article 10 (1) 4 of the Act on the Structural Improvement of the Financial Industry;

3. Where a full-time executive officer is appointed as a liquidator due to the dissolution of a financial company, etc.

(2) Notwithstanding the main sentence of paragraph (1), a full-time executive officer of a financial company may concurrently serve as a full-time executive officer or employee of another company in any of the following cases:

1. If the relevant financial company is a bank: Where a full-time executive officer of the bank concurrently holds office as a full-time executive officer or employee of another company, if the bank holds more than 15/100 of the total number of outstanding voting shares of the company;

2. If the relevant financial company is a mutual savings bank: Where a full-time

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executive officer of the mutual savings bank concurrently holds office as a full-time executive officer or employee of another mutual savings bank, if the former mutual savings bank holds more than 15/100 of the total number of outstanding voting shares of the latter mutual savings bank;

3. If the relevant financial company is an insurance company: Where a full-time executive officer of the insurance company concurrently holds office as a full-time executive officer or employee of another company, if the insurance company holds more than 15/100 of the total number of outstanding voting shares of the latter company (excluding cases where a full-time executive officer of an insurance company concurrently holds office as a full-time executive officer or employee of a financial institution referred to in subparagraph 1 (a) through (h) and (j) of Article 2 of the Act on the Structural Improvement of the Financial Industry);

4. In other cases specified by Presidential Decree as cases where a conflict of interest or impediment to the soundness of a financial company is less likely.

(3) Neither an executive officer nor an employee of a bank shall currently hold office as an executive officer or employee of the Bank of Korea, other bank, or a bank holding company under Article 2 (1) 5 of the Financial Holding Companies Act: Provided, That an executive officer or employee of a bank may concurrently hold office as an executive officer or employee of a

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subsidiary bank under Article 37 (5) of the Banking Act.

(4) Notwithstanding other statutes, Article 6 (excluding paragraph (1) 3), and paragraphs (1) and (3) of this Article, an executive officer or employee of a financial holding company or of a subsidiary, etc. (referring to a subsidiary defined by Article 4 (1) 2 of the Financial Holding Companies Act; hereafter the same shall apply) of a financial holding company may concurrently hold office in any of the following cases:

1. Where an executive officer or employee of a financial holding company concurrently holds office as an executive officer or employee of a subsidiary of the relevant financial holding company;

2. Where an executive officer or employee of a subsidiary, etc. (limited to a company specified by Presidential Decree as a company engaging in financial business or a company closely involved in financial business; hereafter the same shall apply in this subparagraph) of a financial holding company concurrently holds office as an executive officer or employee of another subsidiary, etc. but does not take charge of any of the following business affairs concurrently:

(a) Collective investment business defined by Article 6 (4) of the Financial Investment Services and Capital Markets Act;

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(b) Business affairs that involve variable insurance contracts under Article 108 (1) 3 of the Insurance Business Act;

(c) Other business affairs specified and publicly notified by the Financial Services Commission as those that are likely to cause a conflict of interest with customers of the relevant subsidiary, etc. or undermine sound management of the relevant subsidiary, etc.

Article 11 (Approval, Reporting, etc. of Concurrent Office)

(1) When a financial company intends to have an executive officer or employee of the relevant financial company concurrently hold office as an executive officer or employee of another company under Article 10 (2) through (4), it shall meet the standards prescribed by Presidential Decree concerning prevention of conflicts of interest, the soundness of financial companies, etc. (hereafter referred to as "standards for concurrent office" in this Article) and shall obtain approval thereof from the Financial Services Commission in advance: Provided, That a financial company shall report the following matters to the Financial Services Commission in accordance with the methods and procedures prescribed by Presidential Decree in cases specified by Presidential Decree as cases where such concurrent office is unlikely to cause conflicts of interest or undermine the soundness of the financial company:

1. The scope of

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business aairs o which the executive oicer or employee shall take charge in the company in which he/she concurrently holds office;

2. Matters concerning the maintenance of records on the handling of business affairs for which the executive officer or employee concurrently holds office;

3. Other matters specified by Presidential Decree as those necessary for preventing conflicts of interest or maintaining the soundness of the financial company.

(2) In cases specified by Presidential Decree, from among cases where an executive officer of a financial company concurrently holds office as an executive officer of another financial company (excluding cases of concurrent office under Article 10), the financial company shall report the matters specified in paragraph (1) to the Financial Services Commission in accordance with the methods and procedures prescribed by Presidential Decree.

(3) If a financial company fails to meet any of the standards for concurrent office, does not follow the methods and procedures for reporting under the proviso to paragraph (1), or does not perform matters as reported, the Financial Services Commission may impose restrictions on concurrent office of the relevant executive officer or employee or may issue an order to take corrective measures therefor.

(4) If a financial holding company that has an executive officer or employee

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concurrntly hold offic and its subsidiary, tc. involvd in such concurrent office inflict loss upon a customer due to a conflict of interest ensuing from the concurrent office of the executive officer or employee, in connection with operations of the financial business, the financial holding company and the relevant subsidiary, etc. shall be jointly liable for such loss: Provided, That the foregoing shall not apply to the following cases:

1. Where the financial holding company and the relevant subsidiary have exercised reasonable care to avoid potential conflicts of interest ensuing from the concurrent office of the executive officer or employee;

2. Where the customer concerned were aware of or consented to the conflict of interest ensuing from the concurrent offices of the executive officer or employee at the time of making the relevant transaction;

3. In cases specified by Presidential Decree as cases where loss is incurred by any other cause for which the financial holding company and the relevant subsidiary, etc. are not liable.

CHAPTER III BOARD OF DIRECTORS

SECTION 1 Composition, Management, etc. of Board of Directors

Article 12 (Composition of Board of Directors)

Article 12

(1) A financial company shall have at least three outside directors in its board of directors.

(2) The number of outside directors shall be a majority of the total number of directors: Provided, That at least one-fourth of the total number of directors shall be outside directors in cases of a financial company specified by Presidential Decree.

(3) If the number of outside directors of a financial company fails to meet any of the requirements for the composition of the board of directors under paragraphs (1) and (2) due to resignation, death, or any other event that occurred to an outside director, the financial company shall take measures to meet the requirements falling under paragraphs (1) and (2) at the first general meeting of shareholders (including the general meeting of partners, in cases where an insurance company is a mutual company under subparagraph 7 of Article 2 of the Insurance Business Act; hereafter the same shall apply) after the occurrence of such event.

Article 13 (Election, etc. of Chairperson of Board of Directors)

(1) The board of directors shall elect a chairperson of the board of directors, from among outside directors every year.

(2) Notwithstanding paragraph (1), the board of directors may elect a non-outside director as chairperson of the board of directors, but the board of directors shall give public notice of the reason therefor in such cases and shall elect the representative

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of outsid dirctors (hraftr rfrrd to as "snior outside director") separately.

(3) The senior outside director shall perform the following business affairs:

1. Convening and presiding over meetings of outside directors, which shall be comprised of all outside directors;

2. Assisting outside directors for the efficient performance of business affairs;

3. Assisting outside directors for improving the sense of responsibility.

(4) A financial company and its executive officers and employees shall fully cooperate with the senior outside director so that he/she can effectively perform the business affairs specified in paragraph (3).

Article 14 (Management, etc. of Board of Directors)

(1) In order to protect the interest of shareholders, depositors, investors, insurance policy-holders, and other financial consumers, every financial company shall establish specific principles and procedures that it shall observe in regard to the composition and management of its board of directors, the establishment of committees within the board of directors, the criteria for expertise of executive officers, the evaluation of performance of executive officers, matters concerning succession to business control, etc., such as the qualification for

Article 14

chief executive officer(hereinafter referred to as "internal rules on governance structure").

(2) Specific matters that shall be prescribed by the internal rules on governance structure and other necessary matters shall be specified by Presidential Decree.

(3) Every financial company shall give public notice of the following matters on its website, etc., as prescribed by the Financial Services Commission:

1. Provisions of the internal rules on governance structure as promulgated or amended;

2. The current status of management of the board of directors of the financial company each year under the internal rules on governance structure.

Article 15 (Authority of Board of Directors)

(1) The following matters shall be subject to deliberation and resolution by the board of directors:

1. Business goals and the evaluation thereof;

2. Amendment of articles of incorporation;

3. Budget and settlement of accounts;

4. Critical changes in organization, including dissolution, a transfer of business, and a merger;

Article 15

5. Internal control standards under Article 24 and the establishment, amendment, and abolition of the risk management standards under Article 27;

6. Establishment of policies on governance structure, including the chief executive officer's succession to business control;

7. Supervision over conflicts of interest between major shareholders, executive officers, etc. and the relevant company.

(2) The matters subject to deliberation and resolution by the board of directors shall be specified by articles of incorporation.

(3) The authority of the board of directors under Article 393 (1) of the Commercial Act to appoint or dismiss a manager or to establish, relocate, or close a branch may be delegated, as prescribed by articles of incorporation.

SECTION 2 Committees within Board of Directors

Article 16 (Establishment and Composition of Committees within Board of Directors)

(1) Every financial company shall establish the following committees (hereafter

Article 16

referred to as "committees" in this Article) as committees within the board of directors under Article 393-2 of the Commercial Act. In such cases, the audit committee under subparagraph 2 shall be deemed the audit committee under Article 415-2 of the Commercial Act:

1. The committee for recommendation of candidates for executive officers;

2. The audit committee;

3. The risk management committee;

4. The remuneration committee.

(2) Notwithstanding paragraph (1) 4, the remuneration committee need not be established, if the audit committee deliberates and resolves on the matters referred to in Article 22 (1) in accordance with the relevant financial company's articles of incorporation: Provided, That the foregoing shall not apply to the financial companies specified by Presidential Decree.

(3) The majority of members of each committee shall be comprised of outside directors.

(4) The representative of each committee shall be an outside director.

Article 17 (Committee for Recommendation of Candidates for Executive Officers)

Article 17

(1) The committee for recommendation of candidates for executive officers shall recommend candidates for executive officers (limited to outside directors, the representative director, the representative executive director, and audit committee members; hereafter the same shall apply in this Article).

(2) The committee for recommendation of candidates for executive officers shall be comprised of at least three committee members.

(3) When a financial company intends to appoint an executive officer at a general meeting of shareholders or at a directors' meeting, it shall appoint the executive officer, from among the persons recommended by the committee for recommendation of candidates for executive officers.

(4) When the committee for recommendation of candidates for executive officers recommends candidates for outside directors, it shall include candidates recommended for outside directors by the shareholders who meet the eligibility criteria for exercising shareholders' right to make a proposal under Article 33 (1).

(5) A member of the committee for recommendation of candidates for executive officers shall be excluded from voting on a resolution of the committee for recommendation of candidates for executive officers to recommend the member himself/herself as a candidate for an executive officer.

(6) Paragraph (2)

Article 17

of this Article and Article 16 (3) and (4) shall not apply to cases where a financial company that forms the initial board of directors under Article 12 (1) appoints its executive members.

Article 18 (Provision of Information about Outside Directors)

(1) Every financial company shall provide outside directors with sufficient data or information so that they can perform their duties efficiently, as prescribed by Presidential Decree.

(2) Outside directors may request the relevant financial company to provide data or information necessary to perform their duties. In such cases, the financial company shall comply with such request, unless there is a compelling reason not to do so.

Article 19 (Composition of Audit Committee and Appointment, etc. of Audit Committee Members)

(1) The audit committee shall be comprised of at least three directors. In such cases, at least one of the audit committee members (hereafter referred to as "audit committee member") shall be an expert in accounting or finance, as prescribed by Presidential Decree.

(2) Notwithstanding Article 16 (3), at least two-thirds of audit committee members shall be outside directors.

(3) If the number of audit committee members fails to meet the requirements for

Article 18 ~ 19

the composition of an audit committee under paragraphs (1) and (2) due to resignation, death, or any other event that occurred to an audit committee member, the financial company shall take measures to meet the requirements under paragraphs (1) and (2) at the first general meeting of shareholders convened after the occurrence of such event.

(4) Candidates for audit committee members shall be recommended by the committee for recommendation of candidates for executive officers under Article 16 (1) 1. In such cases, a resolution requires the concurrent votes of at least two-thirds of all committee members.

(5) Every financial company shall appoint at least one outside director who will serve as an audit committee member separately, apart from other directors.

(6) The authority to appoint or dismiss audit committee members resides with the general meeting of shareholders. In such cases, Article 409 (2) and (3) of the Commercial Act concerning restrictions on the exercise of voting right on the appointment of an auditor shall apply mutatis mutandis to the appointment of a director who will serve as an audit committee member.

(7) Where the sum of voting shares of a financial company held by the largest shareholder, specially related persons of the largest shareholder, and other persons specified by Presidential Decree exceeds 3/100 of the total number of outstanding shares, excluding non-voting shares of the financial company, the shareholder

Article 19

shall not exercise his/her voting right for the shares exceeding 3/100 on the appointment or dismissal of a director who will or has served as an audit committee member: Provided, That the financial company may specify a rate lower than 3/100 by articles of incorporation.

(8) A financial company specified by Presidential Decree shall, taking the size of assets, etc. into consideration, have at least one auditor who shall work full time for the company to conduct audits (hereafter referred to as "full-time auditor"): Provided, That no financial company shall have a full-time auditor, if it has an audit committee established pursuant to this Act (including cases where a financial company that is not obliged to establish an audit committee has an audit committee that meets the requirements under this Article).

(9) Paragraph (7) of this Article and Article 409 (2) and (3) of the Commercial Act concerning restrictions on the exercise of voting rights on the appointment of an auditor shall apply mutatis mutandis to the appointment of a full-time auditor.

(10) Article 6 (1) and (2) shall apply mutatis mutandis to qualifications for a full-time auditor or an audit committee member who is not an outside director: Provided, That a person who serves or served as a full-time auditor of the relevant financial company or as an audit committee member who is not an outside director of the relevant financial company may become a full-time auditor or an audit committee member who is not an

Article 19

outside director, otwithstadig Article 6 (1) 3.

Article 20 (Assistance, etc. to Audit Committee or Auditor)

(1) The audit committee or an auditor may seek experts' assistance at the expense of the relevant financial company.

(2) Every financial company shall establish a department in charge of assistance to the audit committee or auditor.

(3) A financial company shall submit reports on the operations of the audit committee or auditor to the Financial Services Commission, on a regular basis, as prescribed by the Financial Services Commission.

(4) Article 18 shall apply mutatis mutandis to the provision of information to audit committee members (referring to the auditor, where no audit committee exists). In such cases, the term "outside director" shall be construed as "audit committee member" or "auditor."

Article 21 (Risk Management Committee)

The risk management committee shall deliberate and resolve on the following matters:

1. Formulation of basic policies and strategies for risk management;

2. Determination of the level of risk the financial company can assume;

Article 20 ~ 21

3. Approval of limits on appropriate investment and limits on tolerable losses;

4. Establishment and amendment of the risk management standards under Article 27;

5. Other matters prescribed and publicly notified by the Financial Services Commission.

Article 22 (Remuneration Committee, Remuneration System, etc.)

(1) The remuneration committee shall deliberate and resolve on the following matters in regard to remuneration for executive officers prescribed by Presidential Decree:

1. Methods of determining and paying remunerations;

2. Preparation and public notification of annual reports on the payment of remunerations;

3. Other matters specified and publicly notified by the Financial Services Commission.

(2) Every financial company shall ensure that no executive officer and employee take excessive risk when it formulates a remuneration system.

(3) A financial company shall defer the payment of remunerations payable to the executive officers and employees specified by Presidential

Article 22

Decree in accordance with the predetermined calculation formula in proportion to performance (hereinafter referred to as "bonus") at a certain ratio of remuneration. Further details about the ratio of remunerations payable in proportion to performance, the period of deferment, etc. shall be prescribed by Presidential Decree.

(4) A financial company shall prepare an annual report on the payment of remunerations for executive officers and employees specified by Presidential Decree and shall give public notice of details thereof on its website, etc. within three months after the settlement of accounts, as prescribed by the Financial Services Commission.

(5) The annual report under paragraph (4) shall include the following matters, and detailed standards for the preparation of annual reports shall be prescribed by Presidential Decree:

1. Composition, authority, responsibilities, etc. of the remuneration committee;

2. Total amount of remunerations for executive officers (basic salary, bonuses, deferred bonuses, the amount paid during the pertinent accounting year out of deferred bonuses, etc.).

Article 23 (Special Cases Concerning Wholly-Owned Subsidiaries, etc. of Financial Holding Companies)

(1) Where a subsidiary whose outstanding shares are wholly owned by a financial

Article 23

holding company or a second-tier subsidiary (including a third-tier subsidiary whose outstanding shares are wholly owned by a second-tier subsidiary; hereafter referred to as "wholly-owned subsidiary") whose outstanding shares are wholly owned by the afore-said subsidiary meets the criteria specified by Presidential Decree, such as transparency in business administration, etc., it need not have outside directors or committees within the board of directors, notwithstanding Articles 12 and 16.

(2) If a wholly-owned subsidiary does not establish an audit committee under paragraph (1), it shall appoint a full-time auditor.

(3) Article 6 (1) and (2) shall apply mutatis mutandis to the qualifications for the full-time auditor under paragraph (2): Provided, That a person who serves or served as a full-time auditor or an audit committee member who is not an outside director of the relevant wholly-owned subsidiary may become a full-time auditor, notwithstanding Article 6 (1) 3.

CHAPTER IV INTERNAL CONTROLS, RISK MANAGEMENT, ETC.

Article 24 (Internal Control Standards)

(1) Every financial company shall establish standards and procedures that its executive officers and employees shall observe when they perform their duties (hereinafter referred to as "internal control

Article 24

standards") so as to ensure that it observes statutes, operates its business soundly, and protects shareholders, interested parties, etc.

(2) Notwithstanding paragraph (1), a subsidiary of a financial holding company need not establish internal control standards, if the financial holding company establishes internal control standards for its subsidiaries.

(3) Detailed matters to be provided by internal control standards and other necessary matters shall be prescribed by Presidential Decree.

Article 25 (Appointment, Dismissal, etc. of Compliance Officers)

(1) Every financial company (excluding the investment advisory business entities and discretionary investment business entities specified by Presidential Decree, taking the size of assets, etc. into consideration) shall have at least one person who shall conduct inspections on compliance with internal control standards, investigate violations of internal control standards, and take charge of general affairs related to internal control (hereafter referred to as "compliance officer“), and the compliance officer may report results of investigation to the audit committee or auditor, if he/she finds it necessary.

(2) Every financial company shall appoint compliance officers, from among inside directors or operating officers: Provided, That a financial company or a domestic branch of a foreign financial company, specified by Presidential Decree in consideration of

Article 25

the size o assets, the inancial business in which it engages, etc., may appoint compliance officers, from among employees who are neither inside directors nor operating officers.

(3) When a financial company (excluding domestic branches of foreign financial companies) intends to appoint or dismiss a compliance officer, it shall obtain a resolution thereon from the board of directors, and a resolution on dismissal shall be passed with concurrent votes of at least two-thirds of all directors.

(4) The term of office of a compliance officer shall be at least two years.

(5) Where a financial company appoints a compliance officer, from among its employees under the proviso to paragraph (2), it shall not appoint a fixed-term or part-time worker under the Act on the Protection, etc. of Fixed-Term and Part-Time Workers as a compliance officer.

(6) Every financial company shall formulate and implement separate standards for remuneration for compliance officers and evaluation of compliance officers, which shall not be linked to financial business performance of the company.

Article 26 (Requirements for Qualification for Compliance Officers)

(1) To qualify as a compliance officer, a person shall meet all the following

Article 26

requirements: <Amended by Act No. 13613, Dec. 22, 2015>

1. The person shall have no record of a warning of reprimand or any request for salary reduction, or any heavier measure, from among the disciplinary measures specified in any of the subparagraphs of Article 35 (1) and (2), imposed upon him/her by the Financial Services Commission, the Governor of the Financial Supervisory Service (referring to the Financial Supervisory Service under the Act on the Establishment, etc. of Financial Services Commission; hereafter the same shall apply) (hereafter referred to as the "Governor of the Financial Supervisory Service"), or any other institution specified by Presidential Decree for any violation of this Act or any finance-related statute during the preceding five years;

2. The person shall meet the requirements in any of the following items: Provided, That a person in whose case five years have not passed since he/she retired or resigned from any of the institutions specified in the former part of item (d), from among the persons who meet the requirements in any of the following items (excluding those who meet the requriements in the latter part of item (d)), shall be excluded herefrom:

(a) A person who has worked for an institution subject to inspection under Article 38 of the Act on the Establishment, etc. of Financial Services Commission (including foreign financial companies equivalent to such institutions)

Article 26

for at least ten years;

(b) A person who holds a master’s degree or any higher degree in a finance-related field and has worked as a researcher in a research institute or as an assistant or any higher-ranking professor in a university for at least five years;

(c) A licensed attorney-at-law or a certified public accountant who has engaged in a business related to his/her qualifications for at least five years;

(d) A person who has worked for the Ministry of Strategy and Finance, the Financial Services Commission, the Securities and Futures Commission under Article 19 of the Act on the Establishment, etc. of Financial Services Commission, the Board of Audit and Inspection, the Financial Supervisory Service, the Bank of Korea, the Korea Deposit Insurance Corporation established under Article 3 of the Depositor Protection Act (hereafter referred to as the "Korea Deposit Insurance Corporation"), or any other finance-related institution specified and publicly notified by the Financial Services Commission for at least seven years. In such cases, a person who has worked as employee of the Korea Deposit Insurance Corporation for at least seven years shall be included if it is necessary to carry out business affairs of an insolvent financial company under subparagraph 5 of Article 2 of the Depositor Protection Act, an insolvency-threatened financial

Article 26

company under subparagraph 6 of the same Article, or a financial company authorized to perform liquidation under Article 36-3 of the same Act;

(e) Other person specified by Presidential Decree as holding qualifications equivalent to those under items (a) through (d).

(2) Where a person who has become a compliance officer fails to meet any of the requirements specified in paragraph (1) 1, he/she shall forfeit the position.

Article 27 (Risk Management Standards)

(1) Every financial company shall formulate standards and procedures for risk management (hereafter referred to as "risk management standards") in order to timely perceive, assess, monitor, and control risks incurred in the course of the management of assets, performance of business affairs, and other various transactions.

(2) Where a financial holding company has formulated risk management standards for its subsidiaries, etc., which are financial companies, a subsidiary, etc. of the financial holding company need not formulate risk management standards, notwithstanding paragraph (1).

(3) Detailed matters to be prescribed by risk management standards and other necessary matters shall be prescribed by Presidential Decree.

Article 27

Article 28 (Appointment, Dismissal, etc. of Risk Managers)

(1) Every financial company (excluding investment advisory business entities and discretionary investment business entities specified by Presidential Decree, taking into consideration the size of assets, the business in which the financial company engages, etc.) shall have at least one risk manager who shall take charge of examining and managing risks incurred in the course of managing assets, performing business affairs, and other various transactions.

(2) Article 25 (2) through (6) shall apply mutatis mutandis to the appointment, dismissal, term of office, etc. of risk managers. In such cases, "compliance officer" shall be construed as "risk manager."

(3) To qualify as a risk manager, a person shall have expertise and practical experience in risk management and shall meet all the following requirements:

1. The person shall have no record of a warning of reprimand or a request for salary reduction, or any heavier measure, from among the disciplinary measures specified in Article 35 (1) and (2), imposed upon him/her by the Financial Services Commission, the Governor of the Financial Supervisory Service, or any other institution specified by Presidential Decree for any violation of this Act or any finance-related statute during the last five years;

2. The person shall meets the requirements in any of the following items:

Article 28

Provided, That a person in whose case five years have not passed since he/she retired or resigned from any of the institutions specified in item (c), from among the persons who meet the requirements in any of the following items, shall be excluded herefrom:

(a) A person who has worked for an institution subject to the inspection under Article 38 of the Act on the Establishment, etc. of Financial Services Commission (including foreign financial companies equivalent to such institutions) for at least ten years;

(b) A person who holds a master’s degree or any higher degree in a finance-relate field and has worked as a researcher in a research institute or as an assistant or any higher-ranking professor in a university in the field of risk management for at least five years;

(c) A person who has been engaged in business affairs related to risk management in the Financial Supervisory Service, the Bank of Korea, the Korea Deposit Insurance Corporation, or any other finance-related institution specified and publicly notified by the Financial Services Commission, for at least seven years;

(d) Other persons specified by Presidential Decree as holding qualifications equivalent to those under items (a) through (c).

Article 28

(4) Where a person who has become a risk manager fails to meet the requirements under paragraph (3) 1, he/she shall forfeit such position.

Article 29 (Prohibition of Concurrent Office, etc.)

Every compliance officer or risk manager owes a duty of care to perform his/her duties as a good fiduciary and shall not be engaged in any of the following business affairs:

1. Management of assets;

2. Essential business affairs of the relevant financial company (referring to the business affairs specified by Presidential Decree as essential business affairs directly related to the business affairs for which the relevant company has obtained authorization or registration) and business affairs incidental to the aforesaid business affairs;

3. Affairs of the businesses concurrently run by the relevant financial company;

4. Affairs of subsidiaries, where the financial company is a financial holding company (excluding cases where a risk manager of a financial holding company takes charge of risk management of its subsidiaries, etc.);

5. Other business affairs specified by Presidential Decree, where a conflict of interest is likely to occur or it is impracticable

Article 29

to concentrate on internal control or risk management.

Article 30 (Duties of Financial Company to Compliance Officers and Risk Managers)

(1) A financial company shall ensure that its compliance officers and risk managers can perform their duties independently.

(2) When a financial company appoints or dismisses a compliance officer or risk manager, it shall report such fact to the Financial Services Commission, as prescribed by Presidential Decree.

(3) When a compliance officer or a risk manager requests to submit data or information necessary for performing his/her duties, the relevant financial company or any executive officer or employee of the financial company shall comply with such request sincerely.

(4) No financial company shall accord any disadvantage in personnel management to a person who served as a compliance officer or a risk manager on any ground related to performance of his/her duties as a compliance officer or a risk manager.

CHAPTER V MAINTENANCE OF SOUNDNESS OF LARGE SHAREHOLDERS

Article 31 (Approval, etc. of Changes in Large Shareholders)

Article 30 ~ 31

(1) A person who intends to become a large shareholder (including shareholders in a special relationship with the largest shareholder, in the case of the largest shareholder, and including the persons specified by Presidential Decree who exercise de facto influence on a corporation over important affairs related to the management of the corporation, if the largest shareholder is a corporation; the same shall apply hereafter in this Article) of a financial company (excluding a bank established with authorization under the Banking Act, a financial holding company under the Financial Holding Companies Act, a mutual savings bank established with authorization under the Mutual Savings Banks Act, an investment advisory business entity or a discretionary investment business entity under the Financial Investment Services and Capital Markets Act, and a facilities leasing business entity, an installment financing business entity, or a new technology venture capitalist under the Specialized Credit Finance Business Act), by acquiring or receiving (referring to having de facto control over shares; hereafter referred to as "acquiring, etc." in this Chapter) shares issued by the financial company, shall not violate the Monopoly Regulation and Fair Trade Act, the Punishment of Tax Evaders Act, and any of the statutes specified by Presidential Decree in relation to finance for sound management, shall meet requirements prescribed by Presidential Decree, and shall obtain approval thereof from the Financial Services Commission: Provided, That the foregoing shall not apply to any person specified by Presidential Decree.

(2) When the acquisition,

Article 31

etc. of shares under paragraph (1) is due to the death of a large shareholder or any other ground specified by Presidential Decree, an application for approval of acquisition, etc. shall be filed with the Financial Services Commission within the period specified by Presidential Decree, which shall not exceed three months from the date of acquisition, etc.

(3) The Financial Services Commission may order a person to dispose of shares acquired, etc. without approval under paragraph (1) and shares for which no application under paragraph (2) has been filed after acquisition, etc., within a specified period not exceeding six months.

(4) A person who has failed to obtain the approval under paragraph (1) or has failed to file an application for the approval under paragraph (2) shall not exercise the voting right for the shares that the person has acquired without approval or of which he/she has not filed an application for approval.

(5) An investment advisory business entity or a discretionary investment business entity under the Financial Investment Services and Capital Markets Act or a facilities leasing business entity, an installment financing business entity, or a new technology venture capitalist under the Specialized Credit Finance Business Act shall report a change in its large shareholders to the Financial Services Commission within two weeks after such change occurs. In such cases, a person who operates an investment advisory business or discretionary investment business and a financial investment business referred to in any provision

Article 31

of Article 6 (1) 1 through 3 and 6 concurrently shall be deemed to have filed such report, when the person obtains the approval under paragraph (1).

(6) Detailed matters necessary for methods and procedures for the matters under paragraphs (1) through (3) shall be prescribed by Presidential Decree.

Article 32 (Examination, etc. of Qualifications for Largest Shareholder)

(1) The Financial Services Commission shall examine whether the largest investor (referring to the largest investor among the largest shareholders of a corporation, if the largest investor is a corporation; and if the largest investor selected is also a corporation, one private individual shall be selected as the largest investor by applying the same method repeatedly until a private individual is selected: Provided, That the largest investor specified by Presidential Decree among the largest shareholders of a corporation shall be deemed the largest investor of the corporation, if the corporation is involved in circular share-holding among corporations; hereafter referred to as “person subject to examination of qualifications") of a financial company (limited to a financial company subject to the application of Article 31 (1); the same shall apply hereafter in this Article) does not violate the Monopoly Regulation and Fair Trade Act, the Punishment of Tax Evaders Act, or any finance-related statute specified by Presidential Decree, and whether the largest investor meets the requirements prescribed by Presidential Decree (hereafter referred

Article 32

to as "requirements for maintaining qualification"), from among requirements for approval of changes, at the interval of the period specified by Presidential Decree.

(2) When a financial company becomes aware that an event has occurred to make the person subject to examination of qualifications cease to meet the requirements for maintaining qualifications in respect to the financial company, it shall report such fact to the Financial Services Commission, without delay.

(3) If the Financial Services Commission finds it necessary for the examination under paragraph (1), it may request a financial company or a person subject to examination of qualifications to provide necessary data or information.

(4) If the Financial Services Commission finds, as a result of the examination under paragraph (1), that a person subject to examination of qualifications fails to meet the requirements for maintaining qualification, it may order the person to take all or some of the following measures to secure soundness in the management of the relevant financial company within a specified period not exceeding six months:

1. Measures to meet the requirements for maintaining qualifications;

2. Measures for preventing a conflict of interest, including restrictions on transactions with the person subject to examination

Article 32

of qualificatis;

3. Other measures prescribed by Presidential Decree as measures deemed necessary for soundness in the management of a financial company.

(5) If the Financial Services Commission finds, as a result of the examination under paragraph (1), that a person subject to examination of qualifications falls under either of the following subparagraphs and that it is impracticable to maintain sound financial order and the soundness of the relevant financial company in view of the degree of the violation of a statute, it may order the person subject to examination of qualifications not to exercise his/her voting right for at least 10/100 of the total number of outstanding voting shares of the financial company (referring to shares held by a corporation, out of outstanding voting shares of the relevant financial company, if the largest investor is a corporation), during the period specified by Presidential Decree within the maximum of five years, out of shares held by the person subject to examination of qualifications:

1. Where a sentence of imprisonment without labor for at least one year or any heavier punishment imposed upon the person subject to examination of qualifications for a violation of any of the statutes specified in paragraph (1) has become final and conclusive;

2. Any other case specified by Presidential Decree for maintaining sound financial order.

Article 32

(6) Notwithstanding Article 38 of the Criminal Act, a crime committed by a person in violation of any of the statutes specified in paragraph (1) and another crime concurrently committed by the person shall be separately examined, and sentences for such crimes shall be pronounced separately.

(7) Detailed matters necessary for the methods and procedures for the matters under paragraphs (1) through (5) shall be prescribed by Presidential Decree.

CHAPTER VI SPECIAL CASES CONCERNING EXERCISE OF MINORITY SHAREHOLDERS' RIGHTS

Article 33 (Minority Shareholders' Rights)

(1) A person who has owned shares equivalent to at least 10/10,000 of the total number of outstanding shares of a financial company continuously for the six preceding months, as prescribed by Presidential Decree, may exercise the shareholder's rights under Article 363-2 of the Commercial Act.

(2) A person who has owned shares equivalent to at least 150/10,000 of the total number of outstanding shares of a financial company (at least 75/10,000, in cases of a financial company specified by Presidential Decree) continuously for the six preceding months, as prescribed by Presidential Decree, may exercise the shareholder's rights under Articles 366 and 467 of the Commercial Act. In such cases, the exercise of the shareholder's

Article 33

rights under Article 366 of the Commercial Act shall be based on voting rights.

(3) A person who has owned shares equivalent to at least 250/100,000 of the total number of outstanding shares of a financial company (at least 125/100,000, in cases of a financial company specified by Presidential Decree) continuously since six months before, as prescribed by Presidential Decree, may exercise the shareholder's rights under Articles 385 (including cases to which the same Article shall apply mutatis mutandis pursuant to Article 415 of the Commercial Act) and 539 of the Commercial Act.

(4) A person who has owned shares equivalent to at least 250/100,000 of the total number of outstanding shares of a financial company (at least 125/100,000, in cases of a financial company specified by Presidential Decree) continuously since six months before, as prescribed by Presidential Decree, may exercise the shareholder's rights under Article 402 of the Commercial Act of the Commercial Act.

(5) A person who has owned shares equivalent to at least 1/100,000 of the total number of outstanding shares of a financial company continuously since six months before, as prescribed by Presidential Decree, may exercise the shareholder's rights under Article 403 of the Commercial Act (including cases to which the same Article shall apply mutatis mutandis pursuant to Article 324, 415, 424-2, 467-2, or 542 of the same Act).

(6) A person who

Article 33

has wned shares equivalent t at least 50/100,000 f the total number of outstanding shares of a financial company (at least 25/100,000, in cases of a financial company specified by Presidential Decree) continuously for the six preceding months, as prescribed by Presidential Decree, may exercise the shareholder's rights under Articles 466 of the Commercial Act.

(7) Where a shareholder referred to in paragraph (5) wins a lawsuit filed pursuant to Article 403 of the Commercial Act (including cases to which the same Article shall apply mutatis mutandis pursuant to Article 324, 415, 424-2, 467-2, or 542 of the same Act) may claim litigation costs and all other expenses incurred in litigation from the financial company.

(8) Paragraphs (1) through (6) shall not affect the exercise of minority shareholders' rights under the relevant provisions of the Commercial Act as referred to in each paragraph.

CHAPTER VII DISPOSITIONS AND PROCEDURE FOR SANCTIONS

Article 34 (Measures against Financial Company)

(1) If a financial company falls within any of the cases referred to in the attached Table, the Financial Services Commission may take any of the following measures:

1. An order to take measures for rectifying an illegal act;

Article 34

2. An order to stop an illegal act;

3. A warning to a financial company;

4. A caution to a financial company;

5. Other measures prescribed by Presidential Decree necessary for rectifying or preventing an illegal.

(2) Notwithstanding paragraph (1), a financial company referred to in subparagraph 1 (a), (c), or (e) of Article 2 shall be subject to the following subparagraphs, if it falls within a case referred to in any subparagraph of the attached Table:

1. The Financial Services Commission may take the measures specified in either of paragraph (1) 1 or 5 against a financial company referred to in subparagraph 1 (a) of Article 2, with recommendation of the Governor of the Financial Supervisory Service, or may authorize the Governor of the Financial Supervisory Service to take the measures specified in any provision of paragraph (1) 2 through 4 against such financial company;

2. The Financial Services Commission may take the measures specified in any subparagraph of paragraph (1) against a financial company referred to in subparagraph 1 (c) or (e) of Article 2, upon recommendation by the Governor of the Financial Supervisory Service, or may authorize the Governor of the Financial Supervisory Service to take the measures specified

Article 34

in paragraph (1) 3 or 4 against such financial company.

Article 35 (Disciplinary Measures against Executive Officers and Employees)

(1) If an executive officer of a financial company (excluding operating officers; the same shall apply hereafter in this Article) falls within any subparagraph of the attached Table, the Financial Services Commission may take any of the following measures:

1. A request for dismissal;

2. Suspension of performance of duties for not more than six months or appointment of an administrator who shall act on behalf of the executive officer;

3. A warning of reprimand;

4. A cautionary warning;

5. A caution.

(2) If an executive officer of a financial company (excluding operating officers; the same shall apply hereafter in this Article) falls within any subparagraph of attached Table, the Financial Services Commission may request the financial company to take any of the following measures:

1. Removal from

Article 35

office;

2. Suspension from office for not more than six month;

3. Salary reduction;

4. Reprimand;

5. Caution.

(3) Notwithstanding paragraph (1), the following subparagraphs shall apply to an executive officer of a financial company referred to in subparagraph 1 (a), (c), or (e) of Article 2:

1. The Financial Services Commission may take the measures specified in either of paragraph (1) 1 or 2 against an executive member of a financial company referred to in subparagraph 1 (a) of Article 2, with recommendation of the Governor of the Financial Supervisory Service, or may authorize the Governor of the Financial Supervisory Service to take the measures specified in any provision of paragraph (1) 3 through 5 against such executive officer;

2. The Financial Services Commission may take the measures specified in any subparagraph of paragraph (1) against an executive member of a financial company referred to in subparagraph 1 (c) or (e) of Article 2, with recommendation of the Governor of the Financial Supervisory Service, or may authorize the Governor of the Financial Supervisory Service to take the measures specified in any provision of paragraph

Article 35

(1) 3 through 5 against such executive officer.

(4) Notwithstanding paragraph (2), the following subparagraphs shall apply to an employee of a financial company referred to in subparagraph 1 (a), (c), or (e) of Article 2:

1. The Governor of the Financial Supervisory Service may request a financial company to take measures specified in any subparagraph of paragraph (2) against an employee of the financial company;

2. The Financial Services Commission may request a financial company to take the measures specified in any subparagraph of paragraph (2), upon recommendation by the Governor of the Financial Supervisory Service, or may authorize the Governor of the Financial Supervisory Service to make such request.

(5) When the Financial Services Commission takes a measure against an executive officer or employee of a financial company under any provision of paragraphs (1) through (4) or makes a request to take such measure, it may take a measure simultaneously against the executive officer or employee who is responsible for management and supervision of such executive officer or employee or may also make a request to take such measure against such executive officer or employee simultaneously: Provided, That a measure against a person who is responsible for management and supervision may be mitigated or remitted, if the person has exercised reasonable care for management and

Article 35

supervision of such executive officer or employee.

(6) If it is found that an executive officer who had already retired from a financial company or an employee who had already resigned from a financial company would have been punished by a measure specified in any provision of paragraphs (1) through (5), if he/she was in service or in employment, the Financial Services Commission may notify the head of the relevant financial company of details of the measure that it considers it could have taken or may request the Governor of the Financial Supervisory Service to give notice thereof. Upon receipt of such notice, the head of the financial company shall notify the relevant executive officer or employee thereof.

Article 36 (Hearings)

When the Financial Services Commission intends to make a request to dismiss an executive officer from office or remove an employee from office as a measure, from among the measures specified in Article 35 (1) through (5), it shall hold hearings.

Article 37 (Petition for Objection)

(1) A person who objects to a measure taken under Article 34 or 35 (1) through (5) (excluding a request for dismissing or removing a person from office) may file a petition for objection with the Financial Services Commission, specifying the reasons therefor, within 30 days from the date he/she is notified of the

Article 36 ~ 37

measure.

(2) The Financial Services Commission shall make a decision on a petition filed for objection under paragraph (1) within 60 days: Provided, That the period may be extended by not more than 30 days, if it is impossible to make a decision within the specified period due to exceptional circumstances.

Article 38 (Recording, Inquiry, etc.)

(1) When the Financial Services Commission takes a measure under Article 34 or 35, it shall record details thereof and shall maintain and manage such records.

(2) When a financial company takes a measure against any of its executive officers or employees in compliance with a request of the Financial Services Commission to take the measure or is notified of a measure under Article 35 (6), it shall record details thereof and shall maintain and manage such records.

(3) A financial company or any of its executive officers or employees (including persons who served as an executive officer or employee) may inquire about whether a measure has been taken against it or him/her under Article 34 or 35 and details of such measure from the Financial Services Commission or the relevant financial company.

(4) Upon receipt of an inquiry made under paragraph (3), the Financial Services Commission or the relevant financial company shall give notice of whether a measure has been taken and the details

Article 38

of such measure to the inquirer, in the absence of good cause to the contrary.

Article 39 (Charge for Compelling Performance)

(1) If a person who was ordered to dispose of shares under Article 31 (3) fails to comply with such order within the specified period, the Financial Services Commission may impose an amount not exceeding the amount calculated by multiplying the book value of the shares that the person shall dispose of by 3/10,000 per day from the date immediately after the end of the period of performance as a charge for compelling performance.

(2) A charge for compelling performance shall be imposed for the period from the date immediately after the end of the period of performance specified in the order to dispose of shares to the date on which shares are disposed of as ordered (referring to the date of delivery of share certificates).

(3) If a person who was ordered to dispose of shares does not perform as ordered even after 90 days from the end of the period of performance specified in the order to dispose of shares, the Financial Services Commission shall collect charges for compelling the performance on the date immediately after every 90 days.

(4) Articles 65-4 through 65-8, 65-10, and 65-11 of the Banking Act shall apply mutatis mutandis to the imposition and collection of charges for compelling the performance.

(5) Other matters

Article 39

necessary for the imposition, payment, collection, refund, etc. of charges for compelling the performance shall be prescribed by Presidential Decree.

CHAPTER VIII SUPPLEMENTARY PROVISIONS

Article 40 (Entrustment of Authority)

The Financial Services Commission may entrust part of its authority under this Act to the Governor of the Financial Supervisory Service, as prescribed by Presidential Decree.

Article 41 (Public Disclosure)

(1) Each financial company shall give public notice of the matters specified by Presidential Decree with respect to general meetings of shareholders, including the attendance rate of shareholders and the ratio of “yeas” and “nays” to each item on the agenda.

(2) When a shareholder exercises the shareholder's rights under Article 33, the financial company shall give public notice thereof.

CHAPTER IX PENALTY PROVISIONS

Article 42 (Penalty Provisions)

(1)Any of the following persons shall be punished by imprisonment for not more than one year or by a fine not exceeding 10 million won:

Article 40 ~ 42

1. A person who has failed to obtain approval or a person who has failed to file an application for approval, in violation of Article 31 (1) or (2);

2. A person who violates an order to dispose of shares under Article 31 (3).

(2) The imprisonment and the fine specified in paragraph (1) may be imposed concurrently.

(3) If the representative of a corporation or an agent, employee, or servant who works for a corporation or for an individual commits a violation under paragraph (1) in connection with the business of the corporation or individual, not only shall such offender be punished accordingly, but the corporation or individual also shall be punished by the fine specified in the relevant Article: Provided, That the foregoing shall not apply where the corporation or individual has not neglected reasonable care and supervision over the relevant business, to prevent such offense.

Article 43 (Administrative Fine)

(1) Any of the following persons shall be subject to an administrative fine not exceeding 50 million won:

1. A person who appoints or dismisses a major operating officer without a resolution of the board of directors, in violation of Article 8 (1);

2. A person who

Article 43

fails t fulfill the duty t appint the utside directors specified in Article 12 (1) or (2), in violation of either of the aforementioned paragraphs;

3. A person who fails to meet any of the requirements for the composition of the board of directors under Article 12 (1) or (2), in violation of Article 12 (3);

4. A person who fails to appoint a senior outside director, in violation of Article 13 (2);

5. A person who interferes with business operations of a senior outside director or refuses to cooperate with a senior outside director, in violation of Article 13 (4);

6. A person who fails to establish a committee within the board of directors, in violation of Article 16 (1) or the proviso to Article 16 (2);

7. A person who fails to have a majority of members of a committee comprised of outside directors, in violation of Article 16 (3);

8. A person who fails to recommend any candidate for an executive officer, in violation of Article 17 (1);

9. A person violates Article 17 (2) in organizing a committee for recommendation of candidates for executive officers;

10. A person

Article 43

who fails to appoint an executive officer in accordance with Article 17 (3);

11. A person who fails to include a candidate recommended as an outside director by a shareholder who meets the requirements for exercising the shareholder's right to make a proposal, in violation of Article 17 (4);

12. A person who fails to establish an audit committee that meets all the requirements prescribed in Article 19 (1) or (2), in violation of either of the aforementioned paragraphs;

13. A person who fails to meet any of the requirements for the composition of an audit committee under Article 19 (1) or (2), in violation of Article 19 (3);

14. A person who fails to observe any of the procedures for appointing audit committee members, in violation of Article 19 (4) through (7);

15. A person who fails to have a full-time auditor, in violation of Article 19 (8);

16. A person who fails to prepare internal control standards, in violation of Article 24 (1);

17. A person who fails to have a compliance officer, in violation of Article 25 (1);

18. A person

Article 43

who fails to appoint a compliance officer in accordance with Article 25 (2);

19. A person who fails to follow the procedure for adopting a resolution under Article 25 (3) (including cases to which the aforementioned paragraph shall apply mutatis mutandis pursuant to Article 28 (2)) in appointing or dismissing a compliance officer;

20. A person who appoints a compliance officer, in violation of Article 25 (5);

21. A person who fails to have risk management standards, in violation of Article 27 (1);

22. A person who fails to have a risk manager, in violation of Article 28 (1);

23. A person who fails to make a report, in violation of Article 32 (2), or who makes a false report;

24. A person who fails to comply with a request from the Financial Services Commission to provide data or information under Article 32 (3) or provides false data or information;

25. A person who fails to comply with an order to rectify or stop an illegal act or who does not take a measure under Article 34;

26. A person

Article 43

who fails to comply with a request to take a measure against an executive officer or employee under Article 35.

(2) Any of the following persons shall be subject to an administrative fine of not more than 30 million won:

1. A person who fails to verify whether an executive officer meets the requirements for qualifications, in violation of Article 7 (1);

2. A person who authorize another person to hold concurrent office or who holds concurrent office, in violation of Article 10;

3. A person who fails to provide data or information, in violation of Article 18 (including cases to which the aforementioned Article shall apply mutatis mutandis pursuant to Article 20 (4)), or who provides false data or information;

4. A person who fails to establish a responsible department, in violation of Article 20 (2);

5. A person who fails tot submit a report, in violation of Article 20 (3);

6. A person who fails to implement separate standards for remuneration of compliance officers and for the evaluation of compliance officers, in violation of Article 25 (6) (including cases

Article 43

to which the aforementioned paragraph shall apply mutatis mutandis pursuant to Article 28 (2));

7. A compliance officer or a risk manager who takes charge of a business affair referred to in any subparagraph of Article 29 or a person who assigns such business affair to a compliance officer or a risk manager, in violation of Article 29.

(3) Any of the following persons shall be subject to an administrative fine not exceeding 10 million won:

1. A person who fails tot give public notice or make a report with regard to the appointment of an executive officer and whether the executive officer meets requirements for qualifications, in violation of Article 7 (2), or gives false public notice or makes a false report with regard to the appointment;

2. A person who fails to give public notice or make a report with regard to the dismissal of an executive officer (including resignation), in violation of Article 7 (3), or who gives false public notice or makes a false report with regard to the dismissal;

3. A person who fails to obtain approval for holding concurrent office, in violation of the main sentence of Article 11 (1);

4. A person who

Article 43

fails t make a reprt n cncurrent ffice, in vilation of the proviso to Article 11 (1) or (2), or who makes a false report on concurrent office;

5. A person who fails to give public notice of the grounds for appointing a person who is not an outside director as chairperson of the board of director, in violation of Article 13 (2), or who give false public notice with regard to such appointment;

6. A person who fails to give public notice in accordance with Article 14 (3) or who gives false public notice;

7. A person who fails to publish an annual report under Article 22 (4) or (5) or who publishes a false annual report;

8. A person who fails to report the appointment or dismissal of a compliance officer or a risk manager, in violation of Article 30 (2), or who makes a false report on the appointment or dismissal;

9. A person who fails to give public notice with regard to a general meeting of shareholders, in violation of Article 41 (1), or who gives false public notice with regard to such meeting;

10. A person who fails to give public notice of details of a shareholder's exercise of the shareholder's rights, in violation of Article 41 (2), or who gives false public notice with

Article 43

regard to suc details;

11. An executive officer or an employee of a financial company, who neglects his/her duty to keep, submit, report, publish, or disclose a document under this Act.

(4) Administrative fines specified in paragraphs (1) through (3) shall be imposed and collected by the Financial Services Commission, as prescribed by Presidential Decree.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one year after the date of its promulgation.

Article 2 (Applicability to Requirements for Qualifications for Executive Officers and Reporting on Whether Requirements for Qualifications are Met)

@Articles 5 through 7 and 19 (10) shall apply, beginning with the first executive officer appointed (or consecutively appointed) after this Act enters into force.

Article 3 (Applicability to Appointment of Major Operating Officers)

@Article 8 shall apply, beginning with the first major operating officer appointed

Addenda

after this Act enters into force.

Article 4 (Applicability to Approval and Reporting of Concurrent Office)

@Article 11 shall apply, beginning with the first case where a person holds concurrent office after this Act enters into force.

Article 5 (Applicability to Appointment of Executive Officers)

@Article 17 shall apply, beginning with the first executive officers appointed after this Act enters into force.

Article 6 (Applicability to Appointment of Compliance Officers)

@Article 26 shall apply, beginning with the first compliance officers appointed after this Act enters into force.

Article 7 (Applicability to Examination of Qualifications for Largest Shareholder)

@Article 32 shall apply, beginning with the case where a person fails to meet requirements for maintaining qualification due to the first event that occurs after this Act enters into force.

Article 8 (Transitional Measures concerning Change of Requirements for Qualifications for Executive Officers)

Addenda

Notwithstanding Articles 5, 6, and 19 (10), former provisions of the Banking Act, the Financial Investment Services and Capital Markets Act, the Insurance Business Act, the Mutual Savings Banks Act, the Specialized Credit Finance Business Act, and the Financial Holding Companies Act shall apply to qualifications for executive officers who work for a financial company as at the time this Act enters into force, until the end of their respective terms of office.

Article 9 (Transitional Measure concerning Restrictions on Concurrent Office)

Notwithstanding Articles 6 and 10, a person who holds concurrent office as an executive officer or employee of another company, while serving as an executive officer of a financial company, as at the time this Act enters into force, shall be deemed to hold concurrent office under this Act until the end of his/her term of office as an executive officer of a financial company or until the end of his/her term of office as an executive officer of another company, whichever comes earlier (if the term of office expires not less than three years after this Act enters into force or if an executive officer holds concurrent office as an employee of another company, the term of office shall be deemed to expire on the third anniversary of the enforcement date of this Act).

Article 10 (Transitional Measures concerning Appointment, Dismissal, etc. of Major Operating Officers)

Addenda

Notwithstanding Article 8, a major operating officer who serves or works for a financial company as at the time this Act enters into force shall be deemed a major operating officer appointed under this Act until the end of his/her term of office (if the term of office expires not less than three years after this Act enters into force or if an executive officer holds concurrent office as an employee of another company, the term of office shall be deemed to expire on the third anniversary of the enforcement date of this Act).

Article 11 (Transitional Measures concerning Formation and Management of Board of Directors)

Every financial company (excluding financial companies that fall under Article 3 (3)) shall form a board of directors in accordance with Article 12 until the date of the first general meeting of shareholders held after this Act enters into force.

Article 12 (Transitional Measures concerning Establishment of Committees within Board of Directors)

Every financial company (excluding the financial companies that fall under Article 3 (3)) shall establish a committee for recommendation of candidates for executive officers, an audit committee, a risk management committee, and a remuneration committee in accordance with Article 16 by the date of the first general meeting of shareholders held after this Act enters into force.

Addenda

Article 13 (Transitional Measures concerning Appointment of Audit Committee Members and Full-Time Auditors)

(1) Every financial company (excluding the financial companies that fall under Article 3 (3)) shall appoint audit committee members in accordance with Article 19 (1) through (7) and (10) until the date of the first general meeting of shareholders held after this Act enters into force.

(2) A financial company specified by Presidential Decree pursuant to the main sentence of Article 19 (8) shall appoint full-time auditors in accordance with Article 19 (8) through (10) until the date of the first general meeting of shareholder held after this Act enters into force.

Article 14 (Transitional Measures concerning Compliance Officers)

(1) A compliance officer who serves or works for a financial company as at the time this Act enters into force shall be deemed a compliance officer appointed under this Act until the end of his/her term of office (if the term of office expires not less than two years after this Act enters into force or if a compliance officer holds concurrent office as an employee of another company, the term of office shall be deemed to expire on the second anniversary of the enforcement date of this Act).

(2) Notwithstanding Article 26, former provisions of the Banking Act, the Financial

Addenda

Investment Services and Capital Markets Act, the Insurance Business Act, the Mutual Savings Banks Act, the Specialized Credit Finance Business Act, and the Financial Holding Companies Act shall apply to requirements for qualifications for compliance officers under paragraph (1).

Article 15 (Transitional Measures concerning Disciplinary Measures)

The former provisions shall apply to the violations of former provisions of the Banking Act, the Financial Investment Services and Capital Markets Act, the Insurance Business Act, the Mutual Savings Banks Act, the Specialized Credit Finance Business Act, and the Financial Holding Companies Act, committed before this Act enters into force.

Article 16 (Transitional Measures concerning Administrative Fines)

The former provisions shall apply to violations of the former provisions of the Banking Act, the Financial Investment Services and Capital Markets Act, the Insurance Business Act, the Mutual Savings Banks Act, the Specialized Credit Finance Business Act, and the Financial Holding Companies Act, committed before this Act enters into force.

Article 17 (Transitional Measures concerning Incompetent Persons, etc.)

A person declared

Addenda

incompetent or quasi-incompetent before this Act enters into force shall be deemed a person under adult guardianship or a person under limited guardianship, respectively, under this Act until such declaration is revoked or invalidated.

Article 18 Omitted.

ADDENDA <Act No. 13613, Dec. 22, 2015>

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)

Articles 2 through 4 Omitted.

ADDENDA <Act No. 14129, Mar. 29, 2016>

Article 1 (Enforcement Date)

This Act shall enter into force four months after the date of its promulgation. (Proviso Omitted.)

Articles 2 through 8 Omitted.

ADDENDA <Act No. 14271, May 29, 2016>

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)

Addenda

Articles 2 through 5 Omitted.

Addenda

ACT ON GOVERNANCE STRUCTURE OF FINANCIAL COMPANIES
- Articles
- Addenda

1. 금융회사의 지배구조에 관한 법률

2025-10-01 / 제21065호 / 시행 2026-01-02
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

2. 금융회사의 지배구조에 관한 법률

2024-01-02 / 제19913호 / 시행 2024-07-03
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

3. 금융회사의 지배구조에 관한 법률

2023-09-14 / 제19700호 / 시행 2023-09-14
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

4. 금융회사의 지배구조에 관한 법률

2017-04-18 / 제14818호 / 시행 2017-10-19
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

5. 금융회사의 지배구조에 관한 법률

2016-05-29 / 제14271호 / 시행 2016-08-01
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

6. 금융회사의 지배구조에 관한 법률

2016-03-29 / 제14219호 / 시행 2016-08-01
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

7. 금융회사의 지배구조에 관한 법률

2015-12-22 / 제13613호 / 시행 2016-08-01
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

8. 금융회사의 지배구조에 관한 법률

2015-07-31 / 제13453호 / 시행 2016-08-01
ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES