ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

영문법령 불러오는 중…

ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES — 법갈피

Article 3(Scope of application) #

(1) 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");

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 pursuant to statutes and regulations 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.: <Amended on Jan. 2, 2024>

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

2. Provisions concerning the establishment of a committee within the board of directors under Article 16(1) through (3);

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

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

4-2. Matters concerning the Internal Control Committee established under Article 22-2;

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 5(Qualifications for executive officers) #

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

1. A minor, a 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 or 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 or she was sentenced under this Act or any other finance-related statutes or regulations 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, etc. of, business under a finance-related statute or regulation;

b. A measure of timely correction under Article 10(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 not exceeding 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 or her under any finance-related statute or regulation for his or 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 or her position; provided, a person who falls within the category specified in paragraph (1)7 shall not forfeit his or her position in cases specified by Presidential Decree.

(3) The executive officers referred to in Article 30-2(1) shall be those who have expertise, work experience, honesty, and reliability suitable for performing their responsibilities prescribed by the accountability structure map referred to in Article 30-3(1). <Added on Jan. 2, 2024>

Article 6(Qualifications for outside directors) #

(1) The following persons shall be disqualified from being an outside director of a financial company; provided, 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 or she becomes an outside director: <Amended on Dec. 29, 2020>

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 12 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 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 or 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 or her position.

(3) An outside 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 10(Restriction on concurrent office) #

(1) No full-time executive officer of a financial company shall be engaged 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 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 1a 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, an executive officer or employee of a bank may concurrently hold office as an executive officer or employee of a subsidiary bank under Article 37(5) of the Banking Act.

(4) Notwithstanding other statutes or regulations, 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; hereinafter 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;

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 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, 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 business affairs of which the executive officer or employee shall take charge in the company in which he or 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 concurrently hold office and its subsidiary, etc. involved 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, 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.

Article 19(Composition of Audit Committee and appointment 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(4), outside directors shall be at least 2/3 of the members of the audit committee. <Amended on Jan. 2, 2024>

(3) If the number of audit committee members fails to meet the requirements for 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 shall not exercise his or 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, 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, 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, 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 outside director, notwithstanding Article 6(1)3.

Article 26(Requirements for qualification for compliance officers) #

(1) To qualify as a compliance officer, a person shall meet all the following requirements: <Amended on Dec. 22, 2015; Oct. 1, 2025>

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 or 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 or regulation during the preceding five years;

2. The person shall meet the requirements in any of the following items; provided, a person in whose case five years have not passed since he or 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 requirements prescribed in the latter part of item d), 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-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 or her qualifications for at least five years;

d. A person who has worked for the Ministry of Economy 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 conduct business affairs of an insolvent financial company under subparagraph 5 of Article 2 of the Depositor Protection Act, an insolvency-threatened financial 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 or she shall forfeit the position.

Article 28(Appointment, dismissal 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 or 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 or regulation during the last five years;

2. The person shall meet the requirements in any of the following items; provided, a person in whose case five years have not passed since he or 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:

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 determined by the Financial Services Commission, for at least seven years;

d. Other persons specified by Presidential Decree who are qualified equivalent to those under items a through c.

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

Article 30-2(Duties to manage internal control of executive officers) #

(1) Executive Officers of a financial company (including executive Officers of other companies who have a de facto influence on the responsibilities of the relevant financial company, but excluding executive officers prescribed by Presidential Decree or employees prescribed by Presidential Decree in consideration of the size of assets of the financial company, the characteristics of positions in charge of the financial company, etc.; hereafter the same shall apply in this Article and Articles 30-3 and 35-2) shall take the following management measures to ensure that internal control and risk management (hereinafter referred to as "internal control, etc.") can effectively operate in connection with their own responsibilities specified in the responsibility structure map under Article 30-3(1):

1. Inspection on whether the internal control standards and risk management standards under this Act and finance-related statutes and regulations (hereinafter referred to as "internal control standards, etc.") have been properly prepared;

2. Inspection on whether the internal control standards, etc. are effectively executed and operated;

3. Inspection on whether executives and employees are faithfully complying with statutes or regulations, internal control standards, etc.;

4. Necessary measures, such as correction and improvement of violations of statutes or regulations, internal control standards, etc., or inadequate matters concerning internal control, etc., which he or she has become aware of in the course of conducting an inspection under subparagraphs 1 through 3;

5. Management measures prescribed by Presidential Decree for the effective operation of internal control, etc., which are measures equivalent to those prescribed in subparagraphs 1 through 4.

(2) An executive officer of a financial company shall report the following matters to the representative director (where an executive director under the Commercial Act is appointed, including the representative executive director; in cases of a domestic branch of a foreign financial company, including its representative; hereinafter referred to as "representative director, etc."):

1. Details and results of management measures taken under the subparagraphs of paragraph (1);

2. Matters concerning internal control, etc. which he or she has become aware of in the course of taking management measures under paragraph (1);

3. Other matters prescribed by Presidential Decree as equivalent to those provided in subparagraphs 1 and 2;

(3) Matters necessary for the management measures under paragraph (1), reporting under paragraph (2), etc. shall be prescribed by Presidential Decree.

[This Article Added on Jan. 2, 2024]

Article 30-3(Responsibility chart) #

(1) The representative director, etc. of a financial company shall prepare a document on the distribution of responsibilities prescribed by Presidential Decree (hereinafter referred to as "responsibility chart") as prescribed by Presidential Decree, which are the matters prescribed by this Act, the Commercial Act, the Criminal Act, finance-related statutes or regulations, and other finance-related statutes and regulations prescribed by Presidential Decree, for executive officers who are required to perform their management obligations under Article 30-2 and each position of an executive officer.

(2) The responsibility chart shall meet the following requirements:

1. There shall be absolutely an executive officer in charge of each responsibility under paragraph (1);

2. There shall not be two or more executive officers in charge of each responsibility under paragraph (1);

3. Requirements prescribed by Presidential Decree for the effective operation of internal control, etc., which are requirements equivalent to those referred to in subparagraphs 1 and 2.

(3) Where the representative director, etc. intends to prepare a responsibility chart, he or she shall refer the case to the board of directors for resolution; provided, in cases of a domestic branch of a foreign financial company, the procedures prescribed by Presidential Decree shall apply.

(4) A financial company shall submit a responsibility chart prepared by the representative director, etc. to the Financial Services Commission.

(5) Where a responsibility chart submitted pursuant to paragraph (4) falls under any of the following cases, the Financial Services Commission may request the submission of such responsibility chart by correcting or supplementing the details thereof:

1. Where it fails to have the proper form;

2. Where important matters are omitted;

3. Where the details of the description are unclear;

4. Matters determined and publicly notified by the Financial Services Commission, which are equivalent to subparagraphs 1 through 3.

(6) Paragraphs (1) through (5) shall also apply where there is any change prescribed by Presidential Decree in the details of the submitted responsibility chart.

(7) Necessary matters concerning the methods for preparing a responsibility chart under paragraphs (1) through (6), details to be stated, methods of submission, requests for correction or supplementation, etc. shall be prescribed and publicly notified by the Financial Services Commission.

[This Article Added on Jan. 2, 2024]

Article 30-4(Duties to manage internal control of representative directors) #

(1) The representative director, etc. of a financial company shall be the final person responsible for the overall execution and operation of internal control, etc. and shall take the following comprehensive management measures effectively:

1. Implementation and operation of policies, basic guidelines and strategies such as internal control;

2. Inspection of the appropriateness of support for human and material resources necessary for executive officers and employees to comply with statutes and regulations, internal control standards, etc. and the appropriateness of support therefor;

3. Establishment and operation of a management system for information, declaration, reporting, etc. to ensure that the representative director, etc. can properly grasp violations of statutes or regulations, internal control standards, etc. by executive officers and employees;

4. Inspection of whether each executive officer is properly performing management duties under Article 30-2;

5. Inspection of potential risk factors or vulnerable areas prescribed by Presidential Decree, which may cause violations of statutes or regulations or internal control standards, etc. by executive officers and employees;

6. Measures prescribed by Presidential Decree to prevent executive officers and employees from prolonging, repeating, systematically or widely committing violations of statutes or regulations or internal control standards, etc., which are prescribed by Presidential Decree;

7. Necessary measures, such as correction and improvement of violations of statutes or regulations, internal control standards, etc., or inadequate matters concerning internal control, etc., which he or she has become aware of in the course of taking management measures under subparagraphs 1 through 6 and 8;

8. Other measures prescribed by Presidential Decree for the effective operation of internal control, etc.

(2) The representative director, etc. of a financial company shall report the following matters to the board of directors:

1. Details and results of management measures taken under the subparagraphs of paragraph (1);

2. Important matters concerning internal control, etc. which he or she has become aware of in the course of taking management measures under paragraph (1);

3. Important matters to be reported by executive officers under Article 30-2(2);

4. Other matters prescribed by Presidential Decree as equivalent to those provided in subparagraphs 1 and 2.

(3) Matters necessary for the management measures under paragraph (1), reporting under paragraph (2), etc. shall be prescribed by Presidential Decree.

[This Article Added on Jan. 2, 2024]

Article 31(Approval of changes in large shareholders) #

(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, the foregoing shall not apply to any person specified by Presidential Decree.

(2) When the acquisition, 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 or 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 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 of and procedures for the matters under paragraphs (1) through (3) shall be prescribed by Presidential Decree.

Article 32(Examination 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, 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 on eligibility") from among the largest shareholders 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 to as "requirements for maintaining eligibility"), from among requirements for approval of changes, at an interval specified by Presidential Decree.

(2) When a financial company becomes aware that an event has occurred to make the person subject to examination on eligibility cease to meet the requirements for maintaining eligibility 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 on eligibility 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 on eligibility fails to meet the requirements for maintaining eligibility, 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 eligibility;

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

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 on eligibility 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 or regulation, it may order the person subject to examination on eligibility not to exercise his or 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 or regulations specified in paragraph (1) has become final and conclusive;

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

(6) Notwithstanding Article 38 of the Criminal Act, a crime committed by a person in violation of any of the statutes or regulations 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.

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 preceding six 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 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 has owned shares equivalent to at least 50/100,000 of 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 preceding 6 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.

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 Appendix, 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. 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 Appendix, the Financial Services Commission may request the financial company to take any of the following measures:

1. Removal from office;

2. Suspension from office for not more than 6 months;

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 1a,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 in subparagraph 1a 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 in subparagraph 1c 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 (1)3 through 5 against such executive officer.

(4) Notwithstanding paragraph (2), the following subparagraphs shall apply to an employee of a financial company in subparagraph 1a,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 of and supervision over such executive officer or employee or may also make a request to take such measure against such executive officer or employee simultaneously; provided, 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 of and supervision over such executive officer or employee.

(6) Where it is deemed 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 any of the measures specified in paragraphs (1) through (5), if he or she was in service or in employment, the Financial Services Commission (including the Governor of the Financial Services Commission may request to take measures pursuant to paragraphs (3) and (4)) may notify the head of the relevant financial company of details of such measures. In this case, upon receipt of such notice, the head of the financial company shall notify the relevant retired executive officer or resigned employee thereof. <Amended on Apr. 18, 2017>

Article 43(Administrative fine) #

(1) Any of the following persons shall be subject to an administrative fine not exceeding 100 million won: <Amended on Apr. 18, 2017; Jan. 2, 2024>

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 fails to fulfill the duty to appoint the outside directors specified in Article 12(1) or (2), in violation of either of those 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(4);

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 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 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);

22-2. A person who prepares a responsibility chart without going through the procedures under Article 30-3(3)

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 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 not exceeding 30 million won: <Amended on Apr. 18, 2017; Jan. 2, 2024>

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

1-2. A person who fails to publicly disclose or report on the fact and whether the executive officer meets the requirements for qualification, or the reasons therefor, or makes a false public disclosure thereof or false report thereon, in violation of Article 7(2);

1-3. A person who fails to publicly disclose or report on the dismissal from office (including resignation) of an executive officer, or makes a false public disclosure thereof or false report thereon, in violation of Article 7(3);

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

2-2. A person who fails to obtain approval for the holding of concurrent office, in violation of the main sentence of Article 11(1);

2-3. A person who fails to report on the holding of concurrent office, in violation of the proviso to paragraph (1) and paragraph (2) of Article 11;

2-4. A person who fails to publicly disclose the reason for electing a non-outside director as chairperson of the board of directors, or makes a false public disclosure thereof, in violation of Article 13(2);

2-5. A person who fails to publicly disclose, or makes a false public disclosure, in violation of Article 14(3);

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 to submit a report, in violation of Article 20(3);

5-2. A person who fails to publicly disclose an annual report in Article 22(4) and (5), or makes a false public disclosure thereof;

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 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.

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

8-2. A person who fails to submit a responsibility chart, in violation of Article 30-3(4);

9. A person who fails to publicly disclose matters with respect to general meetings of shareholders, or makes a false public disclosure thereof, in violation of Article 41(1);

10. A person who fails to publicly disclose the details of shareholder’s exercise of the shareholder's rights, or makes a false public disclosure thereof, in violation of Article 41(2).

(3) Any executive officer or an employee of a financial company, who neglects his or her duty to keep, submit, report, publish, or disclose a document under this Act shall be subject to an administrative fine not exceeding 20 million won. <Amended on Apr. 18, 2017>

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

ACT ON CORPORATE GOVERNANCE OF FINANCIAL COMPANIES

Article 1(Purpose) #

Article 2(Definitions) #

Article 3(Scope of application) #

Article 4(Relationship to other Acts) #

Article 5(Qualifications for executive officers) #

Article 6(Qualifications for outside directors) #

Article 7(Reporting on conformity with qualifications for executive officers) #

Article 8(Appointment, Dismissal of Major Operating Officer) #

Article 9(Reporting by major operating officer to board of directors) #

Article 10(Restriction on concurrent office) #

Article 11(Approval, reporting of concurrent office) #

Article 12(Composition of board of directors) #

Article 13(Election of chairperson of board of directors) #

Article 14(Management of board of directors) #

Article 15(Authority of board of directors) #

Article 16(Establishment and composition of committees within board of directors) #

Article 17(Committee for recommendation of candidates for executive officers) #

Article 18(Provision of information about outside directors) #

Article 19(Composition of Audit Committee and appointment of audit committee members) #

Article 20(Assistance to Audit Committee or auditor) #

Article 21(Risk Management Committee) #

Article 22(Remuneration Committee, remuneration system) #

Article 22-2(Internal control committee) #

Article 23(Special cases concerning wholly-owned subsidiaries, etc. of financial holding companies) #

Article 24(Internal control standards) #

Article 25(Appointment, dismissal of compliance officers) #

Article 26(Requirements for qualification for compliance officers) #

Article 27(Risk management standards) #

Article 28(Appointment, dismissal of risk managers) #

Article 29(Prohibition of concurrent office) #

Article 30(Duties of financial company to compliance officers and risk managers) #

Article 30-2(Duties to manage internal control of executive officers) #

Article 30-3(Responsibility chart) #

Article 30-4(Duties to manage internal control of representative directors) #

Article 31(Approval of changes in large shareholders) #

Article 32(Examination of qualifications for largest shareholder) #

Article 33(Minority shareholders' rights) #

Article 34(Measures against financial company) #

Article 35(Disciplinary measures against executive officers and employees) #

Article 35-2(Disciplinary measures against violations of duties to manage internal control) #

Article 36(Hearings) #

Article 37(Special cases concerning petition for objection) #

Article 38(Recording, inquiry) #

Article 39(Charge for compelling compliance) #

Article 40(Entrustment of authority) #

Article 41(Public disclosure) #

Article 42(Penalty provisions) #

Article 43(Administrative fine) #