Foreign executives running a Korean subsidiary often assume that decision-making works the same way it does at headquarters. In practice, the Korean Commercial Act imposes specific formalities on how boards and shareholders act, and ignoring them can invalidate decisions or expose directors to liability. Understanding the basic governance framework prevents costly disputes later.
Who Decides What
A Korean stock company allocates authority between the shareholders' meeting, the board of directors, and the representative director. Fundamental matters such as amending the articles, mergers, or large asset transfers belong to the shareholders. Ordinary management decisions sit with the board, while day-to-day execution and signing authority rest with the representative director. Smaller companies may operate with a simplified structure, but the division of powers still matters.
Ordinary and Special Resolutions
Shareholder resolutions come in different thresholds. Ordinary resolutions cover routine items, while special resolutions require a higher supermajority for significant corporate actions. Knowing in advance which threshold applies to a planned decision helps you confirm you actually have the votes before you act.
The board likewise acts by resolution at properly convened meetings, and Korean practice increasingly permits certain decisions to be taken in writing or remotely if the articles allow. Whatever the method, the company should be consistent: improvising the process for one decision and following the rules for the next is exactly the kind of inconsistency a disgruntled shareholder will later exploit.
Getting the Formalities Right
Board and shareholder decisions must usually be documented in proper minutes, with attention to notice periods, quorum, and signature or seal requirements. A decision reached informally over email may be commercially clear but legally vulnerable if a dissenting shareholder later challenges it. For foreign-owned companies, keeping bilingual records and confirming that the representative director's authority is properly registered avoids problems with banks, counterparties, and the commercial registry.
Director Duties and Liability
Directors owe duties of care and loyalty to the company. Decisions that harm the company through negligence, conflicts of interest, or self-dealing can lead to personal liability, and related-party transactions often require board approval. Foreign directors who serve in name only should understand that the role carries real legal responsibility under Korean law, not merely a title.
Practical Steps for a Clean Governance Record
Maintain a calendar of required meetings, prepare agendas and minutes for each, and confirm the correct resolution threshold before voting. Keep the corporate registry current whenever directors or the representative director change. When a significant or related-party transaction is on the table, get advice in advance rather than seeking to fix the paperwork afterward.
Sound governance is not bureaucracy for its own sake; it is what makes your company's decisions legally durable. If you are setting up or running a Korean entity and want your board and shareholder processes to withstand scrutiny, contact our office for guidance tailored to your structure.