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Concerns are mounting in Korea’s business sector as lawmakers prepare to push through a so-called “third commercial law amendment,” following the passage of the second amendment and labor law revisions. The new proposal, dubbed the “even tougher commercial law,” would mandate the cancellation of treasury shares, raising fears that companies will be exposed to hostile takeover attempts.

On August 25, the National Assembly passed the second commercial law amendment, which strengthens shareholder rights, including expanded cumulative voting and mandatory separate election of audit committee members. The ruling Democratic Party’s special committee on the KOSPI 5000 announced it would immediately hold a forum on “rational improvements to the treasury stock system,” with options ranging from mandatory cancellation within a set period to restrictions on disposal to prevent abuse in strengthening management control.

The party is also considering introducing a stewardship code, which would encourage institutional investors such as the National Pension Service to play a more active role in corporate governance.

Businesses reacted sharply, warning that back-to-back reforms — the first and second amendments, the Yellow Envelope Act, and now a third amendment — could destabilize management. Lee Chan-hee, head of Samsung’s Compliance Committee, said recently that companies and workers alike “need time to adjust before the laws take effect.”

Experts warn that mandatory treasury share cancellations could leave companies vulnerable to hedge funds posing as minority shareholders, pursuing hostile M&A tactics for short-term profit before exiting. “If the third amendment passes, firms will find it difficult not only to pursue aggressive management but also to maintain long-term strategies,” said Kim Jung-ho, former head of the Center for Free Enterprise.

Business representatives stress that mid-sized companies will be hit harder than conglomerates due to limited resources. One executive said, “There is concern that companies may ultimately be sold off to foreign buyers. Supplementary legislation will be necessary to ease the burden.”

Another industry figure warned that reforms could heighten risks of foreign capital challenging management control and impose excessive liability on executives, stifling innovation.

Some academics argue that while the amendments aim to improve corporate governance, the impact depends heavily on timing and economic conditions. “Strengthening minority shareholders’ rights and curbing the power of controlling shareholders may sound like advanced governance, but it’s uncertain whether this aligns with Korea’s industrial reality,” said Lee Seok-geun, professor at Sogang University. He cautioned that if reforms focus solely on shareholder returns while Korea lags behind China’s AI and manufacturing industries, “innovation and growth will be constrained.”