A third set of revisions to the Commercial Act centered on mandating the cancellation of treasury shares passed a plenary meeting of the National Assembly's Legislation and Judiciary Committee, led by the Democratic Party.

The committee held a plenary meeting on Feb. 23 and approved the bill by 11 votes to 6 among 17 members present. The People Power Party voted against it en bloc during the vote.

Under the revisions, if a company acquires its own shares, it must in principle cancel them within 1 year, and within 1 year and 6 months for shares already held. Violations would be subject to administrative fines.

Exceptions apply when certain reasons are recognized, such as employee compensation and operating an employee stock ownership plan, and when a holding and disposal plan signed and sealed by all directors is approved at the annual general meeting of shareholders each year.

For companies in sectors such as broadcasting and telecommunications that face limits on foreign shareholdings, the bill requires disposal within 3 years from the law’s effective date.

The Democratic Party has pushed the revisions, saying canceling treasury shares reduces the number of shares in circulation and increases earnings per share, effectively boosting shareholders’ interests. The purpose of the revision includes addressing the so-called "Korea discount."

The People Power Party and the business community, by contrast, have opposed a uniform mandate, arguing that domestic companies should not be required to cancel treasury shares across the board if they are to secure a minimum means of defense when exposed to hostile attacks by so-called corporate raiders such as hedge funds.

The Democratic Party plans to put the bill to a vote at a plenary session running from Feb. 24 to March 3.