A director appointed by an overseas parent may receive a clear instruction from headquarters: approve an intercompany loan, transfer an opportunity, or support a restructuring. The Korean board still needs to evaluate that decision under the duties applicable to the Korean company.

For directors of Korean stock companies, Article 382-3 of the Commercial Act now expressly refers to duties to the company and shareholders. The provision also requires protection of shareholders' collective interests and fair treatment of shareholders. The amendment took effect on July 22, 2025. Commercial Act, Article 382-3 and amendment history.

Start with the Korean company's position

The parent company's commercial objectives are relevant context. They should be accompanied by an assessment of what the proposal means for the Korean company and its shareholders.

This is especially significant in a joint venture or a company with minority investors. A transaction may benefit the group while affecting shareholders differently. The board paper should make those effects visible, explain the business rationale, and identify the alternatives considered.

A wholly owned subsidiary still needs a proper decision process. Ownership by one shareholder does not eliminate the need to consider the company, the transaction, and other applicable legal requirements.

Review conflicts before approving the transaction

An intercompany transaction should be screened for the related-party approval rules as well as the directors' general duties. Article 398 requires advance disclosure and approval for transactions within its specified scope and requires fairness in both substance and procedure. The appropriate approval process also depends on the company's governance structure. Commercial Act, Articles 383 and 398.

For an international group, useful supporting material may include a pricing comparison, the purpose and terms of a loan or guarantee, the benefit expected by the Korean company, and the effect on its financial position. The relevant teams should identify conflicts early enough to determine the proper decision-making process.

Make the board record specific

A short resolution stating that a proposal follows group policy may leave important questions unanswered. A more useful board pack and record should address:

• The proposal and the decision requested from the Korean company.
• The relevant facts, financial terms, and alternatives.
• Benefits and risks for the company and the effect on shareholders.
• Any identified conflicts and the approvals required.
• Questions raised, information supplied, and the reasons for the decision.
• Any dissent and any conditions imposed on implementation.

Accurate minutes matter. Under Article 399, a director who participates in a resolution and whose dissent is not recorded is presumed to have supported it. The record should reflect what actually happened at the meeting. Commercial Act, Article 399.

Check the group's governance documents

Review the shareholder agreement, reserved matters, delegation policies, and internal approval rules for consistency with the Korean company's decision process. A headquarters approval and a Korean corporate approval may serve different functions; the workflow should make clear which decisions each body is being asked to take.

Directors should also understand the scope and limits of any indemnity and directors' and officers' insurance. Neither should be treated as a substitute for assessing the transaction before approval.

A practical pre-meeting question

Could someone reading the board papers later understand why the proposal was considered appropriate for the Korean company and how shareholder interests were assessed?

If the answer is unclear, obtain the missing financial, contractual, or legal information before recording the decision. The resulting paper should support a real deliberation and an accurate account of it.

Related services: Corporate Law and M&A.

This article provides general information on Korean law as reviewed on September 29, 2026. It focuses on stock companies; duties, approvals, and potential liability require review of the particular entity and transaction.