Hello, this is Cheongchul Law Firm.

"I only hold a handful of shares — is there anything I can demand from the company?" It is a question small shareholders ask often. The short answer is yes. To supervise management and protect minority interests, the Commercial Act grants minority shareholder rights to shareholders who meet certain thresholds.

[Contents]

1. Single-shareholder rights and minority shareholder rights differ

2. The main minority rights and their thresholds

3. Listed companies have far lower thresholds

4. Why thresholds exist — and why joining forces works

5. Practical points that are easily missed

1. Single-shareholder rights and minority shareholder rights differ

Shareholder rights fall into two broad categories.

• Single-shareholder rights — exercisable with just one share: voting rights, the right to dividends, actions to rescind or annul resolutions of the general meeting, and the right to enjoin a new share issue.

• Minority shareholder rights — exercisable only by holders of a set percentage of the total issued shares. Because they intervene directly in management, thresholds apply.

So neither “a shareholder can do anything” nor “a small shareholder can do nothing” is accurate. The shareholding you need depends on the right you want to exercise.

2. The main minority rights and their thresholds

For an unlisted company, the principal rights and thresholds are as follows.

• Inspection and copying of accounting books — 3% (Commercial Act Article 466(1)). A holder of 3% or more may demand inspection or copying of the accounting books and records by a written request stating reasons.

• Requisition of an extraordinary general meeting — 3% (Article 366(1)). By submitting to the board a document or electronic document stating the agenda and the reasons for convening.

• Application to appoint an inspector — 3% (Article 467(1)). Where there is reason to suspect misconduct or a serious violation of law or the articles in the conduct of business, a shareholder may ask the court to appoint an inspector.

• Derivative suit — 1% (Article 403(1)). A shareholder may demand that the company bring an action to hold a director liable.

• Petition for dissolution — 10% (Article 520(1)). Where unavoidable grounds exist, a shareholder may petition the court to dissolve the company.

The 1%, 3% and 10% mentioned in the video map onto exactly this structure.

3. Listed companies have far lower thresholds

Listed companies are governed by a special regime. Article 542-6 grants minority rights at much lower ratios to shareholders who have held the shares continuously for six months:

• Requisition of a general meeting and appointment of an inspector: 1.5% (paragraph 1)

• Shareholder proposals: 1% (0.5% for listed companies prescribed by Presidential Decree, paragraph 2)

• Removal of directors or auditors: 0.5% (0.25% for larger listed companies, paragraph 3)

• Inspection of accounting books: 0.1% (0.05% for larger listed companies, paragraph 4)

• Injunction against unlawful acts: 0.05% (0.025% for larger listed companies, paragraph 5)

• Derivative suit: 0.01% (paragraph 6)

Paragraph 8 further allows a listed company to set a shorter holding period or a lower holding ratio in its articles of association, so the articles should be checked as well.

4. Why thresholds exist — and why joining forces works

Minority rights are powerful tools that reach into management: opening the accounting books, forcing a general meeting, suing directors. Without any limit, company operations could be paralysed, so a minimum threshold applies.

That does not mean a small shareholder must simply watch management act unlawfully. If, for example, a director is siphoning off company assets while the controlling shareholder shields him, majority rule leaves no way to intervene. Minority rights exist precisely for that situation.

The key is that holdings can be aggregated. Article 542-6(9) expressly provides that, for listed companies, a “holder of shares” includes persons who jointly exercise the rights of two or more shareholders, and in unlisted companies it is likewise standard practice for several shareholders to combine their holdings and exercise the right jointly. What one shareholder cannot reach alone, several can reach together.

5. Practical points that are easily missed

First, observe the formal requirements. Inspection of accounting books requires a written request stating reasons; requisitioning a general meeting requires a document or electronic document stating the agenda and reasons; and a demand to bring a derivative suit must also be in writing stating the reasons. An oral demand may be challenged as failing the requirement.

Second, the company cannot refuse at will. Article 466(2) provides that the company may not refuse the demand unless it proves that the demand is improper. The burden of justifying refusal rests on the company.

Third, a derivative suit has a 30-day waiting period. If the company does not bring the action within 30 days of the demand, the shareholder may then sue on the company’s behalf (Article 403(3)). Where the lapse of that period risks irreparable harm, the shareholder may sue immediately (Article 403(4)).

Fourth, a later fall in your holding does not matter. Even if the holding drops below 1% after the action is filed, the validity of the filing is unaffected unless the shareholder ceases to hold any shares at all (Article 403(5)).

In summary

Not every shareholder holds the same rights, but a small holding does not mean no rights at all. The threshold depends on the right sought, listed companies enjoy far lower thresholds, and shareholders who combine their holdings can meet the requirement together.

Cheongchul Law Firm has handled numerous matters involving the exercise of minority rights — inspection of accounting books, requisitioning general meetings, derivative suits — and control disputes. If you have doubts about a company’s accounting or decision-making, start with a review of which right suits your holding and your objective.

This post is provided for general information only and does not constitute legal advice on any specific matter. Thresholds and procedures vary with whether the company is listed, its articles of association and the facts of each case, so please consult a lawyer.