Hello, this is attorney Kim Kwang-sik of Cheongchul Law Firm.

Mandatory cumulative voting under the amended Korean Commercial Act takes effect on 10 September 2026, about a month from now. Because most listed companies had opted out of cumulative voting in their articles of incorporation, the mechanism has been largely dormant. The amendment removes that option for large listed companies, and the landscape for electing directors is expected to change substantially.

Ahead of the effective date, listed companies are moving pre-emptively — capping or reducing the number of directors in their articles, or introducing staggered boards with directors serving offset terms. Institutional investors and minority shareholders, by contrast, are preparing to use cumulative voting to place their own nominees on the board. The same rule has the company and its minority shareholders preparing in opposite directions.

This article covers what mandatory cumulative voting entails and which companies it applies to, why the mechanism is so sensitive to board size and term structure, the defensive strategies companies are adopting and their limits, and the countermeasures available to minority shareholders.

[Question] What is the mandatory cumulative voting regime taking effect in September 2026 and which companies does it apply to? Why are companies reducing board size and staggering terms, and how can minority shareholders respond?

[Answer]

1. Effective 10 September — what changes

Cumulative voting was introduced into the Korean Commercial Act in 1998, but on an "opt-out" basis that allowed a company to exclude it in its articles of incorporation. The overwhelming majority of listed companies did exactly that, so the mechanism was barely used in practice. The amendment prevents large listed companies with total assets of KRW 2 trillion or more from excluding cumulative voting in their articles, effectively making it mandatory.

The amended provisions take effect on 10 September 2026 and apply from the first convocation of a general meeting for the election of directors after that date. A listed company with assets of KRW 2 trillion or more therefore cannot refuse a minority shareholder's request for cumulative voting at a director election meeting held after the effective date, and must elect directors on that basis.

▶ Summary From 10 September 2026, listed companies with assets of KRW 2 trillion or more cannot exclude cumulative voting in their articles. A dormant rule becomes mandatory.

2. How cumulative voting works — why more seats favour minority shareholders

Under cumulative voting, each shareholder has, per share, as many votes as there are directors to be elected at that meeting, and may concentrate those votes on one or several candidates. If five directors are elected at once, each share carries five votes, and a minority shareholder can concentrate them on one or two preferred candidates.

In that structure, the more directors elected at a single meeting, the lower the shareholding needed to elect one director. In theory the stake required is roughly one divided by the number of seats plus one, so the more seats filled at once, the easier it is for minority shareholders to seat their own nominee. That arithmetic is precisely why companies have an incentive to reduce the number of seats filled at any one meeting.

▶ Summary Cumulative voting gives each share as many votes as there are seats, allowing concentration. The more seats at stake, the lower the threshold for minority shareholders.

3. Corporate defences — smaller boards and staggered terms

Two defensive strategies dominate. The first is capping or reducing the total number of directors in the articles of incorporation. With fewer seats, situations in which several directors are elected at once become rarer, narrowing the scope for a minority-backed candidate to win through cumulative voting. The second is a staggered board, under which directors serve offset terms so that only some seats come up each year, avoiding the election of many directors at a single meeting and blunting the effect of cumulative voting.

In Taiwan, which adopted cumulative voting, minority-nominated director elections reportedly surged immediately after implementation, but subsequently declined again as companies reduced board sizes and responded with active proxy solicitation. These defences, however, generally require amending the articles of incorporation — a special resolution of the general meeting (at least two-thirds of the votes present and at least one-third of the total issued shares). Whether such amendments can be passed over the opposition of minority shareholders and institutional investors so close to the effective date is the decisive question.

▶ Summary Companies defend by reducing board size and staggering terms to cut the number of seats filled at once. But amending the articles requires a special resolution, which is not easy to pass.

4. Minority shareholders' countermeasures

Minority shareholders have several tools of their own.

First, the right to request cumulative voting. A minority shareholder holding the requisite stake (for listed companies, generally at least 1% of the total issued shares) may request that directors be elected by cumulative voting, and a company subject to the mandate cannot refuse.

Second, because defensive amendments to the articles (reducing board size, introducing staggered terms) require a special resolution, a coalition of institutional investors and small shareholders can vote them down and block the defence itself.

Third, combining cumulative voting with the expanded separate election of audit committee members and the 3% cap on major shareholders' voting rights (the so-called 3% rule) introduced by the same amendment materially improves the odds of seating minority-side nominees on the board and the audit committee.

Fourth, a proxy fight, together with institutional investors' implementation of the stewardship code, can be used to marshal supportive holdings. Beyond that, a sharp reduction in board size undertaken solely to block minority nominees may itself be open to challenge on legitimacy grounds.

▶ Summary Minority shareholders can respond with cumulative voting requests, voting down defensive amendments, combining separate audit committee elections with the 3% rule, and proxy fights.

5. Checklist for listed companies and shareholders

A listed company should first confirm whether it falls within the mandate (assets of KRW 2 trillion or more) and when its next director election meeting falls; second, assess soberly whether its board size and term structure need adjusting and whether its shareholder base could pass such a special resolution; and third, ensure that any defence is supported by business rationale and procedural propriety, so that it is not seen as tilted towards entrenchment in breach of directors' duty of loyalty or shareholder equality.

Shareholders — particularly coalitions of institutional and small investors — should first confirm the requirements and deadline for requesting cumulative voting; second, plan candidate consolidation and vote concentration in advance; and third, align their voting positions on defensive amendments ahead of time. For both sides, this change means rewriting the general meeting playbook itself.

▶ Summary Companies should check applicability, meeting timing and the legality of any amendment; shareholders should check request requirements, candidate consolidation and vote concentration strategy.

Mandatory cumulative voting is not merely a change in voting mechanics; it resets the balance of power between the company and its minority shareholders over board composition. Reducing board size or staggering terms can be effective, but must clear the hurdle of amending the articles, while minority shareholders can seek board representation through cumulative voting requests and by marshalling supportive holdings. With the effective date imminent, both sides should be preparing now for the next general meeting.

Cheongchul Law Firm advises across corporate governance — revising articles of incorporation and designing board structures for the cumulative voting mandate, reviewing general meeting agendas and voting scenarios, developing cumulative voting requests and nomination strategies, assessing the legality of takeover defences, and handling proxy fights and disputes over general meeting resolutions. Please contact us if you need support in responding to the new regime.