Like directors in the US and elsewhere, directors in Korean companies have fiduciary-related duties. Such duties are set forth in the Korean Commercial Code and include:

  • Duty of Care as a prudent manager
  • Duty of Confidentiality
  • Fiduciary Duty – the Duty of loyalty

Duty of Care

In Korea, if a director violates the duty of care as a good manager (including the duty to faithfully perform in the company’s best interest) he or she may be held liable to the company or even to third parties and could be required to pay damages. Under Article 382-3 of the Korean Commercial Code, a director’s duty of care and good faith encompasses a number of duties including the:

  • Duty to review the company’s activities
  • Duty to review corporate information and documents
  • Duty to protect a company’s assets
  • Duty to supervise and oversee employees
  • Duty to review all major filings with regulatory agencies

Criminal Liability

A director may even be subject to criminal liability as well as civil liability upon the negligent failure of fulfilling the obligation of care. In Korea, directors have usually been prosecuted for negligence involving financial issues of the company. A failure to protect a company’s assets by refusing to obtain the requisite insurance or agreeing to contracts that put the company in jeopardy (without seeking legal advice, etc)  can definitely lead to prosecution. Liability may be found in other instances when the director fails to fulfill the duty of care and loyalty by:

  • Intentional neglect or negligence in performing duties
  • The failure to manage affairs as “an ordinary prudent person”
  • Endangering company assets through gross negligence

A director needs to proceed with caution and acknowledge the fiduciary duties that he or she has agreed to by becoming a director in the first place.

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