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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] SEOUL – The South Korean government will form a task force (TF) to overhaul the country’s breach of trust (배임죄) laws — a key legal tool for criminal prosecution of business executives — after President Lee Jae-myung warned on July 30 that “overuse of breach of trust charges is stifling corporate activity.”
According to the Ministry of Economy and Finance and the Ministry of Justice on July 31, Vice Ministers Lee Hyung-il (Finance) and Lee Jin-soo (Justice) will co-lead the new “Economic Criminal Law Rationalization TF,” which will draft reform measures by August.
The TF will consider clarifying vague provisions in the current statute and formally codifying the “business judgment rule” — specifying actions by corporate leaders that should not trigger breach of trust liability.
Among proposals under review:
Possible abolition of the Special Breach of Trust clause in the Commercial Act (Article 382), which is rarely applied in practice since the Act on the Aggravated Punishment of Specific Economic Crimes already covers breach of trust over ₩5 billion.
Revision of the Criminal Act breach of trust article (Article 255) to narrow its scope and clarify definitions.
Breach of trust is widely used by prosecutors to investigate corporate executives. The Criminal Act defines it broadly as “a person handling another’s affairs violates their duty to gain financial benefit for themselves or a third party, thereby causing damage,” allowing wide interpretation and aggressive prosecutions.
Critics note the law has been overapplied — the acquittal rate for embezzlement and breach of trust cases is 6.9%, double the overall criminal case acquittal rate (3.3%), according to the 2023 Judicial Yearbook.
Courts and prosecutors have already started tightening standards. Recently, Cho Hyun-beom, chairman of Hankook & Company, was acquitted of ₩20 billion breach of trust charges over purchase decisions, with the court ruling it a legitimate management judgment.
The Ministry of Justice has also directed prosecutors to “carefully weigh whether to pursue breach of trust charges in light of established precedents,” warning that indiscriminate application could chill business decisions.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
