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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Seoul, September 30 – The South Korean government and ruling party announced plans to abolish the criminal offense of breach of trust under the Penal Code, a statute long criticized as a “sword of Damocles” hanging over business leaders. This marks the first revision since the law’s introduction in 1953, ending its 72-year history.
The business community welcomed the decision, calling the repeal a long-awaited reform, and urged the government to push further for bold deregulation in other areas, including labor.
During a policy consultation held at the National Assembly on the 30th, the government and the Democratic Party unveiled the “First Plan for Rationalizing Economic Criminal Penalties.” Out of approximately 6,000 economic criminal provisions, 110 will be streamlined in the initial phase.
Deputy Prime Minister and Finance Minister Koo Yoon-chul stated:
“We have prepared reforms to eliminate breach of trust charges, which have long been cited as a burden on corporate management activities. At the same time, we will establish safeguards to ensure that well-intentioned businesses do not suffer harm.”
The Penal Code’s provisions on general and occupational breach of trust have faced heavy criticism for their ambiguous and overly broad criteria, which allowed prosecutors to interpret them arbitrarily. Many executives were prosecuted for actions that were later deemed normal business decisions.
According to the Korea Chamber of Commerce and Industry, from 2014 to 2023, the acquittal rate in first-instance trials for breach of trust and embezzlement stood at 6.7%, more than double the overall criminal acquittal rate of 3.2%.
The Ministry of Justice, after reviewing 3,300 first-instance breach of trust cases, also concluded that it was “extremely difficult for companies, organizations, public officials, and citizens without legal expertise to predict what conduct constitutes breach of trust.”
The government emphasized, however, that it will pursue alternative legislation to ensure that misconduct—such as the private use of corporate funds or the leakage of trade secrets—remains subject to criminal penalties.
The Korea Employers’ Federation welcomed the announcement, stating:
“This reflects the views of the business sector regarding excessive economic criminal penalties and could serve as a cornerstone for future regulatory reforms.”
알파경제 Kim Jisun (stockmk2020@alphabiz.co.kr)
