There have been strong debates with respect to the protection of creditors in Europe over the last ten years. The legal capital system of the Second Directive of the European Union has been criticized for its high costs compared with its utilities.
The revised Korean Commercial Code (the "KCC") of 2011 provides considerable flexibility with respect to the distribution of profits by introducing Japanese corporation law which accepted United States' corporate finance theory. However, since the KCC does not include relevant articles for the protection of creditors, it is necessary to take some complementary measures to protect the creditors.
This article reviews recent debate regarding legal capital system of the European Union. It introduces results of the Feasibility Study conducted by the KPMG in 2008. Also it deals with legal issues related to legal capital system under the KCC especially revised in 2011. For examples, the eradication of minimum capital requirement, introduction of no par share, the deregulation of contribution in kind, cancellation of shares, reduction of legal capital and legal reserves, and distribution of profits to shareholders are analyzed.
In addition, this article discusses legal issues concerning creditors protection with the implementation of revised KCC. It criticizes the exclusion of creditors protection processes in reducing legal reserves. As the International Financial Reporting Standards is introduced, and the creditors protection function of legal capital becomes lessened, it reviews current regulation of profit distribution and proposes new standards for profit distribution.