Tencent's growing influence raises tensions in South Korean gaming industry over new law. Tencent's expanded role sparks unease in South Korea's gaming sector amid legal changes. Recently, as the revised Commercial Act passed the National Assembly and was promulgated, there is a sense of tension in the domestic gaming industry. This is because the '3% rule' could mark the beginning of foreign capital's infiltration into the board of directors. Domestic gaming corporations are concerned that Tencent's influence will increase as they have deep interlocking relationships with the Chinese tech giant. The revised Commercial Act, passed by both ruling and opposition parties, expands the scope of directors' duty of loyalty from the company to shareholders and introduces the '3% rule' to limit voting rights of major shareholders and related parties by aggregating their equities when appointing all audit committee members. The revised Commercial Act will apply from the shareholders' meeting held after July 2026, following a one-year grace period. The domestic gaming industry is focused on the '3% rule.' Previously, the rule applied only when audit committee members were elected separately, but this revision has expanded its application to the entire appointment process of all audit committee members, including outside directors. Chinese big tech corporation Tencent holds equities in domestic gaming corporations such as SHIFT UP (34.76%), Netmarble (17.52%), KRAFTON (13.86%), and Kakao Games (3.88%). SHIFT UP's CEO, Kim Hyung-tae, holds 39.21%, while Tencent's affiliate, Aceville Hong Kong Limited, holds 34.76%, with total friendly equity including related parties at 42.60%. SHIFT UP's flagship title 'Goddess of Victory: Nikke' relies heavily on Tencent, with Tencent managing 83.4% of SHIFT UP's total revenue. This structure increases Tencent's influence over SHIFT UP's management. Similarly, KRAFTON's flagship title 'PUBG Mobile' is published by Tencent for both China and global markets, raising concerns about substantial management influence. The revised Commercial Act also heightens the industry's tension with subsequent revisions including expanding the number of audit committee members elected separately from one to two and mandating a cumulative voting system. This structure could allow foreign investors with minority equity holdings to exert influence over director appointments. There is already one person from Tencent on the boards of both SHIFT UP and Netmarble. An industry official notes that foreign investors could extend their influence to domestic gaming corporation boards while engaging in publishing and equity investments, potentially affecting management independence and raising concerns about minority shareholder protection.

Tencent's growing influence raises tensions in South Korean gaming industry over new law - CHOSUNBIZ

The revised South Korean Commercial Act, which expands directors' duties and introduces the '3% rule' to limit foreign voting influence, has heightened concerns in the gaming sector about Tencent's growing stake in domestic companies. Tencent holds significant equity in firms like SHIFT UP, Netmarble, and KRAFTON, with its influence over management and operations raising regulatory and economic concerns.