Article 2 (Definitions of Securities and Exchange Act)

2. The costs of appeal shall be borne by the Plaintiff.

The Defendant’s disposition of imposition of KRW 13,751,00 against the Plaintiff on June 22, 2007 is revoked.

Therefore, the judgment of the court of first instance is legitimate, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

[Seoul Administrative Court 2008Guhap12146, 2008)]

2. The costs of appeal shall be borne by the Plaintiff.

The following facts are not disputed between the parties, or evidence Nos. 1, 2, 3, 4, and 1-1, 2, 3, 2, 3, and 4 of the evidence Nos. 1, 1-2, 2, 2, 3, and 4 may be admitted

A. On May 16, 1990, 00 ○ Lebz Co., Ltd. (hereinafter referred to as “OObz”) was registered on the KOSDAQ market on February 17, 2004, as a company incorporated for the purpose of manufacturing, importing, and exporting and importing textile products, such as sports bags.

B. On January 9, 2006, the non-party company held a board of directors and passed a resolution on the issuance of new shares (registered common shares) to five specific persons with a major shareholder from the beginning, including the plaintiff, at the price of 2,680 won per share, and at January 12, 2006, to issue new shares in a third party allotment method. The non-party company received the share price by allocating new shares to the above 5th of Jan. 12, 2006 (hereinafter referred to as "the allocation of new shares in this case").

An offerer;

Number of allocated shares;

Issue Price

Payments

Jinay

For chi-○

89,549 Shares

2,680 won

239,991,320 won

January 13, 2006

2,680 won

479,998,720 won

〃 4

○ Kim Ho-hoon

182,835 Shares

2,680 won

489,997,800 won

〃 4

○○ Kim

11,567 Shares

2,680 won

298,99,560 won

〃 4

○ Headings

182,835 Shares

2,680 won

489,997,800 won

〃 4

Total

745,890 Shares

2,680 won

1,998,985,200 won

〃 4

C. On June 18, 2007, the Defendant deemed that the Plaintiff acquired new shares at a price lower than the market price, and subject to Article 29(1)1(c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828, Dec. 31, 2007; hereinafter referred to as the “former Inheritance Tax and Gift Tax Act”), imposed a disposition of imposing gift tax of KRW 101,910,176 (the amount calculated by multiplying the assessed value per share after capital increase by KRW 3,249, and KRW 179,104, the difference between the assessed value per share and KRW 2,680,000 (hereinafter referred to as the “instant disposition of imposing gift tax”).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 39 (1) 1 (a) and (c) of the former Inheritance Tax and Gift Tax Act provides that in case where a person who is not a shareholder of the relevant corporation directly receives the allocation of new stocks from the relevant corporation at a price lower than the market price, the gift tax shall be imposed by deeming the amount equivalent to the relevant profits as the value of the donated property of the person who acquired such profits. In case where a stock-listed corporation or Association-registered corporation issues and allocates new stocks through a method of public offering of securities under Article 2 (3) of the Securities and Exchange Act, it shall be excluded from the subject of gift tax. Although the number of persons who received the solicitation of subscription falls short of 50 persons, the allocation of new stocks constitutes a company which is likely to resell new stocks pursuant to Article 12 of the Regulations on Issuance and Public Notice of Securities as a KOSDAQ-registered corporation, and thus, the disposition of this case is unlawful, even though it constitutes an offering of securities deemed to constitute the securities under Article 2 (3) of the former Enforcement Decree of the Securities and Exchange Act.

(b) Related statutes;

Article 39 (Donation of Profits from Capital Increase)

Article 2 (Definitions of Securities and Exchange Act)

Article 2-4 (Public Offering and Sale of Securities)

C. Determination

(1) Article 39(1)1 (a) and (c) of the former Inheritance Tax and Gift Tax Act provides that where a corporation issues new stocks at a price lower than the market price of the new stocks to increase its capital, in case where a person who is not a shareholder of the relevant corporation obtains profits by directly obtaining such new stocks from the relevant corporation, gift tax shall be imposed on the person who has obtained such profits as the value of the donated stocks: Provided, That where a stock-listed corporation or Association-registered corporation under the Securities and Exchange Act allocates new stocks by means of public offering of new stocks under Article 2(3) of the Securities and Exchange Act, the term “public offering of new stocks” means solicitation of subscription for acquisition of new stocks under the conditions as prescribed by the Presidential Decree. Article 2(4)3 of the former Enforcement Decree of the Securities and Exchange Act provides that "in case of a public offering of new stocks under Article 2(3) of the former Enforcement Decree of the Securities and Exchange Act, 50 or more persons who are solicited to acquire the new stocks shall notify the person who has received the invitation to acquire them or to sell the stocks."

Meanwhile, Article 2-4 of the former Enforcement Decree of the Securities and Exchange Act provides that " even if the number of persons who have been solicited to subscribe as a result of the calculation under paragraph (3) is less than 50 and do not constitute a public offering of new securities, the securities can be transferred to not less than 50 persons within one year from the date of issuance, and if the securities meet the standards for resale prescribed by the Financial Supervisory Commission, they shall

(2) (A) Comprehensively considering the above relevant provisions, where a corporation issues new stocks at a price lower than their market price to increase its capital, the person who receives allocation shall gain profits equivalent to the difference between the market price and the value of the new stocks. In addition, where new stocks are allocated through a public offering method under the Securities and Exchange Act, it shall be exempted from the imposition of gift tax in the case of public offering even though there are persons who gain profits by the offering of new stocks under the Securities and Exchange Act, and it shall be exempted from the imposition of gift tax in the case of public offering. This is the case where new stocks are issued by a public offering method under the relevant Acts and subordinate statutes such as a stock-listed corporation or Association-registered corporation under the Securities and Exchange Act. This is to be determined again through a fair competition procedure within the Korea Stock Exchange or Association-registered corporation under Article 39(1)1 (a) and (c) of the former Inheritance Tax and Exchange Act without any justifiable reason to protect the general public and third party's investment, and the case where new stocks are newly issued to facilitate the financing of the listed corporation or Association-registered corporation under Article 20(3).

(B) Furthermore, in order to constitute a "distribution by the method of public offering of securities, which does not include the benefit from a low-price issue under Article 39 (1) 1 (a) and (c) of the former Inheritance Tax and Gift Tax Act in the value of donated property," the procedures for soliciting an offer under Article 2-4 (5) of the former Enforcement Decree of the Securities and Exchange Act, namely, advertisements through newspapers, broadcasting, magazines, etc., the distribution of printed materials such as notice and promotion group, holding of an investment presentation meeting, electronic communications, etc. shall not be limited to the method of electronic communications, etc., but shall not be limited to the method of issuing or selling securities or providing information on the acquisition procedure.

(3) As to this case, the non-party company decided to issue new shares to the board of directors only to five persons with a major shareholder, including the plaintiff, with a view to the issuance of new shares, and accordingly, the allocation of new shares cannot be deemed to fall under the "distribution by means of subscription to new shares" under Article 39 (1) 1 (a) and (c) of the former Inheritance Tax and Gift Tax Act. Since the non-party company issued new shares to five persons, including the plaintiff, through a resolution of the board of directors, through a third party allocation method, it cannot be deemed to have completed the procedure of "inviting subscription" under the former Enforcement Decree of the Securities and Exchange Act. Thus, the plaintiff's assertion on the opposite premise is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.