[2] Criteria to distinguish between the method of allocating new shares from the method of allocating shares to the third party in the issuance of new shares

[3] Whether the issue conditions, such as the conversion price, should be amended in cases where forfeited stocks are issued to a third party because a shareholder failed to accept the forfeited stocks at the time of issuance of convertible bonds by shareholders allocation

[4] The case holding that even if the resolution of the board of directors for the issuance of convertible bonds was defective, the resolution of the board of directors to allocate forfeited convertible bonds to a third party does not constitute an occupational breach of trust where the procedure for the issuance of convertible bonds is not defective

[5] Whether the issuance of convertible bonds for the purpose of transferring control over a company constitutes a breach of duty by a director (negative)

[Concurring Opinion by Justice Yang Sung-tae] If funds are needed for a company, directors are obligated to mobilize the possible method and form such funds. However, directors are merely required to form funds to the extent necessary for the company, and they do not have any obligation to form such funds as much as possible, and, in principle, whether to form funds in a certain scale and in a certain way belong to the business judgment of directors. However, if new stocks are issued and allocated to a third party during the process of raising funds through the issuance of new stocks, the existing shareholders’ equity ratio falls short of the existing shareholders’ equity ratio and the dilution of the value of stocks, thereby weakening the control over the existing shareholders. Thus, if the company raises funds necessary for the company through the issuance of new stocks, it cannot be deemed that there was a violation of their duties in relation to the company, and it cannot be deemed that there was a loss to the company due to a decline in the price of the previous stocks due to the issuance of new stocks, and it cannot be deemed that the crime of breach of trust is established as a breach of duty against the company in view of the principle of breach of trust.

[2] [Majority Opinion] The criteria for distinguishing the method of allocating new shares from the method of allocating new shares, etc. in the issuance of new shares, etc. do not depend on whether the company grants the existing shareholders an opportunity to preferentially acquire new shares, etc. in accordance with their share ratio, or whether the company has received the allocation of new shares, etc. by exercising the right to acquire new shares, etc. In addition, even though the company has granted the opportunity to acquire new shares, etc. to the existing shareholders according to their share ratio, there is a change in the company's share ratio as a result of allocating forfeited shares, etc. generated by the waiver of the subscription to new shares, etc. to a third party. In this case, even if the issue price of new shares, etc. is remarkably lower than the market price and the effect of the existing shareholders' share shares, etc. is transferred to the new shareholders due to the dilution of the shares owned by the existing shareholders, the disadvantage thereby is merely the existing shareholders' own choice. Moreover, even from the perspective of the company, the difference between the existing shareholders' acquisition of new shares, etc. and the existing shareholders' transfer to a third party.

[Dissenting Opinion by Justice Kim Young-ran, Justice Park Si-hwan, Justice Lee Hong-hoon, Justice Kim Nung-hwan, and Justice Jeon Soo-ahn] Whether new stocks, etc. to be issued are a shareholder allocation method should be determined depending on whether all shareholders are given an opportunity to acquire them after being allocated all the new stocks, etc. in proportion to the number of shares held by them. Since there are no special provisions in the Commercial Act regarding disposal of forfeited stocks, etc. arising from failure to acquire the new stocks, etc. allocated to shareholders, directors may suspend the issuance of new stocks, etc. corresponding to that portion or assign a third party to the same issue price. However, in cases where new stocks, etc. are issued at a price considerably lower than the market price on the premise that the new stocks, etc. are issued by shareholders allocation method, such issuance method does not change the company’s interest and director’s duty to allocate depending on whether the new stocks, etc. are a third party allocation method, and thus, even if the new stocks, etc. were not issued by the third party allotment method, it is not reasonable to deem that the forfeited stocks were issued by the third party allotment method.

[3] [Majority Opinion] Even in cases where convertible bonds are issued by a shareholder allotment method under the Commercial Act, if a shareholder loses the right to subscribe, the company may freely dispose of the non-acceptance portion to a third party by a resolution of the board of directors, and the issue terms of convertible bonds issued in a single opportunity are the same. As such, in cases where convertible bonds are issued by a shareholder allotment, it is not possible to revise the terms of issuance, such as conversion price, by treating the forfeited portion as a matter of the shareholder’s acceptance, separately from the forfeited portion due to the shareholder’s failure to subscribe. Although a shareholder was granted the subscription right to subscribe for convertible bonds by the method of a shareholder allotment, the forfeited portion is to be issued under the same condition as the shareholder’s issuance to a third party, and such legal principle does not change

[Dissenting Opinion by Justice Kim Young-ran, Justice Park Si-hwan, Justice Lee Hong-hoon, Justice Kim Nung-hwan, and Justice Jeon Soo-ahn] Although there are no special provisions in the Commercial Act, it is generally interpreted that the terms and conditions of issuance of convertible bonds issued on the same opportunity should be equal. However, there is no logical or inevitable ground to regard the convertible bonds acquired by shareholders and the convertible bonds allocated to a third party on the same opportunity as “the convertible bonds issued on the same opportunity.” As for the allocation of forfeited part to a third party, it is necessary to undergo a resolution by the board of directors again, and thus, it is not the same opportunity as the initial resolution of the board of directors. As such, the forfeited part may be issued in a new third party after suspending the issuance of the forfeited part, it does not change from this case. As such, each shareholder’s waiver of his/her preemptive right without exercising his/her voting right and by exercising voting right at a general meeting of shareholders, it cannot be deemed that there was a special resolution required for the issuance of convertible bonds, etc. by a third party.

[4] The case holding that even if the resolution of the board of directors for the issuance of convertible bonds was defective, the resolution of the board of directors to allocate forfeited convertible bonds to a third party does not constitute a breach of the duty of property protection in the absence of any defect in the resolution of the board of directors

[5] The transfer of control over a stock company to a third party against the intention of the existing stockholder is an act of infringing on the interest of the existing stockholder, and cannot be deemed as infringing on the interest of the stock company which is the object of the control. The director of the stock company can be deemed to be in the position of a person who administers the business of the stock company, but not in the position of a person who directly administers his business in relation to the stock company and the separate individual stockholders, and the transfer of control right is merely an incidental effect that is incidental to securing control shares. Thus, if the change in the ratio of shares of the company arises from the existing stockholder'

1. A. The crime of occupational breach of trust is established when a person who administers another's business obtains, or causes a third party to obtain, economic benefits by acting in violation of one's duty and thereby causes damage to the principal. The term "act in violation of one's duty" includes any act that does not perform, as a matter of course, an act in accordance with the provisions of statutes, the terms of a contract, or the good faith principle, or an act that is expected not to perform, as a matter of course, to lose a fiduciary relationship with the person who delegated the management of the business (see, e.g., Supreme Court Decisions 2004Do520, Jun. 24, 2004; 2005Do4640, May 29, 2008; 2005Do1640, May 29, 2008). It includes not only the case where a person inflicts, as a whole, damages on the principal's property but also the case where property risks are generated due to an increase of 200 times or 15 times, without an objective judgment.

B. (1) A stock company is an incorporated association established for commercial activities or other profit-making purposes. The capital of a stock company is funds contributed by shareholders in order to establish a physical foundation for operating the business. The shares are shares held by shareholders in accordance with the ratio of investment. The stock company is a method of raising the equity capital by issuing new shares and raising the equity capital through the issuance of bonds or lending from financial institutions. Convertible bonds or bonds with warrants (hereinafter “convertible bonds, etc.”) are different from the legal nature of shares in that it is a kind of bonds, a financing method for issuing new shares and loans from financial institutions, etc. (hereinafter “convertible bonds, etc.”). Although both are different in terms of the legal nature of shares and shares in that the issuance of new shares by exercising convertible rights or preemptive rights to new shares and the status of bondholders is changed, both are considered as potential shares in that the issuance of convertible bonds, etc. is subject to the application of the provisions on the issuance of new shares in the Commercial Act, etc. (Articles 516 and 516-10).

(2) In a case where a company issues new shares, etc. to shareholders for a price based on the shares ratio, the company will increase its capital and assets due to the inflow of funds equal to the acquisition price. The shareholders will, even if acquiring new shares, etc., do not affect the existing shares ratio, and only the number of shares held increases. Therefore, the division of existing shares and the additional investments by shareholders will be made at the same time.

In addition, in light of the fact that a shareholder is liable to pay new shares to the company for the payment of the subscription price (Article 331 of the Commercial Act), but after the acquisition of shares by paying the full subscription price (Article 331 of the Commercial Act), the company does not assume additional investment obligations to the company in accordance with the principle of limited liability for shareholders, and that where a company transfers its reserve funds to capital or distributes its profits to shares, the company may issue new shares free of charge in accordance with its equity ratio, the company’s issuance price, etc. does not necessarily have to follow the market price if new shares, etc. are issued by allocating new shares, etc. according to the method of stock allocation, i.e., the number of shares held by the shareholders. Therefore, the director, who is an executive of the company, can freely determine the issue price pursuant to the business judgment, taking into account the overall interest of the shareholders and the necessity and situation of raising funds of the company. Thus, by setting the issue price lower than the market price, the company failed to attract funds from the shareholders to the greatest extent possible, thereby failing to violate its duty to protect its property.

(3) However, in the case of the third party allotment method, rather than the method of allocating shareholders, the third party allotment method is to newly acquire shares of the company by acquiring new shares, etc., and thus the relationship with the third party cannot be deemed the same as that of shareholders. In the case of the issuance of new shares, etc. to the third party at a remarkably lower price than the market price, there is a result that prevents the increase of the company’s assets to an extent equivalent to the difference between the issue price and the case where new shares are issued at a reasonable price taking into account the actual price of the shares. In this case, the company’s damages should be deemed as suffered by the company in an amount calculated by multiplying the difference between the fair issue price under the Company Act and the actual issue price by the number of shares issued. Such damages are not only the 3rd party allotment method, but also the 10th party allotment method, 4th party allotment method, 5th party allotment method, etc. of the existing company, and thus, the company’s damages and losses are considerably different from the issuance price of new shares.

2. A. The court below, based on the evidence as stated, found the shares issued by Samsungland Co., Ltd. (hereinafter referred to as "Baland Co., Ltd.") to have been issued on October 30, 196 at the 17 directors meeting, and decided to issue non-guaranteed convertible bonds at the 17 directors' meeting. The major contents of the resolution were 9,954,590,00 won for the total amount of convertible bonds and the method of allocating the bonds to the shareholders as of November 14, 1996, and the number of shares transferred to the third party is 7,70 won per share, and the conversion price was 9,000 won per share, which was 9,000 won or more for the 196th shareholders' shares issued at the time of the issuance of the convertible bonds. The shareholders of Samsungland Co., Ltd. were still an affiliated company of Samsungland Co., Ltd. (the 196th shareholders' shares issued at the time of the issuance of the convertible bonds.).

B. A director bears the duty of care or loyalty to perform his duties in accordance with Acts and subordinate statutes and the articles of incorporation. As such, in issuing new shares, if a director violates his/her duty as a director and thereby causes damage to the company, he/she shall be held liable for occupational breach of trust. However, as seen earlier, barring any special circumstance, even if the issue price of new shares, etc. is significantly lower than the market price in the case of issuing new shares through the method of shareholders allocation, it cannot be deemed that the company violated his/her duty as a director. However, if a company issues new shares, etc. by the method of third party allocation, it shall be determined whether the company’s occupational breach of trust is established by examining whether the issue price of new shares, etc. is a case where a director issues new shares, etc. significantly lower than the fair market price.

(1) First, we examine whether the issuance of the instant convertible bonds is made by a third party allocation method.

The criteria to distinguish between the method of allocating new shares, etc. and the method of allocating new shares, etc. in the issuance of new shares, etc., are the nature that should be objectively determined depending on whether the company given the opportunity to preferentially acquire new shares, etc. to the shareholders in accordance with their shares in the issuance of new shares, etc., and whether the shareholders granted the opportunity to acquire new shares, etc. are allocated by exercising the right to subscribe. Even though the company given the opportunity to acquire new shares, etc. to the existing shareholders in accordance with their shares in the issuance of new shares, there is a change in the shares ratio of the company as a result of allocating forfeited shares, etc., generated by the waiver of the subscription to new shares, etc. to a third party. In this case, even if the issue price of new shares, etc. was remarkably lower than the market price and the effect of the issuance price of new shares, etc., which is transferred to the new shareholders, the disadvantage therefrom is merely by the existing shareholders’ own choice. In addition, even if from the perspective of the company, if the existing shareholders transferred them to a third party, compared with the existing shares, etc.

According to the reasoning of the judgment below, the allocation of the convertible bonds of this case shall be deemed not to be the allocation by a shareholder but to be a third party allocation. The meaning of the above is whether the Defendants expected the forfeited shares due to the failure of the existing shareholders to subscribe for the convertible bonds, or not, or if most other shareholders forfeited shares due to the failure to subscribe for subscription, it is not clear that the economic effect of the convertible bonds of this case is the same as that of the third party allocation. However, even according to the facts acknowledged by the court below, it is clear that the issuance of the convertible bonds of this case is made by the shareholders allocation method, and it is due to the choice of the existing shareholders to choose to not to subscribe for the subscription by the existing shareholders. Thus, it should not be concluded that the issuance of the convertible bonds of this case was made by the third party allocation method.

In addition, even where convertible bonds are issued by the method of allotment of shareholders under the Commercial Act, if a shareholder loses the right to subscribe, the company may freely dispose of the convertible bonds to a third party for the portion without any subscription (Articles 513-3, 419(4), and 469 of the Commercial Act), and the issue terms of convertible bonds to be issued on a single opportunity are the same. As such, in a case where convertible bonds are issued by the allotment of shareholders, the forfeited portion is not accepted by the shareholder, and there is no room for issuing convertible bonds to revise the terms of issuance such as conversion price, by treating them separately from the portion acquired by the shareholder as to the forfeited portion due to the failure of the shareholder to subscribe. In other words, bonds have the nature of circulation, public nature, collective nature, etc. as such, the amount of each bond can be equal or equal in the same type of bonds (Article 472(2) of the Commercial Act), and the number of forfeited shares should be stated in the same method (Article 478(2) of the Commercial Act).

In the instant case, the shareholders were subscribed to underwrite the instant convertible bonds under the terms of issuance decided by the board of directors and allocated them. In such a case, if the existing shareholders other than the first-party company fails to subscribe to underwrite them, and continue to issue convertible bonds with respect to forfeited portions, the company’s issuance conditions, such as the conditions of conversion, etc., must be modified through the board of directors, and if the company’s directors are to issue convertible bonds, the company’s directors would be forced to issue different types of bonds by issuing different issue prices of convertible bonds on the same opportunity. This would rather be in breach of the principle of the equality of debenture holders, and there is no legal basis to acknowledge the issuance terms (in addition, even if the entire convertible bonds were forfeited, if the first-party shareholders at the time of the issuance of the convertible bonds were to acquire them in whole and transfer them to a third party, the company’s duty cannot be deemed to have violated the company’s duty to issue them).

Therefore, the judgment of the court below that the issuance of convertible bonds of this case constitutes a third party allocation method is erroneous in the misapprehension of legal principles as to the issuance of convertible bonds.

The Defendants’ ground of appeal pointing this out is with merit.

(2) We examine whether the company’s resolution for the issuance of convertible bonds becomes invalid due to the failure to meet the quorum, and whether the process of issuing convertible bonds constitutes a breach of trust as a matter of duty.

In breach of trust, breach of duty does not mean any case in violation of the law formally, but means any act in violation of the law, which is likely to cause property damage to the principal from an economic substantive perspective by comprehensively taking into account the specific types of act in question, the type of transaction, the protected legal interest, etc. (see Supreme Court en banc Decision 2006Do4876, Jun. 19, 2008).

In light of the above legal principles, since the issuance of the convertible bonds of this case was made by the shareholder allotment method, it is difficult to deem that any damage has occurred to the company, and even if there was no resolution of the board of directors on the issuance of new stocks or there was a defect in the resolution, a resolution of the board of directors is merely an internal decision-making of the company (see, e.g., Supreme Court Decision 2005Da77060, 77077, Feb. 22, 2007). In full view of the fact that there is no evidence to acknowledge that there was any defect in the resolution of the board of directors on Dec. 3, 196, the Defendants’ conduct without suspending the procedure for the issuance of the convertible bonds of this case without suspending it cannot be deemed as a breach of duty as a violation of the company’s property protection obligation.

Therefore, the judgment of the court below on this point is erroneous in the misapprehension of legal principles on the breach of trust's breach of duty.

The defendants' grounds of appeal pointing this out are justified.

(3) We examine whether the issuance of convertible bonds with the aim of transferring control constitutes a breach of director’s duty.

A director’s transfer of control over a stock company to a third party against an existing shareholder’s will is an act of infringing on the interest of the existing shareholder, and cannot be deemed an act of infringing on the interest of the stock company, which is the object of the control, and the director of the stock company is in the position of managing the affairs of the stock company, but is not in the position of directly managing their affairs in relation to the stock company and the separate individual shareholders (see Supreme Court en banc Decision 2003Do7645 delivered on June 17, 2004). Furthermore, the transfer of control rights is merely an incidental effect incidental to securing control shares (see Supreme Court Decision 2001Da36580 delivered on February 13, 2004). If a change in the ratio of shares of the stock company arises from the existing shareholder’s own choice, the director may not be deemed to have a breach of duty in relation to

Therefore, the court below erred by misapprehending the legal principles on the breach of trust's duty as a director to allocate a large quantity of forfeited convertible bonds which cause the transfer of control over the company to a third party.

The defendants' grounds of appeal pointing this out are justified.

(4) We examine the Prosecutor’s grounds of appeal on the conversion value of the instant convertible bonds.

The Prosecutor’s grounds of appeal are 85,00 won per share of the pertinent convertible bonds, but it is unreasonable for the lower court to recognize the pertinent convertible bonds as 14,825 won per share and recognize the liability for the crime only within the scope of the said amount, based on the reasons indicated in its reasoning. However, as seen earlier, the instant convertible bonds were issued by the method of shareholders allocation, and the issuance of the convertible bonds by the method of shareholders allocation does not necessarily necessarily have to be issued by the conversion price reflecting the market price or the actual value of the stocks. Therefore, the Prosecutor’s grounds of appeal are without merit, without examining whether the conversion price of the instant convertible bonds is appropriate.

(5) Ultimately, the Defendants’ ground of appeal pointing out each of the above points is with merit, and the Prosecutor’s ground of appeal is without merit, and the lower judgment is not exempt from reversal without proceeding to the remaining grounds of appeal by the Defendants.

3. Therefore, the judgment of the court below shall be reversed, and the case shall be remanded to the court below for a new trial and determination. It is so decided as per Disposition.

The dissenting opinion of Justice Kim Young-ran, Justice Park Si-hwan, Justice Lee Hong-hoon, Justice Kim Nung-hwan, and Justice Jeon Soo-ahn as to the above 2. B. (1) is consistent with the majority opinion, but the dissenting opinion of Justice Yang Sung-tae as to the above 2.2.

4. Dissenting Opinion by Justice Kim Young-ran, Justice Park Si-hwan, Justice Lee Hong-hoon, Justice Kim Nung-hwan, and Justice Jeon Soo-ahn

In the issuance of new shares, etc., it should be distinguished from the case of the method of shareholders allocation and the case of the third party allocation, and accordingly, the majority opinion agrees with the majority opinion that the duty of directors is different from the case of the issuance of convertible bonds by the method of shareholders allocation. However, the majority opinion does not agree with the majority opinion on the following grounds that even if the Defendants were to issue the convertible bonds at a low price, it cannot be applied to the

A. First, the majority opinion on the grounds and grounds for distinguishing between issuance of new shares, etc. by a shareholder allocation method and issuance by a third party allocation method is basically unreasonable, but it is not appropriate. Therefore, it is intended to supplement or correct the majority opinion as follows.

(1) A stock company is an association incorporated into capital based on a basic unit (Article 329(2) of the Commercial Act). The capital of a stock company shall be divided into shares (Article 329(2) of the Commercial Act); the total number of shares to be issued by a company in the establishment of a stock company and the par value per share must be stated in the articles of incorporation (Article 289(1) of the Commercial Act); the total number of outstanding shares, the class and number of shares shall be registered at the time of registration of incorporation along with the total amount of capital (Article 317(1) of the Commercial Act); and the issue value of new shares shall be determined not only in the type and number of new shares when the company issues shares after the incorporation but also in the issuance of new shares (Article 416 of the Commercial Act). Therefore, not only in the establishment of a company, but also in the issuance of new shares, the appropriateness of the total issue value per share with the exception of the appropriateness of the total issue value per share is not an appropriate approach method.

In addition, promoters shall subscribe to shares (Article 293 of the Commercial Act); shares issued at the time of incorporation which have not yet been subscribed or whose subscription to shares has been cancelled shall be jointly subscribed by promoters; shares for which the payment of subscription price has not been completed shall be jointly paid by promoters (Article 321 of the Commercial Act); and the promoters shall prepare the articles of incorporation (Article 288 of the Commercial Act); and the types and number of shares issued at the time of incorporation, and the number and amount at the time of issuance of shares above par value shall be determined by the articles of incorporation without the consent of all promoters (Article 291 of the Commercial Act). Therefore, the issue is basically a matter of determination by shareholders, including all the shares issued at the time of incorporation. This is based on the premise that the board of directors shall subscribe to shares at the time of issuance of new shares or convertible bonds, or bonds with warrants, and the issue price of new shares, etc. shall be determined by the board of directors at least 14 per share and at least 2 per share amount per the company’s articles of incorporation.

However, the issuance of new shares, etc. by a third party allocation method does not have any provision that directly regulates it. However, the Commercial Act stipulates that a director, in collusion with a director, is liable to pay an amount equivalent to the difference between fair issue price and the company when he/she acquires shares at an remarkably unfair price, under the premise that the director is liable to issue shares at the market price. Article 424-2(1) of the Commercial Act provides that since all shareholders are treated equally in the shareholder allocation method, there is no room for a certain shareholder to claim the difference between the company and the other shareholders, and therefore, the above provision does not apply to the shareholder allocation method. In this case, it is stipulated that a director is liable for damages against the existing shareholders and the company (Articles 399 and 401 of the Commercial Act), unlike the case of the allocation of shares at the market price by a third party (Article 39, Article 401 of the Commercial Act).

(2) The reason behind the distinction between the method of allocating new shares and the method of allocating a third party is that the inherent nature and nature are different. The stock company is an association formed by the shareholders who own the shares to capital, and shareholders are not liable for additional investment within the scope of their subscription price (Article 331 of the Commercial Act). Therefore, under the premise that all new shares are acquired and paid in proportion to their own number of shares, it is sufficient to determine the issue price above par value under the principle of capital adequacy, and there is no obligation to demand additional investment, and to demand that the difference be made at the market price above par value. The result of the issuance of new shares should not be evaluated as losses of the company even if the shares were issued at a lower price than that of the existing shares and the shares were issued at a lower price than that of the new shares, and as such, the existing shares were issued at a lower price than that of the new shares to a third party. Therefore, the rights and dilution value of the existing shares to a third party cannot be seen as being reflected in the existing shares issuance price.

B. Next, on the premise of such a legal doctrine, we examine the duties of directors in issuing new shares, etc. and whether breach of trust is established due to the low-price issuance.

(1) Directors of a corporation shall be appointed at a general meeting of shareholders, and the provisions on delegation to the company and directors shall apply mutatis mutandis (Article 382 of the Commercial Act). Thus, in relation to the company, directors shall have the duty of due care and duty of due care as a good manager. Since the issuance of new shares to be made after the formation of the company is delegated to directors, directors shall not only the number of issued shares but also the appropriate issuance price of one share in the issuance of new shares. The total amount of new shares is determined by the number of issued shares and the issuance price of one share. Accordingly, in relation to the issuance of new shares, unless otherwise stipulated by the articles of incorporation or the resolution of the general meeting of shareholders, it shall be adequate to appropriately determine the issue price of new shares in accordance with the business judgment rule as well as the amount of capital or the total amount of capital to be raised through the issuance of new shares, i.e., the scale of increase in the capital or the total amount of bonds to be raised through the issuance of new shares, etc., and the reasonable amount of issuance price of new shares shall be determined within a reasonable financial market price.

If a director determines the issue price of new shares in an appropriate manner, the value of the existing shares does not decline, but this is merely a result of the director's performance of the duty to protect shareholders in relation to the company, not a result of performing the duty to protect shareholders.

Therefore, in the issuance of new shares, etc., directors are merely to form funds as necessary for the company, and if the shares are issued in a quantity equivalent to the size of the funds and the necessary funds are raised, directors perform their duties in relation to the company, the separate opinion that the issue price of one share must be determined in addition to the number of new shares.

(2) The funds raised through the issuance of new shares, etc. are not attributed to the company, nor belong to the shareholders. Accordingly, if new shares, etc. are allocated to a third party at a low price, a company cannot obtain funds equivalent to the difference in the issue price, i.e., the issue price, compared to the issue price at the market price, multiplied by the number of issued shares. It is clear that this constitutes a passive loss of the company as otherwise pointed out by the Majority Opinion. However, if new shares, etc. are issued by a shareholder allocation method, it cannot be deemed that the company or directors have the obligation to issue the market price,

In addition, the market price refers to the normal transaction price in the market, and the damages are normative evaluations from a legal perspective. Therefore, if the market price of a company’s shares can be assumed, even if the new shares, etc. are issued at the market price, it shall be deemed that there is possibility of acceptance, and if new shares, etc. are issued at a remarkably unfair price than the market price, the company shall be deemed to incur damages equivalent to the difference between the market price and the new shares. Since the existence or amount of damages is a normative evaluation, it shall be determined on a daily basis as to whether there is a possibility of actual acceptance when new shares, etc. are issued at the market price. In this regard, the separate opinion that denies the occurrence of damages on the ground that the issuance of new shares, etc. at the market

Therefore, if a director issues new shares, etc. at a remarkably unfair price without determining the issue price of such shares at the market price, this would be a violation of the duty of care and good faith of the director to the company, and thereby a loss is caused to the company, thereby resulting in failure to obtain funds equivalent to the difference, and thus, the crime of occupational breach of trust against the company of the director is established. In this case, the company's loss shall not be denied on the ground that the existing shareholders occur simultaneously due to dilution with the decline in the value of the existing shares and the decrease in the shareholding ratio of the existing shareholders, but it does not mean that the above losses of the company and the shareholders shall not

(3) In the case of the issuance of convertible bonds, etc., if the convertible bonds, etc. are subscribed to and paid out to someone, the company will obtain funds as much as the issuance of the convertible bonds, etc., but it does not always cause any damage to the company. If the convertible rights are exercised according to the conversion price of one share, which is stipulated as the conversion condition, from the issuance of convertible bonds, and the shares are issued accordingly, it is the issuance of new shares. Accordingly, the company should be able to obtain funds as the market price of the newly issued shares. Accordingly, if the par value of one share as specified as the conversion condition is low, it shall be less than the difference between the issuance of the number of shares issued at the market price of the convertible bonds at the conversion and it shall be regarded as the company’s damage. In the case of the issuance of convertible bonds, it is important not only to obtain the total issuance amount but also the conversion price of one share price. If a company acquires funds equivalent to the total issuance amount of convertible bonds, it shall not be considered as a matter of full consideration of the total amount of the company’s duty of trust.

As one of the grounds for the Concurring Opinion stating that the low-price issuance of convertible bonds may cause damage not to a company, but to a shareholder, the former Inheritance Tax and Gift Tax Act stipulates that the profits earned by the transferee at the low-price issuance of convertible bonds shall be deemed as having been donated to a person with a special relationship, such as a controlling shareholder of the issuing company. However, this is merely a legal and technical fiction from the need to impose gift tax on a person who has acquired at low-price and received profits from the issuance of convertible bonds. On the other hand, deeming that the substantial asset value of the controlling shareholder, etc. should have to have been transferred to a third party when the convertible bonds are issued at low-price is transferred to a third party is the end of this year. Since convertible bonds

(4) Whether new shares, etc. are issued shall be determined depending on whether all shareholders were given an opportunity to receive shares, in proportion to the number of shares held by them. As to the disposal of forfeited shares, etc. arising from the failure of shareholders to acquire new shares, etc. allocated to shareholders, directors shall be entitled to suspend the issuance of new shares, etc. corresponding to that portion or assign them to a third party with the same issue price. However, under the premise that new shares, etc. are issued by shareholders allocation method, where the issue price of new shares, etc. is considerably lower than the market price, under special circumstances, such as the forfeited shares, etc. are not acquired by shareholders but forfeited. As seen earlier, the issue price of new shares, etc. varies depending on whether it is a third party allocation method or a third party allocation method. Thus, in relation to the company, a director who is obligated to issue new shares, etc. in the issuance of new shares, etc., due to the allocation method of shares by a third party allocation method, shall cease to issue the forfeited shares, and it is reasonable to deem the forfeited shares to be issued by a third party.

Since the occurrence of forfeited stocks is the result of the waiver of preemptive rights by shareholders, allocating such forfeited stocks to third parties is merely a follow-up measure of the issuance of new stocks by the method of shareholders allocation, and accordingly, it is unreasonable to maintain the original issue price of forfeited stocks as it is. However, considering that the entire forfeited stocks, etc. issued by the method of shareholders allocation are more clear than that of the Majority Opinion. In light of the relationship with the company, a director is in the position of managing affairs or does not have a duty to protect shareholders’ interests. Therefore, the duty of directors to properly dispose of forfeited stocks in relation to the company by deeming that the issuance of new stocks, etc. including new stocks, is legally effective, and that the duty or duty of directors to appropriately dispose of the forfeited stocks, etc. is not directly related to the issuance of new stocks, etc. by the method of shareholders allocation. Although the duty of directors to appropriately issue new stocks, etc. is not extinguished, it cannot be deemed that the same opportunity is not the same as that of the forfeited stocks to be newly issued by the shareholders, the same opportunity as that of the forfeited stocks cannot be seen as the forfeited stocks.

Therefore, even if new shares, etc. were issued by a shareholder allotment method, if a director did not discontinue the issuance of new shares, etc. as to the forfeited portion, but did not change the issue price by a third party allotment method and continued to distribute and acquire the forfeited portion to a third party without changing the market price, such act constitutes a director’s duty of care in relation to the company, and thereby, if the company’s damage was caused by a low flow of funds, it shall be deemed that the crime of occupational breach of trust is established.

C. Examining the instant case in accordance with such legal principles, the market price of Sttland shares as of October 30, 1996 at the time of the resolution to issue the instant convertible bonds was 14,825 won per share, but the meeting of the board of directors participating in the Defendants determined the conversion price to 7,700 won per share while issuing the instant convertible bonds by the method of shareholders allocation. There is no problem that the conversion price is issued by the method of shareholders allocation, but the above conversion price is merely 1/2 of the market price as of the third party allocation method, and it is considerably unfair price exceeding the permissible limit under the business judgment rule. Meanwhile, the instant convertible bonds were issued by the first method of shareholders allocation. Of 26 shareholders, only the first 2.94% convertible bonds were subscribed to them, and the remaining shareholders were not entitled to acquire the forfeited bonds at the original price of 97.06%, and as such, the Defendants’ act of distributing forfeited bonds to the third party without obtaining the forfeited bonds at the forfeited price as of the above third party.

The substance of the instant case is that, under the provisions of the former Commercial Act (amended by Act No. 6488, Jul. 24, 2001) which was in force at the time of the resolution for the issuance of the instant convertible bonds, it is clear whether the issuance of the instant convertible bonds is permitted by a third party allocation method, and there is no provision allowing the issuance of the instant convertible bonds by a third party allocation method under the Articles of Incorporation, and it is difficult for the Defendants including the Defendants to obtain a special resolution of the general shareholders’ meeting. It is reasonable to deem that the Defendants issued the instant convertible bonds by a shareholder allocation method, and that the Defendants, including the Defendants, made the issuance of the instant convertible bonds would induce most shareholders to forfeit their rights and allocate and underwrite the forfeited stocks to the victims. In this sense, it is reasonable to view that the substance of the issuance of the instant convertible bonds is the issuance by a third party allocation method. In addition, since the issuance of the instant convertible bonds by acquiring the instant convertible bonds and immediately after the payment of them, it is reasonable to deem the issuance of the instant convertible bonds as its purpose.

The ultimate goal of criminal justice is to find substantial truth and apply reasonable penal provisions to it. The majority opinion or the separate opinion is difficult to agree in this respect.

As above, I express my dissenting opinion.

5. The Concurrence by Justice Yang Sung-tae is as follows.

We agree with the conclusion of the majority opinion that the issuance of the convertible bonds of this case is deemed to have been issued by the method of shareholders allocation, but it is not an issuance by a third party. However, under the premise of the above conclusion, the majority opinion does not agree with the conclusion of the majority opinion that the issuance of new stocks is based on the method of shareholders allocation and the third party allocation method, and the issuance of new stocks is considerably lower than the reasonable price reflecting the market price at a reasonable price per share in the case of the former, even if the issuance (hereinafter referred to as the "issuance at a low price"), the crime of breach of trust is not established, and in the latter case, the difference between the appropriate issue price and the actual issue price is deemed to have suffered damage equivalent to the amount obtained by multiplying the number of issued stocks by the number of issued stocks (this opinion is the only dissenting opinion with the majority opinion with regard to this point). In conclusion, it is not acceptable to agree with the majority opinion as to this issue, and in conclusion, it does not constitute a crime of breach of trust solely on the ground of third party allocation

A. The crime of breach of trust is established when a person who administers another’s business commits an act in violation of his/her duty (Article 355(2) of the Criminal Act). Therefore, in order to establish a crime of breach of trust in relation to the issuance of convertible bonds or new shares, first of all, the director’s duties should be examined.

(1) The issuance of new shares is made as a means of financing the company, such as the issuance of bonds or the borrowing of money, except in exceptional cases such as gratuitous shares. When funds are required for the company, the director is obligated to adopt a possible method and form such funds. However, the director is not obligated to form funds to a certain extent necessary for the company, and is not obligated to form funds to a certain extent possible, and it is, in principle, necessary for the company to form funds to a certain extent, and what method belongs to the director’s business judgment.

Therefore, even though the management funds of the company are urgently required and the company can raise sufficient funds through the issuance of new shares or bonds, if a director did not raise funds in order to gain a certain profit, this would have affected the company's management in violation of his/her duty as to the company. However, even if the company does not require its management funds, it cannot be said that there is a duty to create new funds or a duty to raise a certain amount of funds when it is sufficient to raise a certain amount of funds. Thus, even though there was an opportunity to raise new shares or bonds, it cannot be said that such funds are a breach of duty.

(2) However, if new shares are issued at a low price in the process of raising funds through the issuance of new shares and allocating them to a third party, the existing shareholders' share ratio falls below the existing shareholders' equity ratio, and the control over the existing shareholders' company through the old shares is reduced due to the dilution of the so-called value of shares, thereby causing losses to the existing shareholders. However, since the company and shareholders are independent of each other under the Commercial Act, and the interests of shareholders are strict distinction between the company and shareholders, the company's directors are not in the position of directly managing their affairs in relation to their shareholders, and therefore, even if losses to shareholders occur due to the acts of directors, the crime of breach of trust is not established (see Supreme Court en banc Decision 2003Do7645, Jun. 17, 2004). On the other hand, even if the acts consistent with the interests of shareholders cause losses to the company, such acts of breach of trust constitutes a breach of duty in relation to the company, and thus, losses to the company are not incurred due to the issuance of new shares.

In principle, the Commercial Act recognizes the preemptive right to be preferentially allocated new shares to the existing shareholders, and it is necessary to set the price of new shares at an appropriate price to prevent the decline in the previous shares when new shares are issued by the third party allocation method. However, it is a device to protect the interests of shareholders, not to protect the interests of the company itself. In addition, the price of one share is expressed the value calculated by dividing the actual value of assets of the company by the total number of issued shares. Therefore, even in a case where the value of assets of the company increases due to the issuance of new shares, the number of shares increases, but the price of one share is reduced due to the increase in the number of shares, but the control over the existing shareholders exercising the shares is weak, not the decrease

(3) Ultimately, if a company raises funds necessary for the issuance of new shares, it cannot be deemed that the company violated the duty in relation to the company, and it cannot be deemed that there was damage to the company due to the decline in the price of the previous shares due to the issuance of new shares. Even if the company allocated a third party or set a low price for the issuance of new shares to a third party in the process of forming such funds, it cannot be deemed as a breach of duty in accordance with the principle of breach of trust that evaluates the interests of shareholders and the interests of the company separately, and thus,

(4) The above legal principle is more clear in the case of the conversion of convertible bonds into an issuer of special new stocks. On the other hand, once convertible bonds are issued, funds are raised first by the company, and new stocks are issued within the total amount of convertible bonds issued thereafter, but the new funds are not raised by the issuance of new stocks. Therefore, the conversion of the funds already created by converting the bonds into the stocks into the capital from the liabilities to the capital is to reduce the company’s interest burden, and thus, it is not entirely disadvantageous to the company. In the process, the reduction of the existing shareholders’ equity ratio and the dilution of the value of the stocks due to the low price issuance of new stocks are all disadvantageous to the existing shareholders. Therefore, the conditions of conversion into the stocks are disadvantageous to the existing shareholders, and thus, it cannot be deemed as a breach of duties against the company.

B. The Majority Opinion argues that, in cases where convertible bonds are issued by a third party allocation method, the market price is set by reflecting the market price at a low price, thereby preventing increase in the company’s assets to the extent equivalent to the difference, compared with the case where the company issues the convertible bonds at a reasonable price taking into account the actual price of stocks, and thus, the crime of breach of trust is established.

(1) However, since the issuance of new shares only forms new funds, it cannot be deemed that there is damage to the company. Nevertheless, the majority opinion states that there is passive damage to the company that could have been obtained by the issuance of shares at a low price due to the issuance of shares. However, for the crime of breach of trust, there is a breach of trust on the part of the company and losses to the company due to such breach of trust. However, the above opinion recognizes that, even if a director completed the formation of necessary funds in accordance with his/her duties, if the market price is issued at the request of the shareholder protection even though the director completed the formation of the necessary funds, it is likely that there was a breach of trust against the company on the ground that there was a possibility of raising funds exceeding the necessary funds, and therefore, it does not go against the logic of the crime of breach of trust, and it does not always constitute a higher amount of funds by setting a conversion price only because the number of funds to be converted is linked to the necessary funds.

(2) The majority opinion states that the damages of a company due to a low-price issuance are different from the damages suffered by the existing shareholders due to the dilution of the real value of the old market, and that it should be distinguished from the damages suffered by the existing shareholders, as it does not coincide with the method of evaluation. However, it is unreasonable because the damages caused by a low-price issuance overlap with both the shareholders and the company, which are deemed to result in multiple losses.

(3) Article 424-2(1) of the Commercial Act recognizes the liability of a third party to pay an amount equivalent to the difference between fair issue price and the company where the third party acquires new shares in collusion with the director. In this case, the existing shareholder may file a lawsuit against the third party seeking payment of an amount equivalent to the difference between the fair issue price and the above fair issue price, and if the company does not comply with the request, the shareholder may directly file a representative lawsuit against the third party (Article 424-2). In the case of the third party allocation, the majority opinion explains that this provision is the duty of market price issuance in order to facilitate the financing of the company. However, each of the above provisions introduced as a series of devices to prevent disadvantages to the existing shareholder by amending the Commercial Act in order to facilitate the financing of the company, such as expanding the opportunity for the issuance of new shares, and thus, it is clearly revealed that the above provision is not an obligation to pay damages to the existing shareholder due to the allocation of new shares, and thus, it is not an obligation to pay damages to the existing company.

Meanwhile, Article 399(1) of the Commercial Act provides that directors shall be liable for damages caused by breach of their duties against the company. Since this provision provides for the general responsibility of directors, it is not appropriate to explain that the majority opinion is responsible for the issuance of the market price.

(4) The majority opinion, while taking the above opinion as to the allocation of a third party, decides that the allocation of a stock at a low price does not constitute a crime of breach of trust on the issuance of a stock at a low price. However, as the difference between the appropriate price and the issue price by the issuance at a low price does not increase in the company's assets, if the above damage to the company arises in the case of the allocation of a stock at a low price, it shall be deemed that the same damage would occur in the case of the allocation of a stock to a third party. However, in the case of the allocation of a stock at a low price, the majority opinion does not match the logic that the crime of breach of trust is established

The majority opinion argues that shareholders are not obliged to make additional investments to the company, and that shareholders are allowed to issue new shares free of charge according to their equity ratio in the case of distributing capital or profits to shares. However, the majority opinion argues that shareholders are not forced to make additional investments, and that there is no relation with the issue price in the issuance of new shares since they are divided into real shares free of charge. Furthermore, since the interests of shareholders under the Commercial Act are strictly distinguishable from the interests of shareholders under the Commercial Act, even if the acts that correspond to the interests of shareholders cause losses to the company, such acts constitute breach of trust as a breach of trust in light of established precedents in which the act of breach of trust is committed in relation to the company, even if the acts that correspond to the interests of shareholders are likely to cause losses to the company, it shall be deemed that the crime of breach of trust is established as a breach of trust against the company as long as the acts of breach of trust are committed as a loss to the company. Accordingly, the majority opinion is not grounded in the grounds that the crime of breach of trust is not established only in the case of stock allocation.

Of course, it cannot be deemed that a director’s breach of trust is established by issuing new shares at a low price. However, this is not due to the reasons presented by the majority opinion, but for the reason that there is no breach of duty by a director in relation to the company, and there is no loss to the company. This is only different from the case of a third party allocation, in which the share ratio, i.e., the company’s control over the company, is reduced due to the low price issuance, but there is no change in the share ratio due to the increase in the number of shares owned by each shareholder.

(5) On the other hand, the dissenting opinion with the majority opinion on this issue argues that in the case of a third party allocation and a shareholder allocation, the crime of breach of trust is established only in the case of the former, without establishing the crime of breach of trust, even if the latter is intended to issue new shares at a low price. In the case of a third party’s acquisition of new shares, etc. and the payment of the value of the subscription has the meaning of consideration for the third party’s acquisition of rights and status equal to the existing shareholders, so the company has the right and duty to receive reasonable compensation from the third party.

However, since the issuance of new shares is provided as a means of investment, and the issue price is different from the price of goods or services, it is difficult to establish a concept of fair payment from the standpoint of the company, and eventually, it is merely a situation in which the result of investment by the third party's low-price issuance is relatively attributable to the losses of the existing shareholders. Thus, the above reasons that the dissenting opinion set out in the dissenting opinion can only be the basis for the dissenting opinion that there is damage to the shareholders and that there is no damage in itself by the company.

(6) In addition, unlike the majority opinion, the Dissenting Opinion argues that it is inappropriate to distinguish directors from their duties on the basis of the appearance of new shares allocation method, and that, even if the method of shareholders allocation is taken, if the substance of the allocation of forfeited stocks is the same as that of the issuance of forfeited stocks by a third party allocation method from the beginning to the third party, the Dissenting Opinion is obliged to appropriately deal with forfeited stocks in relation to the company, as

However, if the substance of the allocation should be based upon the result of the Dissenting Opinion, it should be determined together with the determination as to whether the allocation of forfeited shares to a third party or the third party allocation method of new shares is the same as the acquisition of new shares by the intention of an existing shareholder. If the result is the same as that of the existing shareholder’s acquisition of new shares by the allocation of shares, then the breach of duty to the company should not be considered at all.

Therefore, we cannot agree with the discussion about the substance of the allocation method presented by the Dissenting Opinion because it violates equity. Ultimately, we point out that this problem arises from the issue of distinguishing the method of allocation of new shares from the point of view that the discussion about the duty of the company itself is unreasonable.

(7) The passive losses in breach of trust should be assessed on the basis of the profit that can be objectively anticipated to be acquired. However, even in cases where convertible bonds are issued at a market price, it is very questionable whether it is possible to acquire new shares at low price (hereinafter “the number of new shares to be converted at low price”) equivalent to the number of new shares to be converted at the time of their issuance. An underwriter of convertible bonds shall take over convertible bonds within the limit of its funds to be contributed. If the number of new shares to be converted at low price decreases considerably by the market price, a third party may take over them as a result of a decrease in profit or necessity, and as such, rather than accepting them, it may be determined as more favorable to purchase existing shares than to take account of the difference in the number of new shares, given that there is no reasonable doubt as to the financial capacity of the convertible bonds and the possibility of actual acquisition, it cannot be readily concluded that the new shares can be converted to the extent that the new shares are converted to the market price without considering the above difference between the market price and the new shares to the extent that they are converted to the market price.

C. We can find the basis for our positive law that the low price issuance of convertible bonds is not a company’s loss but a shareholder’s loss. Even after the issuance of the instant convertible bonds, Article 31-3 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 15509, Nov. 10, 1997; hereinafter “Gift”) newly establishes a provision on constructive donation of new-type bonds, etc., and “a person who falls under a controlling shareholder, etc. or has a special relationship with controlling shareholders, etc.,” directly acquires and acquires new-type bonds from a corporation that issues new-type bonds such as convertible bonds (A.) and “a person who falls under a controlling shareholder, etc. or has a special relationship with controlling shareholders, etc.,” under Article 30 of the former Enforcement Decree of the Inheritance Tax and Gift Tax Act (amended by Presidential Decree No. 1509, Nov. 10, 1997; 2013.

The above provisions stipulated under the Inheritance and Gift Tax Act are interpreted to the effect that gift tax is imposed on the profits of the former controlling shareholder, etc. on the premise that the actual asset value that the former controlling shareholder, etc. should have according to the conversion of the convertible bonds issued at low-price into new shares by a third party is transferred to a third party from the controlling shareholder, etc. If a loss occurs to the company due to the issuance of new shares at low-price by a third party allocation method, as stated in the majority opinion, it shall be compensated for the losses incurred to the company. Therefore, the above legislative measure should be deemed to be premised on the general legal principle that the profits equivalent to the losses suffered by the existing shareholder, due to the issuance of convertible bonds at low-price, shall belong to the new shareholder, and it shall not be deemed as a special technical treatment for the purpose of tax law

D. In the past, the Supreme Court held that, where convertible bonds are issued at a low price by a director to obtain marginal profits from the conversion of stocks, the crime of breach of trust may be established as an act of acquiring economic benefits equivalent to the difference between the market price of stocks and the conversion price, and causing losses to the company (see, e.g., Supreme Court Decisions 2001Do3191, Sept. 28, 2001; 2003Do5309, May 27, 2005). However, it should be modified to the extent inconsistent with the above legal principles.

E. According to the facts acknowledged by the court below in this case, since there was no urgent need to issue convertible bonds to form the company fund at the time of the issuance of the convertible bonds in this case, the issuance of convertible bonds under such circumstance can only be at issue as to whether the interest rate is appropriate, and as long as new capital has been formed in the company, damage to the company may not occur to the company. Furthermore, the disadvantages incurred by shareholders other than the first party to whom the convertible bonds were issued after the waiver of their own right to subscribe to new shares was reduced in the value of the existing shares, and as such, it cannot be deemed that the existing shareholders were at a disadvantage to the existing shareholders who did not acquire the convertible bonds, or that they were at a disadvantage to the company, regardless of the fact that the existing shareholders were allowed to do so.

In addition, the stock value per share as of the time of the issuance of the instant convertible bonds alleged in the grounds of appeal is 85,00 won. Based on this, the total value of shares is 60.12 billion won (existing number of shares 707,200 x 85,000 won) and the amount to be paid when new shares are purchased from the existing shareholders to obtain approximately 62.75% of the share ratio formed through the acquisition of the instant convertible bonds, which is approximately 3.7 billion won (6 billion won x 62.75% of the total amount of shares x 62.6 billion won). On the other hand, it is difficult to view that there was no difference between the existing shareholders' share price and the new shares to be paid for the issuance of the instant convertible bonds at the conversion price of KRW 185,000 per share as of the facts charged, and that there was no difference between the existing shares and the new shares to be paid for the issuance of the instant convertible bonds at the conversion price of KRW 10.66 billion.

F. In conclusion, in the instant case where, when issuing convertible bonds at a low price without urgent need for financing, the company took the form of allocating convertible bonds to the existing shareholders, but the remaining shareholders except for one shareholder forfeited, the forfeited convertible bonds were allocated to the third party, and thus, the existing shareholders cannot be deemed as losses to the existing shareholders within the extent permitted by the existing shareholders. Even if the existing shareholders were not acceptable, the disadvantage incurred thereby would only affect the shareholders, and thus, it does not constitute a crime of breach of trust against the company. It cannot be said that the conclusion differs depending on whether the existing shareholders are the stock allocation or a third party allocation.

Therefore, the judgment of the court below that recognized the defendants' crime of breach of trust against the defendants is erroneous in the misunderstanding of legal principles as to the company's breach of duty in the process of issuing convertible bonds, which affected the conclusion of the judgment, and thus, the judgment of the court below shall be reversed and remanded to the court below without examining the remaining grounds of appeal. However, the majority opinion is the conclusion that the judgment of the court below should be reversed as above, but

Justices Kim Young-ran (Presiding Justice)