[2] Where the acquisition of shares in a third party’s name, other than a company, constitutes the acquisition of treasury shares prohibited by Articles 341, 625 subparag. 2, and 622 of the Commercial Act, and where a director of a merchant bank violates the above provisions and supervisory regulations of the merchant bank, whether the principle of business judgment is applicable (negative)

[3] Whether liability for damages under Article 399 or 414 of the Commercial Act is established even in cases where a proximate causal relationship is not established between a director or auditor’s violation of the statutes, the articles of incorporation, or a violation of duties and the damage incurred therefrom (negative)

[4] The case holding that a merchant bank's loan agreement for the purpose of acquiring treasury stocks in the name of a third party under its own account is null and void, and the portion of the loan paid as stock price shall not be deemed as actual loss to the above company, but the remaining portion of the loan paid as stock price shall be deemed as loss caused by violation of the duties of directors and auditors

1. As to the acquisition of treasury stocks through bypassing loans to a maritime food service company

Article 399 of the Commercial Act provides that a director shall be liable for damages to a company when he/she commits an act in violation of the laws and regulations. If a director commits an act in violation of the above-mentioned laws and regulations in performing his/her duties, such act itself constitutes nonperformance against the company, and thus, barring any special circumstance, he/she shall not be exempted from liability for damages to the company unless there is any special circumstance. Meanwhile, even where a director is liable for damages caused by a director’s breach of the duty of care in performing his/her duties, if a reasonable executive officer of a financial institution performs his/her duties in good faith for the maximum profit of the company in accordance with procedures appropriate in the current situation, and the decision-making process and contents are not considerably unreasonable, such officer’s act is within the permissible scope of business judgment, but in principle, the principle of business judgment does not apply to a director’s act in violation of the laws and regulations (see, e.g., Supreme Court Decisions 201Da52407, Jun. 14, 2002; 2003Da638, Oct.

Article 21 of the former Merchant Banks Act (amended by Act No. 5750 of Feb. 5, 1999; hereinafter “former Act”) provides that “If a company acquires shares under a third party’s name, the fund for acquiring such shares will be contributed by the company and the profits or losses accrued from acquiring such shares will be attributed to the company, such acquisition of shares is likely to endanger the company’s capital foundation, and constitutes the acquisition of treasury shares prohibited by Articles 341, 625 subparag. 2, and 622 of the Commercial Act (see Supreme Court Decision 201Da4109, May 16, 2003).” Meanwhile, Article 21 of the former Act on the Merchant Banks (amended by Act No. 5750 of Feb. 5, 199; hereinafter “former Act”) provides that “The Financial Supervisory Commission shall supervise the business of a merchant bank and order necessary for the acquisition of shares, and Article 21 subparag. 2, 2012 of the Commercial Act shall not be deemed to have violated Article 26 subparag. 2 of the Commercial Act.

According to the reasoning of the judgment of the court below, the non-party, who was the representative director of the Korea Financial Services Corporation (hereinafter referred to as the "Korea Financial Services Corporation"), was a corporation of the same industry (hereinafter referred to as the "Dongnam Industry") and the Korea Food Services Corporation (hereinafter referred to as the "Korea Food Services") to lend money to the Korea Food Services, and it is decided that the Korea Food Services Corporation will take over new shares for the purpose of offering new shares on March 25, 199, while it provides the Korea Food Services Corporation with the above new shares as collateral for the redemption of the Korea Food Services, and if the Korea Food Services Corporation was subject to the disposition of business suspension from the competent authority, it is possible to notify the Korea Food Services Corporation 2 that the Korea Food Services Corporation would lose its obligation to repay the above shares, and the Korea Food Services Corporation 90 billion won will be subject to the Korea Food Services Corporation 2's new shares acquisition of the Korea Food Services Corporation 90 billion won for the purpose of offering new shares to the Korea Food Services Corporation 300 billion won.

On the other hand, the director's liability for damages under Article 399 of the Commercial Act due to a director's violation of laws, articles of incorporation or a violation of duties is limited to the damage which is proximate to such violation. Thus, even if a director committed a violation of laws, articles of incorporation or duties in the course of performing his/her duties, if a proximate causal relationship is not acknowledged between the loss and the loss caused by such violation, the director's liability for damages shall not be established (see Supreme Court Decision 2005Da2820, Apr. 29

The above agreement entered into between Daehan and Daehan service is entirely null and void including a loan agreement, and it is also null and void that the plaintiffs paid the price of new stocks with a loan to Daehan pursuant to the contract (see Supreme Court Decision 2001Da44109, May 16, 2003, etc.). Thus, it is difficult to deem that the portion of 2.5 billion won out of the loans to Daehan service, which was paid with the stock price of Daehan, was actually incurred, unless there are special circumstances, even though it is difficult to deem that the actual damage was caused to Daehan, as seen above, in violation of the prohibition of acquisition of treasury stocks, the expenses of 30 million won, which were disbursed for the acquisition of invalid treasury stocks, can be deemed as damage to Daehan due to the violation of the above duties.

Nevertheless, the court below determined otherwise, although the loan of the Korea Franchising service was in violation of Article 23 (1) of the Franchising Control Regulations as a loan to enable the Korea Franchising to purchase its own shares, the loan of the Korea Franchising service seems to be a business judgment within the limit of discretion permitted to be made in an imminent situation at the time for the existence of the Franchising loan for Franchising service, and it is difficult to view that the loan of the Korea Franchising service was paid as the stock price for the subsequent Franchising service to have caused any damage to the Korea Franchising. In so doing, the court below erred by misapprehending the business judgment rule, by misapprehending the legal principles on the occurrence of damage or the calculation of damages, and by misapprehending the legal principles

2. As to the act of establishing a pledge for the Sungwon Start-up Investment Company

According to the reasoning of the lower judgment, Korea Investment Trust Co., Ltd. (hereinafter “Korea Investment Trust”) has engaged in call loan transactions with Korea from May 6, 1998 to lend a certain amount of money for a short period. Under the guarantee of the close payment to Korea, Sungwon Investment Co., Ltd. (hereinafter “Ssung original Investment Co., Ltd.”), which is an affiliated company, has engaged in call loan transactions with Sungwon Investment Co., Ltd. (hereinafter “Ssung original Investment Co., Ltd.). On April 6, 1999, at the same time, KRW 30 billion each; KRW 60 billion each; KRW 60 billion each; KRW 70 billion each; KRW 70 billion each; KRW 60 billion each of the above call deposits and KRW 70 billion each of the above credit guarantee obligations; KRW 600 billion each of the above credit guarantee obligations and KRW 700 billion each of the above credit guarantee obligations; KRW 700 billion each of the above credit guarantee obligations and KRW 700 billion each of the above credit guarantee obligations.

Article 23 (2) of the supervision of the Sejong District Court Regulations provides that "the non-party, who is the representative director of the Korea Financial Institution, shall not offer the property owned by him as a security for any other person." Thus, the non-party, who is an affiliated company, established a pledge on the claim for deposits of MF in the Korea Investment Trust as a security for the obligation for the call loan of Sungwon Investment, which is an affiliated company, shall be deemed to violate the above provisions. However, on April 7, 1999, the Korea Financial Institution terminated the above pledge agreement with the Korea Investment Trust. After the termination, the Korea Financial Institution terminated the above pledge agreement. After the termination, the payment of the MMF deposit claims of KRW 70 billion was withdrawn, and repaid the payment of the deposit and the repayment of the repayment of the repayment of the deposit and the repayment of the repayment of the obligation for the payment of the deposit due to the payment of his debt and the outstanding debt that was due

On the other hand, the court below held that although Korea's paper paid to Korea Investment Trust a pledge on the MFF's deposit claims as a security for the obligation of call loan against sexual origin, it is not appropriate to determine that the non-party violated his/her duties, since it is for securing its liquidity and at the same time it is for the performance of the collateral obligations, it is ultimately conducted for his/her own interest, and therefore it is not appropriate to deem that the non-party violated his/her duties. However, there is no violation of the rules of evidence or incomplete deliberation as to the director's liability for damages. The plaintiffs' grounds for appeal

3. Conclusion

Therefore, the part of the judgment of the court below regarding the loan for piracy service is reversed, and that part of the case is remanded to the court below for a new trial and determination. The remaining appeals by the plaintiffs are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Young-ran (Presiding Justice)