In case where the reorganization company provided a guarantee or security for its affiliated company's obligations without any direct economic benefit as consideration, whether it constitutes a gratuitous act subject to avoidance under Article 78 (1) 4 of the Company Reorganization Act (affirmative)

The purpose of corporate reorganization is to coordinate the interests of creditors, stockholders, and other interested persons with respect to a corporation which faces bankruptcy due to financial difficulties but has economic rehabilitation value, and to arrange and reorganize its business. As a result of the achievement of this objective, Article 78(1)4 of the Company Reorganization Act provides that "any gratuitous act performed by the company after payment has been suspended, or within six months prior to the commencement of reorganization proceedings, or any other consideration act to be performed simultaneously thereto" shall be subject to avoidance for the company's property, and recover the profit-making power of the company or promote equality among creditors. Here, "free act" refers to any act of reducing the company's property without receiving any consideration or increasing its obligation, i.e., negative property, and all acts to increase its obligation. Such acts simultaneously refer to an act of free payment, which is in fact different from an act of free payment, provided by the other party without any obligation by the reorganization company for another person. Thus, even in cases where it directly causes the principal debtor's contribution to the company, the liquidation company's act constitutes an act of free payment, and such legal doctrine shall not be construed as so-called so-called an affiliated company or family company.

Article 78 (1) 4 of the Company Reorganization Act

Dongyang Securities Co., Ltd. (Law Firm Squa, Attorneys Seo Jong-woo et al., Counsel for the plaintiff-appellant)

Administrator of Korea Cement Manufacturing Co., Ltd. (Attorney Kim Sang-won, Counsel for the defendant-appellant)

Gwangju High Court Decision 96Na8504 delivered on April 24, 1997

The judgment below is reversed, and the case is remanded to the Gwangju High Court.

The grounds of appeal are examined.

According to the reasoning of the judgment below, when the plaintiff guaranteed the payment of about seven billion won of guaranteed bonds issued by non-party company, non-party company (hereinafter referred to as "non-party company") on January 20, 1995, the court below rejected the defendant's claim against the non-party company's guarantor's claim against the non-party company under the above payment guarantee at the time of the non-party company's default (hereinafter "guarantee of this case"). The reorganization company and non-party company decided to commence reorganization proceedings for the reorganization company (the appointment of the defendant as administrator) on December 18, 1995 at the Gwangju District Court 95No340 decided on December 18, 1995 (the appointment of the defendant as reorganization company) and reported the amount of 7,136,306,65 won as reorganization claim within the period of reporting the claim against the plaintiff, and therefore, the reorganization company bears a guaranteed obligation equivalent to the above amount to the plaintiff, and the plaintiff's claim against the non-party company's guarantor and non-party company's administrator's claim.

In other words, although the guarantee of this case was made within six months from the date of the default, it should not have received any contribution in a quid pro quo relationship or any economic benefit. The liquidation company is an affiliated company of the Cement Group (10 stock companies) substantially managed by the non-party 1, and the non-party 2 is an affiliated company of the CF Group (28 stock companies) substantially managed by the non-party 1. The CF Group, to which the non-party company belongs, was placed in the financial crisis around September 1994 (50 billion capital, 100 million won, 50 million won, and 50 million won capital), and it was found that the CF Group, which was affiliated with the CF Group, continued to obtain the guarantee of the non-party 2's financial institution's financial disadvantage with the financial institution's repayment guarantee of the company's debt at the request of the CF Group, even if it had not been able to obtain the financial guarantee of the company's financial institution's debt repayment guarantee of the company.

The purpose of corporate reorganization is to coordinate the interests of creditors, shareholders and other interested persons with respect to a stock company which faces bankruptcy due to financial difficulties, but which is worth economic rehabilitation, and to arrange and reorganize its business (Article 1 of the Company Reorganization Act). As a result of the achievement of these objectives, Article 78 (1) 4 of the Company Reorganization Act defines the "free act performed by the company after payment has been suspended, or within six months prior to the commencement of the reorganization procedure, or the act of compensation to be performed simultaneously with such act" as the object of denial for the company's property, thereby recovering the profit of the decreased property and the company, or promoting

The term "free act" refers to the act of reducing the company's active property without receiving any consideration, or increasing its obligation, i.e., small property, and the act to be simultaneously conducted refers to the case where the other party's contribution as consideration is too minor and is virtually no different from the gratuitous act. The guarantee or security offered for another person without the liquidation company's obligation is a case where it directly causes the creditor's contribution to the principal debtor, it is reasonable to interpret that it constitutes a gratuitous act as mentioned above unless the liquidation company receives economic benefits as consideration. This legal principle does not change from the perspective that the principal debtor is a so-called affiliated company or family company.

In addition, since the act of the reorganization company is not accompanied by consideration, and the risk of undermining the corporate profit and the general interest of creditors is particularly significant, it is recognized as a special type of denial, without considering the supervision of the reorganization company and the beneficiary, the gratuitous nature is sufficient to determine it in relation to the reorganization company, and it does not consider whether it is free of charge from the creditor who is the beneficiary. In addition, it is nothing more than the fact that there is a de facto relationship between the guarantee act of the reorganization company and the creditor who gained profits, the right to indemnity acquired by the reorganization company does not always constitute an economic interest in consideration of the act of guarantee. Furthermore, even in the case where the reorganization company provides the above guarantee for its affiliated company, the reorganization procedure is conducted for the purpose of satisfaction of the reorganization company separate from the affiliated company, it cannot be concluded that the economic interest of the principal debtor and the economic interest of the guarantor company, and therefore, it cannot be denied as free of charge unless the reorganization company receives direct and realistic economic benefits as a consideration for the guarantee.

However, according to the facts established by the court below, the reorganization company provided the guarantee of this case without any obligation, and there was no economic benefit resulting from the acquisition of guarantee fees or other increase in property, and rather, it provided the guarantee of this case to the non-party company while unilaterally provided financial assistance, such as payment guarantee, to the non-party company's affiliated companies, etc. which are the principal debtor, and even after examining the record, it does not seem that the reorganization company obtained a direct and realistic economic benefit in return for the guarantee of this case.

In light of these facts, the guarantee of this case that the reorganization company provided for the non-party company for the non-party company without any obligation within 6 months prior to the date of payment suspension constitutes a gratuitous act under Article 78 (1) 4 of the Company Reorganization Act.

Nevertheless, the court below erred by misapprehending the legal principles as to the interpretation of economic benefits in return for free payment and guarantee on the premise that the reorganization company received economic benefits in return for the guarantee of this case, which affected the conclusion of the judgment.

The defendant's appeal pointing this out is with merit.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.

Justices Song Jin-hun (Presiding Justice)