Suwon District Court 2008Guhap1424 ( October 07, 2008)

Early High Court Decision 2007J3906 ( December 18, 2007)

Whether an exception to the deemed donation due to capital increase with consideration falls under a method of securities offering;

The non-party company issued new shares to 5 specific persons, including the plaintiff, by the resolution of the board of directors, through a third party allocation method, and thus, it cannot be said that it was subject to the procedure of 'invitation'. It cannot be deemed that the disclosure of the decision to issue new shares to the electronic disclosure system of the Financial Supervisory

The contents of the decision shall be the same as attached.

The plaintiff's appeal is dismissed.

Expenses for appeal shall be borne by the plaintiff.

Purport of claim and appeal

The judgment of the first instance shall be revoked. The defendant shall revoke the disposition of imposition of gift tax of KRW 6,748,770 against the plaintiff on June 15, 2007.

1. Quotation of judgment of the first instance;

The reasoning of the judgment of this court is as follows, and it is stated in the judgment of the court of first instance except in the following cases. Thus, it is accepted in accordance with Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. The damaged part;

�� 2의 가.항을 아래와 같이 고쳐 쓴다.

The allocation of new shares in this case is deemed to have been subject to the procedure of soliciting subscription under Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 20551, Jan. 18, 2008; hereinafter the same), and in the case of deemed invitation of subscription, the definition provision on the solicitation of subscription under Article 2-4 (5) of the former Enforcement Decree of the Securities and Exchange Act shall not apply. Even if the above definition provision is applied, the capital increase in this case was made in accordance with the small-sum public offering procedure of less than 2 billion won, and was made on Jan. 9, 2006 under the Securities and Exchange Act, the public notice of the capital increase in this case was made on Jan. 12, 2006, the public notice of small-amount public offering on the 13th of the same month, and the public notice of the result of small-amount public offering on the 13th of the same month. Accordingly, the plaintiff was not subject to the disposition in this case.

�� 2의 다.항을 아래와 같이 고쳐 쓴다.

(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 in order 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 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 same shall not apply. Article 2(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, the term "in case of a public offering of new stocks, the number of persons who are solicited to acquire new stocks issued shall be 50 or more," and Article 2-4(5) of the former Enforcement Decree of the Securities and Exchange Act provides that the public offering of new stocks through newspapers or magazines.

Meanwhile, Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act provides that " even if the number of persons who are solicited to subscribe as a result of the calculation under paragraph (3) is less than 50 and does 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 as determined by the Financial Supervisory Commission,

(2) Comprehensively taking account of the aforementioned provisions, where a corporation issues new stocks at a price lower than their market price to increase its capital, the allocated person obtains profits equivalent to the difference between the market price and the value of the donated stocks, and where the allotment of new stocks is made pursuant to the Securities and Exchange Act, the gift tax shall be excluded from the allotment of the value of the donated stocks. In the case of allotment of new stocks by means of offering of securities under the Securities and Exchange Act, even if there is a person who gives a discount, the imposition of gift tax shall be exempted. This is to be determined again through fair competition process within the Korea Stock Exchange or the Association brokerage market even if the new stocks are issued under the relevant Acts and subordinate statutes such as the Securities and Exchange Act. This is also a case where the issuance of new stocks by the issuer of the new stocks at a price lower than their market price is to be excluded from the issuance of new stocks to facilitate the financing of the listed corporation or the Association-registered corporation under Article 39 (1) 1 (a) and (c) of the former Enforcement Decree of the Securities and Exchange Act. Such a case where the issuance of new stocks at a 20-listed corporation or Association is deemed to be excluded from the issuance of stocks.

Furthermore, in order to constitute "distribution by means of a public offering of securities, which is an exception that does not include profits arising from the issue at a low price in the value of donated property" under Article 39 (1) 1 (a) and (c) of the former Inheritance Tax and Gift Tax Act, 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 matters, such as notice and leaflets, holding an investment presentation meeting, and electronic communications, etc. shall not be limited, but the fact that the securities are issued or sold are issued or sold at least in a manner similar thereto, or the procedures for acquisition thereof shall be notified or announced (see Supreme Court Decision 2003Do7554, Feb. 13, 2004).

(3) In light of the above legal principles, the non-party company decided to issue new shares only to five persons with a special interest in the plaintiff et al. from the beginning to the board of directors, and accordingly, the allocation of new shares in this case that issued new shares cannot be deemed to fall under "a distribution by means of offering of securities", which is an exception to the legal fiction of donation due to capital increase by issuing 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 through the resolution of the board of directors only to five persons with a specific person including the plaintiff, it cannot be deemed to have undergone the procedure of "inviting subscription" under the former Enforcement Decree of the Securities and Exchange Act. The disclosure of the decision to issue new shares in the electronic disclosure system by the Financial Supervisory Service cannot be deemed to be "inviting subscription" under the former Enforcement Decree of the Securities and Exchange Act, and there is no other evidence to deem that

3. Conclusion

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