In a case where a person who has taken over shares but did not enter a change of shareholders in the register of shareholders, or a person who has taken over or intended to take over shares, takes over shares of a company by lending another person's name, and completes entry in the register of shareholders, whether only the shareholders entered in the register of shareholders can exercise voting rights, such as voting rights (affirmative in principle), and in such a case, whether the company can recognize the exercise of shareholder rights by a person who has not completed the entry in the register of shareholders (negative in principle)

[Majority Opinion] (A) The reason for the establishment of the shareholder registry system under the Commercial Act is to ensure the efficiency and legal stability of business affairs related to the issuance and transfer of shares so that a company can process the legal relations related to large number of shareholders in accordance with the form and uniform criteria, which can be easily identified externally, due to the nature of the organizational legal relations where the structure of a shareholder continues to change following the issuance and transfer of shares. This is to uniformly determine persons entitled to exercise shareholder rights according to the entry in the shareholder registry, without conducting a separate examination of the substantive legal relations with the shareholders, by taking into account that the exercise of shareholder rights may have a significant impact on the legal relations between the company and the large number of interested parties surrounding the company, and rather, it cannot be deemed as only

(B) The legal principle that a person who exercises shareholder's rights against the company shall be determined by the entry in the register of shareholders applies to not only a case of share transfer but also a case of issuance of shares.

Unlike transfer of shares, the Commercial Act does not stipulate the entry of a company in the register of shareholders as requisite for setting up against the exercise of shareholders’ rights, but the Commercial Act provides that when shares are issued, the name, address, etc. of a shareholder in the register of shareholders shall be entered and kept in the principal office (Articles 352(1) and 396(1)). If a company’s notice or peremptory notice to a shareholder is given to the address entered in the register of shareholders or the address notified by such person to the company, then such notice or peremptory notice shall be given to the company (Article 353(1)). The purport of the foregoing provision of the Commercial Act is to uniformly determine the person who exercises shareholders’ rights in relation to the company at the stage of issuing or transferring shares.

(C) In a case where not only a transferor is indicated as a shareholder but also a transferee of a company’s shares, but also a person who acquires or intends to acquire shares by means of lending another’s name, and thereby completing the entry in the register of shareholders under another’s name, the register of shareholders is legally entitled to exercise shareholders’ rights, such as voting rights, as a shareholder, in relation to the company.

This is a natural result in light of the legal doctrine that, barring special circumstances, a person entered in the register of shareholders can legitimately exercise shareholder rights such as voting rights in relation to the company, and even if a company’s shares were acquired by transfer, the acquisition of shares cannot be asserted against the company unless the company completes the entry in the register

In addition, it is reasonable to view that a person who is entitled to exercise shareholder rights by claiming entry in the register of shareholders as a shareholder, at least, has an intention to allow or accept the entry in the register of shareholders in a name other than his/her own name, even if a shareholder on the register of shareholders exercises shareholder rights in a relationship with the company.

Therefore, even if a shareholder in the register of shareholders exercises shareholders' rights against the intention of the person who acquired or acquired shares, it is a result of allowing shareholders to exercise shareholders' rights on the register of shareholders, and thus, it cannot be deemed that the exercise of shareholders' rights is contrary to

(D) The legal doctrine that only shareholders listed in the register of shareholders may exercise shareholders’ rights in relation to the company is equally applicable to the company, not only to shareholders but also to the company. Thus, barring any special circumstance, the company cannot deny the exercise of shareholders’ rights by those listed in the register of shareholders or recognize the exercise

Article 352(1) and Article 396 of the Commercial Act provides that a company shall pay the subscription price after acquiring shares by means of a document with the name and address of the subscriber, and the number and type of shares held by each shareholder in the register of shareholders and make it available for shareholders and creditors to inspect the shares issued by the company (see Articles 352(1) and 396). The purpose of this provision is to ensure that a company as well as the relevant shareholders are bound by the company by identifying a person who exercises shareholders’ rights with respect to the shares issued by the company and making it available for inspection by shareholders and creditors.

Unlike issuance of shares, in cases of a transfer of shares, the entry in the register of shareholders is to be changed at the request of an acquirer, not by the company itself, but at the request of the company. However, under the premise that the entry in the register of shareholders prepared and kept by the company at the time of issuance of shares is binding on the company, thereby recognizing the binding power in relation to the transfer of shares. Therefore, the opposing power under Article 337(1) of the Commercial Act should be interpreted to include the meaning that the company is bound by the entry in the register of shareholders, and thus, it cannot be denied the exercise of shareholder rights by a person entered in the register of shareholders or by a person

(E) Therefore, barring special circumstances, a person lawfully entered in the register of shareholders is entitled to exercise a shareholder’s right, such as voting right, in relation to the company, and the company cannot deny the exercise of a shareholder’s right by a shareholder on the register of shareholders, regardless of the existence of another person who actually acquired or intended to acquire shares, other than a shareholder on the register of shareholders, even though he/she was aware of the existence of another person who actually acquired or intended to acquire shares

The exercise of shareholders' rights in relation to the company even without completing entry in the register of shareholders shall be limited to cases where extremely exceptional circumstances are acknowledged, such as where entry in the register of shareholders or transfer claims have been unfairly delayed or rejected.

Article 316(2) of the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) provides that the entry of listed stocks deposited in the Korea Securities Depository in the register of beneficial shareholders has the same effect as the entry in the register of beneficial shareholders (Article 316(2) of the Capital Markets Act). In such a case, a shareholder on the register of beneficial shareholders may exercise the same shareholder’s

[Concurring Opinion by Justice Parkdae-dae, Justice Kim So-young, Justice Kwon Soon-il, and Justice Kim Jae-hyung] (A) When a company is established, the holder of a title deed signed and sealed as promoters or subscribers for shares to acquire the status of shareholders together with the formation of the company, barring any special circumstances. Even if there is a separate person who provided funds in the hinterland, it is only an internal relationship between the holder of a title deed and the person who provided funds, and it

(B) The Commercial Act imposes a liability for the payment of shares when shares are acquired in the name of a temporary owner or a third person, but there is no clear provision as to who is a shareholder. This problem is a matter to determine who is the party who has subscribed shares in the name of a temporary owner or who has subscribed shares without the consent of a third party. A separate from that, where shares are acquired in the name of a third party or shares are acquired in the name of a third party without the consent of a third party, a shareholder’s status should be acquired if a person who has subscribed to shares is a party to a share acquisition contract (Article 634 of the Commercial Act). This is because a temporary owner or a person who is not the nominal owner of a share acquisition contract cannot be a party to a share acquisition contract. This is consistent with the language and text of Article 332(1) of the Commercial Act as well as with the legislative intent of Article 332(1) of the Commercial Act. Next, if shares are acquired in the name of a third party with the consent of a third party, the legal principle on the issue of determining contracting parties should be reflected in a share acquisition contract.

(C) Separate from the issue of validity of stock transfer or ownership of shareholders’ rights, the Commercial Act provides for a transfer system so that the relationship between shareholders and the company can be uniformly and stably handled by taking into account the characteristics of collective legal relations in which shareholders continue to change due to stock circulation. In other words, in order for a person who acquired registered shares to exercise shareholder’s rights against the company, his/her name and address should be entered in the register of shareholders (Article 37(1) of the Commercial Act). Since the transferee of shares is presumed to lawfully acquire shareholder status against the company by transfer of ownership, he/she may lawfully exercise shareholder rights, such as voting rights, without separately proving that he/she is a right holder, even if the company is presumed to be a shareholder. In addition, a company is not liable even if a shareholder entered in the register of shareholders is recognized as a shareholder, such as the right to claim dividend, voting rights, and preemptive rights, and thus, a shareholder entered in the register of shareholders is not genuine. However, the Commercial Act merely prescribes the entry in the register of shareholders as a requisite to oppose the company, and thus the transfer of shares takes effect.

(D) A person who intends to acquire shares issued by a listed company shall establish a trading account in his/her own name and entrust the securities transaction to a securities company. The opening of a trading account is intended for financial transactions, and thus, the Act on Real Name Financial Transactions and Confidentiality applies, and thus, the entrustment of transaction ought to undergo real name verification procedures, and the entrustment of transaction ought to be made under the real name. The shares purchased by a securities company on the securities market are deposited in the account holder’s trading account. Since the shares deposited by the securities company are reverted to the account holder, the account holder is a truster (Article 103 of the Commercial Act). As such, the shares deposited therein belongs to the account holder, and the account holder is a shareholder. Even if the account holder

Articles 103, 289(1)8, 293, 295(1), 302(1), 303, 332, 336, 337(1), 352(1), 353(1), 354(1), 359, 396, 418(3), 425(1), 462-3(1), and 634 of the Commercial Act; Article 316(2) of the Financial Investment Services and Capital Markets Act; Article 2 subparag. 1(f), and 364 of the Act on Real Name Financial Transactions and Confidentiality

[Plaintiff-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellee-Appellant-Appellant-Appellee-Appellant 2, 1975, 196, 196, 196, 196, 197, 197, 196, 197, 196, 197, 197, 196, 197, 197, 196, 197, 197, 196, 197, 196, 197, 196, 197, 196, 197, 197, 197, 196, 197, 197, 199.

Plaintiff (Attorney Han-tae et al., Counsel for the plaintiff-appellant)

New Industry Co., Ltd. (Bae & Yang LLC, Attorneys Lee Han-hoon et al., Counsel for the defendant-appellant)

Intervenor joining the Defendant

Seoul High Court Decision 2014Na2051549 decided November 13, 2015

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

The grounds of appeal are examined.

1. (1) According to the Commercial Act, where a company is to be incorporated by promoters’ incorporation, the name, resident registration number, and address of promoters shall be stated in the articles of incorporation, and each promoters shall write their names and affix their seals or signatures, and each promoters shall subscribe to shares in writing, and the promoters shall, without delay, pay the full amount of the acceptance price (Articles 289(1)8, 293, and 295(1)), and (2) Where a company is incorporated by public offering, any person who intends to subscribe to shares shall write his/her name and seal or sign his/her name and seal, and address on the subscription note, stating the types, number, and address of shares to be taken over, and sign and seal the subscription price in accordance with the number of shares allotted by promoters (Articles 302(1) and 303), and the provisions on subscription to shares at the time of public offering at the time of issuance of new shares (Article 425(1)). When shares are issued, the name and address of shareholders, and the kind and number of shares held by each shareholder (Article 352(1)

Meanwhile, the transfer of shares shall be delivered in cases where share certificates have been issued (Article 336(1)); in cases where share certificates have not been issued, the transfer of shares takes effect only by the declaration of intention of the parties in accordance with the general principle regarding the transfer of nominative claims (Supreme Court Decision 94Da36421 delivered on May 23, 1995). However, the transfer of shares cannot be asserted against the company unless the name and address of the acquisitor are entered in the register of shareholders (Article 337(1)).

(1) In addition, notice or peremptory notice of a company to a shareholder shall be given to the address entered in the register of shareholders or the address notified by such person to the company (Article 353(1)), and (2) In order to determine persons who exercise voting rights or are entitled to distribute dividends or other shareholders, the company may suspend entry or change in the register of shareholders for a specified period, or may be deemed as a shareholder who exercises his/her rights to the shareholders listed in the register of shareholders on a specified date (Article 354(1)), and (3) in allocating new stocks free of charge following the transfer of preemptive rights or reserve funds, or interim dividends, the company may revert to the shareholders listed in the register of shareholders on the specified date (Articles 418(3), 461(3), and 462-3(

(2) The reason for the establishment of the shareholder registry system under the Commercial Act is to ensure the efficiency and legal stability of business affairs related to the issuance and transfer of shares so that a company can process the legal relations related to a large number of shareholders in accordance with the form and uniform criteria, which can be easily identified externally, due to the nature of organizational legal relations where the composition of a shareholder continues to change following the issuance and transfer of shares. This is to uniformly determine persons who can exercise shareholder rights according to the entry in the shareholder registry, without conducting a separate examination of the substantive legal relations with the shareholders, by taking into account the fact that the exercise of shareholder rights may have a significant impact on the legal relations between the company and the large number of interested parties surrounding the company, and cannot be deemed as only for

The Commercial Act provides that the transfer of shares issued shall be based on the issuance of share certificates, and the possessor of share certificates shall be presumed to be a lawful holder (Article 336), and the provisions on bona fide acquisition of share certificates under the Check Act shall apply mutatis mutandis to share certificates (Article 359). Nevertheless, in cases where a transfer of ownership is made in the register of shareholders as seen earlier, recognition of opposing power in relation to the company and notification to the address of shareholders on the register of shareholders, and allowing the transfer of preemptive rights to shareholders listed on the register of shareholders to vest in the register of shareholders on a certain date as determined by the company. This is the attitude to recognize special effect on the register of shareholders or transfer of shareholders in relation to the latter.

The same purport is that the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) has the characteristics of continuously transferring stocks through mass and repetitive transactions, and thus, it is also the same that the said Act has established a roster of beneficial shareholders and has the persons indicated therein exercise shareholders’ rights.

(3) The legal principle that a person who exercises shareholder's rights against the company shall be determined by the entry in the register of shareholders applies likewise to not only a case of share transfer but also a case of issuance of shares.

Unlike the case of a transfer of shares, the Commercial Act does not stipulate the entry of a company in the register of shareholders as requisite for setting up against the exercise of shareholders. Nevertheless, the Commercial Act provides that the name and address of a shareholder shall be entered in the register of shareholders when shares are issued (Articles 352(1) and 396(1)), and that notification or peremptory notice of a company to shareholders shall be given to the address entered in the register of shareholders or the address notified by such shareholder to the company (Article 353(1)). The purport of the Commercial Act is to ensure that the person who exercises shareholders’ rights in relation to the company at the issue or transfer of shares is uniformly determined according to the entry in the register of shareholders in the register of shareholders. The need to deal with the legal relationship of a company related to a number of shareholders is not different from the issuance of shares in the case of issuance of shares, and that it is difficult for the company to uniformly determine the legal relationship between the transferee and the company to exercise shareholders’ rights in the register of shareholders at least 4 in a case where shares are completely entered in the register of shareholders.

Ultimately, as long as shares are recorded as shareholders in the register of shareholders, only shareholders on the register of shareholders can exercise shareholder rights in relation to the company.

(4) In a case where not only a transferor is indicated as a shareholder but also a person who acquires or intends to acquire shares by lending another person’s name but also a company’s name has taken over or completed the entry in the register of shareholders, the register of shareholders is legally entitled to exercise shareholder rights, such as voting rights, as a shareholder, in relation to the company.

A person entered in the register of shareholders can legitimately exercise shareholder rights, such as voting rights, in relation to the company, unless there are special circumstances (see Supreme Court Decisions 84Da2082, Mar. 26, 1985; 2007Da51505, Mar. 11, 2010). Even if a company’s shares are acquired by transfer, the acquisition of the company’s shares cannot be set up against the company unless the entry in the register of shareholders is completed (see Supreme Court Decision 90Da6774, May 28, 191).

In addition, it is reasonable to view that a person who is entitled to exercise shareholder rights by claiming entry in the register of shareholders as a shareholder, at least, has an intention to allow or accept the entry in the register of shareholders in a name other than his/her own name, even if a shareholder on the register of shareholders exercises shareholder rights in a relationship with the company.

Therefore, even if a shareholder in the register of shareholders exercises shareholders' rights against the intention of the person who acquired or acquired the shares, it is a result of allowing shareholders to exercise shareholders' rights on the register of shareholders. Therefore, the exercise of shareholders' rights cannot be deemed as contrary to the good faith principle.

(5) The legal doctrine that only shareholders listed in the register of shareholders may exercise shareholders' rights in relation to the company is equally applicable to the company, not only to shareholders but also to the company. Thus, barring any special circumstance, the company cannot deny the exercise of shareholders' rights by those listed in the register of shareholders or recognize the exercise

In the case of issuance of shares, the Commercial Act requires a company to pay the subscription price after acquiring the shares by means of a document with the name and address and the number and type of shares held by each shareholder in the register of shareholders (Article 352(1) and Article 396). The purpose of the Commercial Act is to ensure that the relevant shareholders and the company are bound by themselves by identifying those who exercise shareholder rights with respect to the shares issued by the company as shareholders in the register of shareholders and allowing them to keep and peruse the shares in the register of shareholders (Articles 352(1) and 396). It is reasonable to recognize that a company’s exercise of shareholder rights with respect to the shares held by the company under the provisions of the Commercial Act is bound by the company’s own prepared and kept in the register of shareholders, and that it is unreasonable to recognize the exercise of shareholder rights without entering in the register of shareholders in the register of shareholders. However, unlike issuance of shares, a change in the register of shareholders at the request of a company, which is not a company itself, and thus, can be consistently interpreted under the premise that the exercise of shareholder rights by entry in the register of a company.

Inasmuch as exercising voting rights against a company based on shareholders’ rights is governed by collective law, it is difficult for the other party to exercise rights if the same group exercises voting rights. Nevertheless, if a company arbitrarily determines the subject to exercise shareholders’ rights based on the legal relationship on the ownership of shares, the existence of the shareholder registry system under the Commercial Act intended to uniformly determine the subject to exercise shareholders’ rights, and the requirement for exercising shareholders’ rights is inconsistent with the principle of equality of shareholders by differently interpreting the requirements for exercise of shareholders’ rights between shareholders. Moreover, there are unreasonable points that a company may choose to recognize the exercise of rights against all of the subscribers or transferees who did not complete the entry in the shareholder registry on the ground that there is no substantial right to do so, and thus, there is a gap in exercising rights because both shareholders or transferees who did not complete the entry in the shareholder registry and thus, could be rejected from exercising their rights. Moreover, if a company’s exercise of rights against a large number of shareholders or transferees who did not have a legitimate right to exercise shareholders’ rights by investigating the risk of exercise of shareholders’ rights against the other party.

(6) Therefore, barring any special circumstance, a person lawfully entered in the register of shareholders may exercise shareholder rights, such as voting rights, in relation to the company, and the company may not deny the exercise of shareholder rights by shareholders in the register of shareholders, regardless of the existence of another person who actually acquired or intended to acquire shares, other than the shareholders listed in the register of shareholders, regardless of the existence of another person who actually acquired or intended to acquire the shares, and cannot be recognized as exercising shareholder rights by a person

The exercise of shareholders' rights in relation to the company even without completing entry in the register of shareholders shall be limited to cases where extremely exceptional circumstances are acknowledged, such as where entry in the register of shareholders or transfer claims have been unfairly delayed or rejected.

Since the entry in the list of beneficial shareholders on listed stocks deposited in the Korea Securities Depository pursuant to the Capital Markets Act has the same effect as the entry in the list of beneficial shareholders (Article 316(2) of the Capital Markets Act), shareholders listed in the list of beneficial shareholders can exercise shareholder rights in the same manner as shareholders listed in the list of beneficial shareholders.

(4) Supreme Court Decisions 74Da804 Decided September 23, 1975; 76Da1448 Decided October 11, 197; 80Da398 Decided September 19, 1980; 79Da1989 Decided December 9, 198; 20Da1979 Decided December 19, 207; 30Da196 Decided December 19, 207; 30Da1989 Decided December 19, 207; 40Da319 Decided April 10, 198; 205Da1650 Decided December 16, 205; 200Da1665 Decided December 16, 205, which held that the company did not know that it would have been able to exercise shareholders' rights in relation to the company.

2. (1) A shareholder may file a lawsuit against a company to revoke a resolution of a general meeting of shareholders and to confirm the invalidity and non-existence of such resolution (Articles 376 and 380 of the Commercial Act). This constitutes a part of a shareholder’s right recognized as a shareholder for the management supervision of the company.

(2) The reasoning of the lower judgment and the evidence duly admitted reveal the following: (a) the Plaintiff purchased shares issued by the Defendant using the securities account in the name of the Plaintiff established in the KIKO Securities Co., Ltd.; and (b) completed the entry on the list of beneficial shareholders.

According to the legal principles as seen earlier, in a case where a person who acquires or intends to acquire shares takes over or takes over shares of a company using another person's name, and the person who actually acquired or intended to take over shares in the register of shareholders is proved to have been different from a shareholder on the register of shareholders, only the shareholder on the register of shareholders can exercise shareholder rights in relation to the company. Thus, a shareholder on the register of shareholders may file a lawsuit against the company for cancellation of the resolution of the general meeting of shareholders, invalidation and non-existence of the resolution, and the company may not deny the exercise of shareholder rights

Examining the above facts in light of such legal principles, even if the Nonparty purchased shares issued by the Defendant in the name of the Plaintiff with the Plaintiff’s consent, and actually bears the price of such shares, the Plaintiff, a shareholder on the actual shareholder registry, has the right to exercise shareholders’ rights in relation to the Defendant, and thus, is entitled to seek confirmation of invalidity and non-existence of the resolution of the general meeting of shareholders of this case against the Defendant

(3) Nevertheless, the lower court determined that the person who actually assumed the acquisition fund of the Plaintiff’s shares is the Nonparty, and that the evidence submitted by the Plaintiff alone does not have the right to independently exercise the shareholder’s right against the Defendant. In so determining, the lower court erred by misapprehending the legal doctrine on the exercise of shareholder’s right against the company on the actual shareholder registry, which completed the purchase of shares with the acquisition fund

3. Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices, except for a separate opinion by Justice Parkdae-dae, Justice Kim So-young, Justice Kwon Soon-il, and Justice Kim Jae-hyung, and there is a supplementary opinion by Justice Park

4. The separate opinion by Justice Park Poe-dae, Justice Kim So-young, Justice Kwon Soon-il, and Justice Kim Jae-hyung is as follows.

(1) A company is a corporation established for commercial activities or any other profit-making purpose (Article 169 of the Commercial Act). Of the types of a company, a stock company is a physical company established based on the capital invested by a shareholder who is an employee, and at the same time, refers to a share held by the shareholder as an investor in the form of capital. The shareholder acquires shares upon acquiring shares at the time of incorporation or at the time of issuance of new shares, thereby naturally acquiring them or acquiring shares through comprehensive succession by merger or inheritance or individual succession by acquisition of shares.

(2) At the time of incorporation of a company, promoters shall subscribe to shares in writing (Article 293 of the Commercial Act); and when promoters subscribe to the total number of shares to be issued at the time of incorporation, they shall pay the total amount of the acceptance price (Article 295(1) of the Commercial Act). In cases of incorporation through public offering, any person who intends to subscribe to shares shall subscribe to the subscription price for shares and pay the subscription price by paying the subscription price (Articles 302(1) and 305(1) of the Commercial Act). Therefore, in cases of incorporation of a company, unless there are other special circumstances, the nominal person whose name is signed and sealed as promoters or subscribers for shares acquires the status of shareholders along with the formation of the company, and even if there is any person who has provided funds behind the company, in principle, it is merely an internal relationship between the nominal person and the person who has provided the funds, and may not assert

(3) A person who has subscribed to shares in a temporary name or without the consent of another person shall be liable for the subscription to shares in such name (Article 332 (1) of the Commercial Act) and a person who has subscribed to shares in such name with the consent of another person shall be jointly liable for the payment with such other person (Article 332 (2) of the Commercial

Although the Commercial Act imposes liability for the payment of shares in the case of acquiring shares in the name of a temporary owner or a third person, it does not have clear provisions as to who is a shareholder. This issue is to determine who is the party who has subscribed shares in the name of a temporary owner. A matter is to determine who is the party who has subscribed shares in the name of a third person. A matter is to establish who is the party who has subscribed shares in the name of a third person without the consent of a third person, a matter is to acquire the shareholder's status, even though the user of the name can be criminal liability (Article 634 of the Commercial Act). This is because a person who is not the party who has subscribed to shares in the name of a temporary owner or the nominal owner of a contract for subscription of shares can not be a party to a contract for subscription of shares. This is also consistent with the intent of the parties, as well as with the language and legislative intent of Article 332(1) of the Commercial Act. In principle, the legal principles on the issue of determining the parties to a contract for subscription of shares should be reflected in the contract.

(4) The status of a shareholder may be freely transferred by the transfer of shares, different from the status of a member of the personnel company. The transfer of shares shall be effective in the event of the issuance of share certificates (Article 336(1) of the Commercial Act), and the transfer of shares between the parties concerned even before the issuance of share certificates: Provided, That when a company fails to issue share certificates and transfers shares without the issuance of share certificates before six months elapse from the date of incorporation or the date of payment of new shares, it is merely impossible to assert its effect against the company (Article 335(2) of the Commercial Act). If shares are transferred without the issuance of share certificates even after six months have elapsed from the date of incorporation or the date of payment of new shares after the date of payment of the new shares (see, e.g., Supreme Court Decision 94Da36421, May 23, 1995).

Unlike the issue of the validity of stock transfer or ownership of shareholders’ rights, the Commercial Act has established a transfer system so that the relationship between shareholders and the company can be uniformly and stably handled, taking into account the characteristics of collective legal relations that may continue to change due to stock circulation into account. In other words, in order for a person who acquired registered shares to exercise shareholder’s rights against the company by acquiring shares, his/her name and address must be entered in the register of shareholders (Article 37(1) of the Commercial Act). Since the transferee of shares is presumed to legally acquire shareholder status against the company through transfer, he/she may lawfully exercise shareholder rights, such as voting rights, without separately proving that he/she is a right holder (see, e.g., Supreme Court Decisions 84Meu2082, Mar. 26, 1985; 2007Da51505, Mar. 11, 2010; 2007Da3782, Jun. 26, 2017>

(5) The distribution of stocks listed on the securities market shall be carried out in accordance with the stock transfer and payment system operated by the Korea Securities Depository established under the Capital Markets Act. In other words, the delivery and payment of securities following transactions on the securities market shall be carried out by the Securities Depository as a settlement institution, and any person other than the Securities Depository shall not engage in the business of receiving securities, etc. and settling accounts by means of transfer between accounts in lieu of the number of such securities (Articles 297

First of all, a person who intends to acquire shares issued by a listed company shall establish a trading account in his/her name and entrust the trading of securities to a securities company. The opening of a trading account is intended for financial transactions, and thus, the Act on Real Name Financial Transactions and Confidentiality (hereinafter “Real Name Financial Transactions Act”) is subject to the real name verification procedure, and the entrustment of the trading should be based on the real name. The shares purchased by a securities company through an exchange in the securities exchange are deposited into the account of the account holder. The shares deposited in the securities exchange are attributed to the account holder, who is the truster (Article 103 of the Commercial Act). As such, the shares deposited are attributed to the account holder, who is the account holder (see, e.g., Supreme Court en banc Decision 2008Da45828, Mar. 19, 2009). Even if there is another person who provided funds to the account holder

Next, investors who have acquired stocks issued by listed companies shall deposit their stocks in a securities company, and a securities company shall re-deposit the deposited stocks in the Korea Securities Depository. An investor and the depositor are presumed to have a co-ownership share in the deposited securities, etc. depending on the type, issue, and quantity of securities, etc. stated in the investors’ book and depositors’ book (Article 312(1) of the Capital Markets Act). Co-owners of securities, etc. among deposited securities, etc. (hereinafter “beneficial shareholders”) are deemed to have shares equivalent to their co-ownership share in exercising rights as a shareholder (Article 315(1) of the Capital Markets Act). The Korea Securities Depository shall notify the issuer, etc. of the names and addresses of shareholders as to beneficial shareholders as of the date on which the list of shareholders is closed, and the issuing company, etc. who has received the notification shall prepare and keep the list of beneficial shareholders as to the matters notified (Articles 315(5) and 316(1) of the Capital Markets Act).

(2) The reasoning of the lower judgment and the evidence duly admitted reveal the following.

① The Plaintiff established a trading account in its name with a securities company, and purchased the shares of Defendant Company, a securities-listed corporation, on the securities market upon entrustment of securities transaction, into the Plaintiff’s account under the name of the Plaintiff. In order to settle the purchase price of the said shares, the Plaintiff transferred the money in the deposit account opened in its name to the said trading account. The money in the bank’s deposit account was primarily remitted to the Nonparty, etc.

② As to the Plaintiff’s shareholder of the Defendant Company, the lower court rejected the instant lawsuit on the ground that the Nonparty, etc., who provided the purchase price of the said shares, was the actual shareholder, even if the shareholder on the shareholder registry of the Defendant Company stated the Plaintiff as the Plaintiff.

(3) We examine the judgment of the court below in light of the aforementioned legal principles.

① The Plaintiff is a purchaser of the shares of the Defendant Company on the securities market through consignment sales and internal purchase transactions. The Plaintiff opened a trading account with a securities company through real name verification procedures in accordance with the Act on Real Name Financial Transactions, and entrusted a securities company with the purchase of shares of the Defendant Company, which is a listed securities on the securities market. Accordingly, the shares purchased by a securities company were entered into a trading account in the name of the Plaintiff. The shares entered as above belong to the Plaintiff who entrusted the sale and purchase. As such

② The money used by the Plaintiff as the purchase price of the said shares was deposited in the account in the name of the Plaintiff, and the said money was transferred from the bank account in the name of the Plaintiff. As such, the said money was ultimately transferred to the Plaintiff. In other words, as long as a financial institution concluded a deposit contract with the deposit account title holder after undergoing real name verification procedures pursuant to the Real Name Financial Transactions Act as the deposit account holder, the right to claim the return of the deposit is vested in the deposit account holder, who is the nominal owner. If it is intended to view the contributor, etc., who is not the deposit title holder, as the party to the deposit account, the right to claim the return of the deposit should be excluded by denying the deposit contract with the deposit title holder, which was made in writing, between the financial institution and the contributor, and should be extremely exceptional cases where the Nonparty, etc. agreed with the Plaintiff, etc. to vest in the deposit account in the name of the Plaintiff (see, e.g., Supreme Court en banc Decision 2008Da45828, supra).

③ The shareholder registry of the Defendant Company also states that the Plaintiff is a shareholder. Therefore, the Plaintiff is presumed to be a shareholder based on the effect of granting qualification to the shareholder registry, and barring any special circumstance, the Plaintiff can exercise its rights as a shareholder, such as voting rights.

④ In the instant case, the Plaintiff, as a shareholder, has the qualification or interest to seek confirmation or non-existence of the resolution of the general meeting of shareholders of this case against the Defendant. Nevertheless, the lower court determined that the Plaintiff was merely a shareholder who lent only his name to the Nonparty, who could have actually borne the acquisition fund of shares. In so determining, the lower court erred by misapprehending the legal doctrine on the attribution of shares, thereby adversely affecting

(4) As above, I agree with the conclusion of the majority opinion as to the instant case, but differ in its reasoning, and therefore I express my concurrence.

5. Concurrence with the Concurring Opinion by Justice Park Poe-dae and Justice Kim So-young

(1) According to the Majority Opinion, even if a person who has actually subscribed or acquired shares is not entered in the register of shareholders, a company cannot exercise shareholders’ rights against the company unless it is entered in the register of shareholders, and even if the company knows that there are separate owners of shares, it should recognize only the shareholders on the register of shareholders, even though it knows that there are separate owners of shares, who are not the nominal holders registered in the register of shareholders. Ultimately, the issue of the validity of exercise of rights between the company and its shareholders ought to be determined solely on the register of shareholders, and the legal relationship

(2) However, the issue of attribution of rights as to who is a right holder cannot be raised and the validity of exercise of rights cannot be discussed. In addition, even if legal relations under the Company Act are in the nature of a collective law, the exercise of rights is valid whenever only formal qualifications are required for exercise of rights. Our Commercial Act does not stipulate the requirement for substantive attribution of shareholders’ rights. The status of shareholders is acquired when shares are acquired from a company or shares are acquired from an existing shareholder by transfer of shares. The entry in the register of shareholders is not a requirement for change of shareholders’ rights, such as registration in real rights, but is not a requirement for the establishment of change of shareholders’ rights, such as registration in real rights. The existence of a shareholder status and the existence of a shareholder’s right is an issue of substantial attribution of rights to confirm the subject of rights that meet the requirements for acquisition of shares, such as new shares or acquisition of shares. The register of shareholders is a book prepared and kept by a company to indicate matters related to the company’s stocks, stock certificates, and shareholders, and the function of disclosure of rights such as the register of shareholders and the company creditors

Article 337(1) of the Commercial Act provides that the transfer of shares shall not be effective against the company unless entered in the register of shareholders. However, this is determined in the form required for exercising shareholders' rights in relation to the company. If a shareholder status was not effectively acquired, it is not a shareholder right holder even if the shareholder status was entered in the register of shareholders, and if there is no shareholder right, it is merely an appearance without the substance of the right holder. Therefore, even if a shareholder’s name is entered in the register of shareholders, it would be later changed to the effect that a person who does not have a right to exercise shareholders can exercise his/her rights effectively even if he/she is not recognized

There are many cases where the shareholders who have acquired shareholders' rights by accepting or taking over shares and the nominal holders entered in the register of shareholders are the same. However, the fact that the shareholders or underwriters entered the names of shareholders in the register of shareholders in a third party, and thus the acquisition of shareholders' status or rights is not denied or a third party who is the nominal holders is not a shareholder. No legal restriction such as the Act on Real Name Financial Transactions and the Act on the Registration of Real Estate under Actual Titleholder's Name as to deposits, etc. does not exist with respect to the shares of a company. It is not a prohibited area under the current law, but a free choice is not a field where the ownership of shares is registered by lending the names of third parties

Although the nominal owner may be presumed to be a shareholder even if the nominal owner actually stated in the shareholder registry, if it is proved by other factual relations that the actual right-holder is a third party different from the nominal owner, not only the nominal owner but also the relationship between the company and its shareholder, in principle, the right-holder shall be deemed to have the status as a shareholder (see Supreme Court Decision 84Meu2082, Mar. 26, 1985). Even if the transfer of ownership cannot be asserted against the company without a change of ownership, the company may refuse to exercise its rights when it intends to exercise shareholder rights without a change of ownership, and further, if the company accepts the exercise of shareholder rights with the belief that the nominal shareholder is a genuine shareholder, the actual shareholder shall not be asserted against the company. Even though the company clearly knows that there is a separate shareholder who acquires shares or is actually a third party only on the shareholder registry, the intrinsic nature of the company shall be deemed to have been attendance at the general meeting of shareholders and to have been distributed to the third party, and even if it is not effective, it shall not be deemed to have any substantive rights-holder.

(3) When issuing new shares to either establish a company or increase capital, a contractual relationship is formed between promoters or between the subscribers for the subscription of shares and the company. In such a case, who is a substantial subscriber and the shareholder is a matter of determination of the parties to the new shares acquisition contract.

However, in reality, there is a wide range between the party who has entered into a share subscription contract and the nominal owner thereof. The cases where a substantial share holder exists, such as where a closed company established by a single-person company, family company, or minority partner acquires new shares in the name of his/her child or partner, and only the shareholders listed in the register of shareholders lend their names to a small-scale stock company. Moreover, the cases where a company, as well as a small-scale large-scale company, maintains a closed company as a non-public company without disclosing its shares, may be shaking. In addition, when a capital increase is made in such company, there are many cases where the existing major shareholder only engages in a third party’s acquisition of new shares while acquiring new shares, and the name of the shareholder in the register of shareholders is distributed to a third party following a prior consultation between the new investor and the new investor on the scale of new shares subscription and the number of new shares underwriter. In such case, the shareholder is not the nominal owner who actually paid the shares and entered into a share subscription contract.

It is common that the company recognizes a legitimate transferee based on the notification of the transfer of shares or the possessor of the share certificates prior to the issuance of the share certificates (see Articles 335(3) and 336 of the Commercial Act). However, in cases where the company clearly knows that a shareholder on the register of shareholders is not a substantial transferee due to the transfer of shares following the management’s involvement, there is nothing in the unlisted company.

In all such cases, only the nominal owner is entitled to exercise shareholders' rights, and the actual subscribers or business owners are unable to exercise shareholders' rights, and it is too far far away from our society’s reality that if the company allows such subscribers, etc. to exercise shareholders’ rights, it is so null and void. Moreover, it cannot be said that it conforms to the language and text of the Commercial Act or the statutory order stipulated by the Commercial Act

The Majority Opinion states that even if a company had a nominal owner on the register of shareholders exercise shareholders' rights against the intent of the person who acquired or acquired the shares, it does not go against the good faith principle even if the company had a nominal owner on the register of shareholders exercise shareholders' rights with the knowledge of the fact. However, this is merely stated in the register of shareholders, and it is questionable as to whether the exercise of rights is valid only when there is no right. It is questionable whether the Commercial Act provides that a possessor of share certificates as a legitimate holder can be deemed valid only when he/she does not exercise rights. The premise that a possessor of the share certificates under Article 336(2) of the Commercial Act is not a shareholder in a real relationship, and that a possessor of the share certificates is not a shareholder in a real relationship, and that a transfer of shareholders would not oppose the company. Therefore, if a person who acquired shares in a real relationship intends to exercise his/her rights without a transfer of shareholders, the company may refuse the exercise of rights on the ground that he/she did not meet the qualification to exercise rights, but it should be deemed legitimate (see, e.g., Supreme Court Decision 20014Da174.

A company may not be held legally liable even if it grants rights as shareholders, such as notification and peremptory notice to a person entered in the register of shareholders and voting rights, preemptive rights, and dividend rights (see, e.g., Supreme Court Decisions 96Da32768, 3275, 32782, Dec. 23, 1996; 96Da45818, Sept. 8, 1998). The genuine meaning of the entry in the register of shareholders is that the company’s good faith can be protected. In addition, there is no concern that the company’s actual legal confusion may arise because it regulates so, or that the company’s collective legal relationship may be unstable. As seen in the Majority Opinion, it is not necessary to make a daily investigation into the existence of other holders’ rights in the register of shareholders, as well as the aforementioned legal relationship between the substantive rights holder and the company.

(4) The regulatory framework under which the Commercial Act is placed in place. Therefore, it is reasonable to maintain and apply the aforementioned legal doctrine with respect to unlisted companies that account for most of the Korean companies. On the contrary, in order to have the absolute probative value entered in the register of shareholders, or to be called an absolute prerequisite for the requirement for the establishment of rights or for the exercise of rights, legislation should be prior to the enactment. There is no institutional change such as the introduction of a real name system in relation to stock holding. It goes beyond the bounds of statutory interpretation to grant the absolute status of the person eligible for exercise of rights to the nominal holders on the register of shareholders. Such change is distinguishable from that of the next group legal relationship. Such change is desirable in the future. Such change must require a buffer system and adjust for the adjustment of the transition period. The issue of whom a shareholder is a shareholder is not in the territory of the company law, but rather is the foundation that affects the application of the tax law, administrative regulation, and criminal law.

However, under the current law, a listed company subject to the application of the Capital Markets Act or the same case as the over-the-counter stocks of the unlisted company should be viewed differently. In the case of an unlisted company, entry in the register of shareholders can only be recognized as the degree of de facto presumption of attribution of rights, but since the legal regulation of the Act on Real Name Financial Transactions is applied to the stock transaction conducted through the securities market, the nominal owner should be regarded as a shareholder. Since the acquisition price of stocks through the securities market is paid after transfer from the trading account in the name of the transferee, the funds deposited in the account are owned by the transferee under the Act on Real Name Financial Transactions and the right to the stocks acquired through the fund is naturally attributed to the transferee. The same applies

In short, in the case of a company governed by the Capital Markets Act, such as listed companies, only the nominal owner on the register of shareholders should be deemed a shareholder in principle in relation to the Act on Real Name Financial Transactions. However, in the case of a general company to which the Commercial Act applies, only the actual owner of rights can exercise the right legally, and it is reasonable to view that entry in the register of shareholders is only a requisite for setting up against the

As above, I express my concurrence with the Concurring Opinion.

Justices Lee Sang-hoon (Presiding Justice)