Plaintiff (Appointed Party) (Law Firm Gender Equality, Attorneys Lee Sung-chul et al., Counsel for the plaintiff-appointed party)

Hocom Construction Industry Co., Ltd. (Attorney Dong Dong-dong et al., Counsel for the plaintiff-appellant)

January 11, 2018

1. The plaintiff (appointed)'s claim is dismissed.

2. The costs of lawsuit shall be borne by the plaintiff (appointed party).

The Defendant’s capital decrease in amount of KRW 21,546,045,00,00,000, which was paid on December 8, 2016 by the Defendant, shall be null and void.

1. Basic facts

A. Status of the parties

Ulsan Construction Co., Ltd. (hereinafter “Suld Construction”) was a stock company with the purpose of civil engineering and construction work. On October 7, 2014, the Seoul Central District Court (hereinafter “Rehabilitation Court”) filed an application for commencement of rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Bankruptcy Act”) with the Seoul Central District Court on October 7, 2014, and received a decision to commence rehabilitation proceedings from the rehabilitation court on October 22, 2014 (the rehabilitation procedure following the foregoing decision to commence the rehabilitation procedure “instant rehabilitation procedure”). Tuld Construction was listed, but its listing was abolished on April 13, 2015.

As of October 11, 2016, the Plaintiff (appointed; hereinafter “Plaintiff”) held 47 common shares of Ulsan Construction Co., Ltd.; 115 Preferred shares; Nonparty 1 held 147 common shares of the said company; 31 common shares of the said company; and Nonparty 2 held 10 common shares of the said company; and Nonparty 2 held 21 common shares of the said company (hereinafter collectively referred to as “Plaintiff, etc.”).

B. Reduction of capital due to consolidation of shares of Ulsan Construction in the rehabilitation procedure of this case

In the instant rehabilitation procedure, on July 1, 2015, the rehabilitation plan for Ulsan Construction approved by the rehabilitation court (hereinafter “the first rehabilitation plan in this case”) included the content that, with respect to common shares and preferred shares issued prior to the decision to authorize the first rehabilitation plan in this case, the total amount of 5,000 won per share with a face value of 5,000 won per share with a face value of 5,000 won per share with a face value of 5,000 won per share with a face value of 5,000 won per share with a face value of 5,000 won per share with a value of 5,000 won per share with a view to the appropriateness of the capital scale of Ulsan Construction after completing the reduction in capital and the conversion of investment into the above rehabilitation plan, five thousand won per share with a face value of 5,000 won per share.

The Ulsan Construction, in consultation with the rehabilitation court on January 6, 2016, promoted M&A on the promotion of M&A on January 6, 2016, such as making a public announcement of the sale of M&A, and entered into an investment contract (hereinafter referred to as the "investment contract in this case") with the Hoban Construction Co., Ltd. on March 21, 2016, which provides for KRW 20.842 billion for Hoban Construction, and takes over KRW 4,168,400 for common shares of Ulsan Construction, and the due date for the payment of the acquisition price shall be the day prescribed in the rehabilitation plan, and the new shares shall take effect on the day following the due date for the payment of new shares, and the contract shall take effect from the time when the approval is obtained from the rehabilitation court (hereinafter referred to as the "instant investment contract").

In the rehabilitation procedure of this case, on July 20, 2016, Ulsan Construction was authorized by the above court to amend the rehabilitation plan (hereinafter “the revised rehabilitation plan of this case”) to amend the first rehabilitation plan of this case (hereinafter “the revised rehabilitation plan of this case”) with the following contents: (a) the general share and preferential share shares of the instant investment contract of this case and Ulsan Construction shall be 5,000 won per share with a face value of 5,000 won per share; and (b) the shares shall be re-merged with a face value of 5,000 won per share with a face value of 5,00 won per share (if all shares are multiplied by a share consolidation ratio, 2,560 won per share).

The Ulsan Construction performed the consolidation of shares in accordance with the rehabilitation plan of this case.

C. Reduction of capital due to consolidation of shares of Ulsan Construction after the rehabilitation procedure of this case

1) On September 26, 2016, the Ulsan Construction decided to hold a temporary general meeting of shareholders on November 4, 2016 (hereinafter “instant general meeting of shareholders”). The board of directors, as indicated in the attached table, determined the instant general meeting of shareholders as a proposal to change the amount per share of shares issued by the Ulsan Construction from KRW 50 million to KRW 50 million and KRW 50 million per share of shares issued by the Ulsan Construction’s articles of incorporation (hereinafter “instant proposal”). The Ulsan Construction notified shareholders, including the Plaintiff, etc. of the instant proposal to convene the instant general meeting of shareholders.

2) The instant general meeting of shareholders was held on November 4, 2016. As of the time, the number of shares issued in Ulsan Construction was 4,308,776 shares for common shares, and 4,309,209 shares for 433 common shares for 4,309,209 shares for 4,300 common shares for 4,308,000 shares for 4,168,40 shares for 4,00 shares for 4,309,00 shares for 96.73% of the total shares issued was held for 4,309,209 shares for 4,180,664 shares for 209 shares for 4,00 shares for 4,309, and the instant bill was adopted as is.

3) Pursuant to the resolution of the general meeting of shareholders in this case, the Ulsan Construction implemented capital reduction (hereinafter “capital reduction”) by means of a stock consolidation (hereinafter “instant stock consolidation”) as stated in the resolution of the general meeting of shareholders (hereinafter “instant stock consolidation”) and changed the number of stocks, par value, and capital as stated in the agenda in this case. As a result, the shareholders of Ulsan Construction came to three persons, including Hobro Construction, from 980 persons, and the Plaintiff et al. was unable to hold shares for Ulsan Construction. However, with respect to the shares less than one share as a result of the said stock consolidation, the shares were calculated as 5,000 won per share, regardless of ordinary shares and preferential shares, and the Plaintiff et al. received them.

(d) Relationship between Ulsan Construction and Defendant

Ulsan Construction changed the trade name on April 20, 2017 to the Hoban industry, and the Hoban industry was merged with the Defendant, a stock company with the purpose of housing construction and housing management business on August 31, 2017.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1-4, Eul evidence Nos. 1-3, 9, 10, 13, and 14, and the purport of the whole pleadings

2. The plaintiff's assertion

In the case of the consolidation of shares of this case, the existing preferred shareholders would lose all the shares held differently from the ordinary shareholders. Thus, even though approval of the general shareholders' meeting is obtained, the defendant did not hold the general shareholders' meeting, so the reduction of capital of this case is null and void.

The general meeting of shareholders of this case, without reflecting the opinions of minority shareholders, including the plaintiff, unilaterally conducted the procedures for consolidating shares and capital reduction without unilaterally making a decision on the merger of shares of this case, and as a result, minority shareholders lose all of them and became only major shareholders, it is unlawful as it violates the principle of equality of shareholders.

In the rehabilitation procedure of this case, the 10,000 shares were already consolidated and capital reduction, but the 10,000 shares were decided again, and the 10,000 shares were reduced. This is for the sole purpose of the withdrawal of minority shareholders without any specific and clear managerial necessity, and thus, it violates the principle of good faith and the prohibition of abuse of rights.

3. Determination

A. As to the lack of resolution of a general meeting of shareholders

1) Relevant legal principles

A) In a case where a company issues different classes of shares, even where the articles of incorporation does not provide for any other provision in the articles of incorporation, special provisions regarding the allotment of shares due to the consolidation of shares may be provided (Article 344(3) of the Commercial Act). (Article 344(3) of the Commercial Act provides that where special provisions are provided according to the class of shares, and where a company’s division or merger through division, share exchange, share transfer, or share transfer and a merger would inflict loss on a class of shareholders due to a merger of the company, a resolution of the general meeting of shareholders of different classes of shares (hereinafter

According to the above Article 436, where a company provides special provisions according to the class of shares pursuant to Article 344(3) of the Act, i.e., where a company provides for a certain class of shares without the articles of incorporation, it may be interpreted that a general meeting of shareholders should be held regardless of the occurrence of losses to shareholders of a certain class of shares. However, in a case where there is no loss to shareholders of a different class of shares or profits, demanding a resolution of a general meeting of shareholders should be limited to a case where there is a risk of causing losses to shareholders of a different class of shares, as well as the opportunisticistic behavior of a different class of shareholders, a resolution of a general meeting of shareholders should be deemed necessary. Accordingly, whether a resolution of a general meeting of shareholders is necessary should be decided whether a loss to shareholders of a different class of shares has been issued in the course of a certain act. In this case, whether a resolution of a general meeting of shareholders is necessary or not, by the consolidation and reduction of capital of the shares in this case, the resolution of a general meeting of shareholders should be decided (q of the same common shares and preferential shares).

If it is deemed necessary to adopt a resolution of the general meeting of shareholders comprised of priority shareholders, including the Plaintiff, in the reduction of the capital of this case, the resolution of the general meeting of shareholders of this case is a special requirement for the legal effect of the reduction of the capital of this case. Thus, the merger of shares of this case and the reduction of capital of this case without the resolution of the general meeting of shareholders are not yet effective,

B) The requirement that “when a resolution of a general meeting of shareholders would inflict a loss on a certain class of shareholders,” which requires a resolution, is satisfied not only where a certain class of shareholders would have a direct disadvantage, but also where even if it is formally equal, it would have a substantial disadvantage (see Supreme Court Decision 2004Da44575 delivered on January 27, 2006).

A decrease in capital due to the consolidation of shares shall be determined by the consolidation ratio, and there are cases where there are no number of shares which are inappropriate for the consolidation ratio (hereinafter referred to as "short shares"). In the event that a company has issued multiple shares, even if they were to be issued, a certain class of shares may result in a fractional shares in comparison with other shares, even if they were to be equally applied.

However, it cannot be deemed that the resolution of the general meeting of shareholders of the class of shares that occurs at a large ratio of single shares is necessary on the sole basis of the fact that a large ratio of single shares takes place. This is because, in the case where certain compensation is given to a single share and such compensation is appropriate, the class of shares that occurred at a large ratio of single shares can not be considered disadvantageous to other shares. In addition, in most cases where several classes of shares are issued, the ratio of single shares occurs in the process of the consolidation of shares is different, and even in the case where the same ratio of consolidation is applied, if it is interpreted that the resolution of the general meeting of shareholders of the class of shares that occur at a large number of shares is necessary on the sole ground that there is a difference in the ratio of single shares, it can be said that even if

Therefore, it is clear that the issue of whether a resolution of a class of shareholders' meeting constitutes a consolidation of shares and a reduction of capital is substantially disadvantageous to a class of shareholders by taking into account the following factors: whether the same ratio of consolidation of shares is applied; compensation for a group of shares; the purpose of stock consolidation and capital reduction; the result of stock consolidation.

2) Determination

A) The instant consolidation of shares was conducted by applying 10,000 all of the common shares and preferential shares of Ulsan Construction, namely, 10,000: 1.

B) We examine the compensation for fractional shares. The compensation for fractional shares arising from the consolidation of shares and the reduction of capital in the instant case was made at KRW 5,000 per share without setting priority shares and common shares. According to the overall purport of the statement and arguments in Section B, new accounting corporation may recognize the fact that the value per share of shares of Ulsan Construction as of September 30, 2016 can be calculated at KRW 3,812, and the plaintiff did not argue that it is unreasonable to receive the compensation for KRW 5,00 per share of Ulsan Construction. In light of the fact that the value of each share exceeds KRW 5,00,000, the degree of the compensation is determined as sufficient.

C) As a result of the combination of shares and the reduction of capital, priority shareholders including the Plaintiff, etc. were unable to acquire one share and maintain their status as shareholders. In addition, as a result of the consolidation of shares and the reduction of capital, the shareholders of Ulsan Construction decreased from 980 to 3 persons, and the degree of the decrease of capital of the instant case is about 0.21% [(21,546,000 - 21,500,000) - 10%] of the capital reduction [21,546,045,000] x 10% of the instant shares]. The agenda of this case appears to be incidental to the consolidation of shares, and the Defendant also asserted that the purpose of the consolidation of shares and the reduction of capital should go beyond the duty of disclosure to reduce the number of shareholders to reduce and reduce the administrative expenses of the shares, it is reasonable to deem that the instant capital reduction was conducted for the purpose of the consolidation of shares and the reduction of capital, rather than the duty of disclosure.

Notwithstanding the aforementioned results and purpose of the combination of shares and reduction of capital, ① It is important to reduce the cost of the instant rehabilitation procedure since the Ulsan Construction completed the instant rehabilitation procedure. According to the respective entries and arguments stated in the Eul evidence Nos. 4 and 5, it can be acknowledged that the effect actually existed in a certain portion. Furthermore, according to the overall purport of the statements and arguments stated in the Eul evidence Nos. 6-8, where the consolidation of shares and reduction of capital of the instant case were conducted, 20 billion won with the issuance of new shares by a third party who was an underwriter on December 5, 2016, and 20 billion won with the issuance of new shares by the third party who was an underwriter on March 27, 2017, and 30 billion won with the same purpose as that of the Plaintiff’s new shares issued on the account of the above 10% increase in the credit rating of the Ulsan Construction’s new shares x 15% of the total number of shares issued on the account of the above 30% increase in the number of shares held at 10.

D) In light of the aforementioned circumstances, it is deemed that the resolution of the general meeting of shareholders comprised of the Plaintiff, etc. is unnecessary for the consolidation of shares and reduction of capital in the instant case. The Plaintiff’s assertion in this part is without merit

B. Whether the principle of equality of shareholders, the principle of good faith, and the principle of prohibition of abuse of rights is violated

Unlike the plaintiff's assertion, the general meeting of shareholders of this case was granted voting rights to minority shareholders, including the plaintiff, etc., the merger of the shares of this case and the reduction of capital lost all minority shareholders, but as seen earlier, it was intended to achieve the managerial purpose of the Ulsan Construction, and the rehabilitation procedure of this case was conducted to reduce the capital again 10,000: 1. However, there is no evidence to prove that the consolidation of shares and the reduction of capital of this case were for the purpose of withdrawal of minority shareholders even though they could not achieve any particular managerial purpose, and there is no sufficient compensation to the plaintiff et al., it is difficult to view that this part of the plaintiff's assertion is against the principle of equality of shareholders, the principle of good faith and good faith, and the principle of prohibition of abuse of rights.

4. Conclusion

Therefore, the plaintiff's claim is without merit, and it is so decided as per Disposition.

(attached Form omitted)

Judges Hah-sik (Presiding Judge)