[1] Whether the articles of incorporation of a corporation can provide for a quorum for the establishment of a general meeting of shareholders (affirmative)

[2] In a case where the articles of incorporation of a stock company provides for the attendance of shareholders holding shares equivalent to a majority of the total number of issued and outstanding shares and the attendance of shareholders by a majority of the voting rights, whether the quorum for the proceedings stipulated in the articles of incorporation should be satisfied when the appointment of directors is

[1] Article 368(1) of the Commercial Act provides that “Except as otherwise provided in this Act or the articles of incorporation, a resolution of the general meeting of shareholders shall be made in the number of a majority of the voting rights of the shareholders present and at least 1/4 of the total number of the issued and outstanding shares,” with respect to the requirements for the general resolution of the general meeting of shareholders, and thus, the quorum for the establishment of the general meeting of shareholders shall not be separately determined by the articles of incorporation, but the general

[2] Where two or more directors are elected in the column of cumulative voting under Article 382-2 of the Commercial Act, each shareholder shall have the same number of voting rights per share as the number of directors to be elected, and exercise them by means of a concentrated vote for one or more candidates for directors, in order of them to be elected from the person who obtained the largest number of votes to be elected to the directors. This provision is a provision relating to the exercise of shareholder’s voting rights.

Therefore, in a case where the articles of incorporation of a stock company provide that the appointment of directors shall be made by the attendance of shareholders holding shares equivalent to a majority of the total number of issued and outstanding shares and by a majority of voting rights of shareholders present, the above provisions of the Commercial Act concerning cumulative voting do not constitute the exclusion of the quorum provided for in the articles of incorporation. Therefore, even in a case where a

[1] Article 368 (1) of the Commercial Act / [2] Articles 368 (1) and 382-2 of the Commercial Act

Plaintiff 1 and four others (Law Firm Shin, Attorneys Seo-jin et al., Counsel for the plaintiff-appellant)

Seoul Metropolitan Transport Business Co., Ltd. (LLC, Attorneys Lee Jong-ho et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Na2021439 decided March 18, 2016

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

According to Articles 389 and 386 of the Commercial Act, if the term of office of the representative director expires but the rights and obligations of the former representative director continue to exist due to the failure to select a new representative director, the court below rejected the plaintiffs' claim that the plaintiffs do not continue to maintain the rights and obligations of the representative director under Article 389 (3) and Article 386 of the Commercial Act, on the ground that the plaintiffs, who are the defendant's shareholders, failed to take measures to appoint a new representative director after the expiration of the term of office of the defendant's representative director, and there is no ground to exclude the application of the above Commercial Act against the non-party 1, and there is no evidence to recognize that the non-party 1 unfairly extended the term of office of the representative director by abusing the above provisions of the Commercial Act, on the ground that there is no evidence that the retired representative director has abused the above provisions of the Commercial Act and unfairly extended the term of office of the representative director.

Examining the records in light of the relevant legal principles, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the establishment and scope of emergency

2. Regarding ground of appeal No. 2

A. Article 368(1) of the Commercial Act provides that “Except as otherwise provided in this Act or in the articles of incorporation, a resolution of the general meeting of shareholders shall be made in the number of a majority of the voting rights of the shareholders present and at least 1/4 of the total number of issued and outstanding shares,” with respect to the requirements for the general resolution of the general meeting of shareholders, and thus, the quorum for the establishment of the general meeting of shareholders shall not be separately determined by the articles of incorporation, but it is possible

Meanwhile, in cases where two or more directors are elected, each shareholder shall have the same number of voting rights per share as the number of directors to be elected, and exercise them by means of a concentrated vote for one or more candidates for directors, thereby appointing directors in order from the person who obtained the largest number of votes to be elected to the directors. This provision is a provision relating to the exercise of shareholder’s voting rights.

Therefore, in a case where the articles of incorporation of a stock company provide that the appointment of directors shall be made by the attendance of shareholders holding the shares equivalent to a majority of the total number of issued and outstanding shares and by the majority of the voting rights of shareholders present, the above provisions of the Commercial Code concerning cumulative voting do not constitute the exclusion of the quorum provided for in the articles of incorporation. Therefore, even in a case where

Therefore, the court below erred in holding that the quorum provision of Article 22 of the Articles of Incorporation does not apply to the resolution to appoint directors by means of a concentrated vote, requiring the attendance of shareholders holding shares equivalent to a majority of the total number of outstanding shares.

B. However, according to the reasoning of the lower judgment and the record, the following facts are revealed.

1) On July 10, 2014, Nonparty 1, as the Defendant representative director, issued a notice of convening a temporary general meeting of shareholders with the purpose of the meeting, including the date, time, place, and case of appointment of four directors, etc., of the meeting, as well as seven major staff candidates for new directors.

2) On August 5, 2014, Nonparty 1 filed a written claim with the Defendant to appoint directors by means of a concentrated vote under Article 382-2 of the Commercial Act, and on August 6, 2014, Nonparty 1 notified the Defendant as the Defendant’s representative director’s qualification to the shareholders.

3) On August 18, 2014, the instant shareholders’ meeting was held in the presence of 7 shareholders, including the Plaintiffs, in order to resolve four (4) directors, and Nonparty 1, the president, notified Nonparty 1 of the purport that the four (4) directors were recommended to appoint only two (2) directors and that the request for concentrated voting was made. Although the Plaintiffs proposed to appoint only two (4) directors, Nonparty 1 refused to do so and carried out the voting procedure as “the case of four (4) directors’ appointment,” which is the original agenda, and the ballot paper was issued to each shareholder.

4) The Plaintiffs and 6 shareholders, including Nonparty 2, did not cast a vote while staying in the meeting place, but did not express their intent to refuse to present the agenda, and only Nonparty 1 cast a vote by means of a concentrated vote. As a result, the resolution was made to appoint Nonparty 3, Nonparty 4, and Nonparty 5 as directors in order from those who obtained the largest number of votes to order.

C. Examining these facts in light of the record, it is reasonable to view that all the shareholders of the Defendant were present at the time of the resolution to elect directors by means of a concentrated vote at the general meeting of shareholders of the instant case. As such, the quorum of intention as provided in Article 22 of the Defendant’s Articles of incorporation was satisfied. Moreover, this does not change even if six shareholders including the Plaintiffs appeared at the general meeting of shareholders of

D. Therefore, the part of the court below's decision that the quorum under the defendant's articles of incorporation does not apply to a resolution to appoint directors by means of a concentrated vote is not appropriate, but it is just in its conclusion that the method of resolution is not in violation of statutes or the articles of incorporation or is not considerably unfair, and contrary to the allegations in the grounds of appeal, there is no error of law by misunderstanding the legal principles

3. As to the third ground for appeal

The gist of the plaintiffs' assertion in this part of the grounds of appeal is that, on March 3, 2014, the defendant decided to appoint two directors by means of a concentrated vote, the plaintiffs did not present the agenda and declared the closure of the meeting without holding the meeting on the grounds that the quorum under the articles of incorporation was not satisfied. The plaintiffs asserted the same purport in the case of an application for a general meeting of shareholders against the defendant for a permit to convene a general meeting of shareholders against the defendant, but the defendant asserted that the quorum provision under the articles of incorporation does not apply to the case where the defendant makes a resolution to appoint directors by means of a concentrated vote in the general meeting of shareholders in this case violates the good

However, even in the case of a resolution for the appointment of directors by means of a concentrated vote, the quorum under the Articles of Incorporation should be satisfied is as seen earlier. Therefore, this part of the ground of appeal, which asserts omission in judgment, cannot be accepted.

4. As to the fourth ground for appeal

The lower court determined that the method of resolution by the general meeting of shareholders cannot be deemed to be considerably unfair in violation of the statutes or the articles of incorporation, due to insufficient recognition that the meeting of the general meeting of shareholders was led by a person other than Nonparty 1, or that the Plaintiffs’ right to debate and deliberation was infringed.

Such judgment of the court below shall be deemed to include the purport of rejecting the plaintiffs' claims that the proceedings of the general meeting of shareholders of this case infringed the shareholders' right to debate and deliberation. Therefore, contrary to the allegations in the grounds of appeal, there is no violation of law by omitting

5. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)