[1] In a case where the company's division or merger after division omitted the "individual peremptory notice to known creditors" under Articles 530-9 (4) and 527-5 (1) of the Commercial Code, the relationship between the beneficiary company and the creditors of the divided company (=joint liability)

[2] The meaning of "creditors known to the company" in need of individual peremptory notice in accordance with Articles 530-9 (4) and 527-5 (1) of the Commercial Act in the division or merger after division of a company, and whether the creditors known to the representative director of the company are included therein (affirmative)

[3] In a case where Gap corporation and Eul corporation agreed not to bear joint and several liability for divided parts of Gap corporation's electrical construction business, Eul corporation's specialized fire-fighting system construction business, and Eul corporation did not pay individual peremptory notice to Byung who owns promissory notes issued by Gap corporation, the case holding that Byung is jointly and severally liable for the payment of the amount of promissory notes since Byung's individual peremptory notice is deemed to be a creditor on the promissory notes known to Byung, in light of all circumstances

[1] Where a divided company and a beneficiary company do not support joint and several liability for the company's obligations before the division, there is a change in the debtor's liability property and has a significant influence on creditors' interests, and thus, it shall be notified individually to creditors known to the company that is divided for the protection of creditors. Therefore, a change in the debt relationship between the divided company and the beneficiary company into the divided debt relationship shall be deemed to be the requirement that the divided company had properly completed individual procedures for creditors known to the creditors. If such individual peremptory notice is omitted, the effect of the divided debt relationship shall not occur to the creditors, and in principle, the company and the beneficiary company shall be jointly and severally liable to repay the divided debt.

[2] Considering the legislative intent of the Commercial Act to protect creditors who are aware of the company's right to raise an objection and to individually notify the creditors known to secure its effectiveness in order to protect creditors who change the company's responsible property due to division or merger after division, "creditors known to the company" refers to creditors whose claims are creditors and whose claims are known to the company, and whether the company is known to the company should be determined by comprehensively taking into account all the circumstances in each case. It is reasonable to view that not only those whose names and addresses are known to the company, but also those whose representative director is known to the company by the company's books or other grounds, should be included.

[3] In a case where Gap corporation and Eul corporation agreed not to bear joint and several liability for the divided portion of Gap corporation's electrical construction business, specialized fire-fighting system construction business, and Eul corporation's division, but Eul did not individually give notice to Byung holding a promissory note issued by Gap corporation, the case holding that Byung is liable for the debt of the above promissory note jointly and severally with Gap corporation, considering the fact that Byung is recognized to have been in the status of creditors entitled to exercise the right to a promissory note against Gap corporation, the issuer of Gap corporation, and Byung has the status of an endorser who endorsed and transferred a promissory note from the representative director Gap corporation to a third party, since Eul is deemed to be a creditor on a promissory note known to Gap corporation, since Eul corporation did not have individual peremptory notice so that the exercise of the right to raise an objection, which would have a significant effect on Gap corporation's rights under a promissory note due to the division and merger, was omitted, and Eul corporation has not applied the exclusion of joint and several liability for the debt of the promissory note.

[1] Articles 527-5 and 530-9 of the Commercial Act / [2] Articles 527-5 and 530-9 of the Commercial Act / [3] Articles 527-5 and 530-9 of the Commercial Act

[1] Supreme Court Decision 2003Da25973 decided Aug. 30, 2004 (Gong2004Ha, 1594) Supreme Court Decision 2005Du4731 decided Nov. 23, 2006 (Gong2007Sang, 69)

Plaintiff (Law Firm Han, Attorney Song-soo et al., Counsel for plaintiff-appellant)

Tae Young Construction Co., Ltd. (Law Firm Taeil, Attorneys Hy Sang-op et al., Counsel for defendant-appellant)

Seoul Eastern District Court Decision 2010Na3904 decided April 20, 201

The judgment of the court below is reversed, and the case is remanded to the Seoul Eastern District Court Panel Division.

The grounds of appeal are examined.

1. The Commercial Act provides that a company established through division or a surviving company through division and merger (hereinafter referred to as a "beneficiary company") shall be jointly and severally liable to repay the obligations of the company before division and the divided company (Article 530-9(1) of the Commercial Act): Provided, That a special resolution by the general meeting of shareholders may determine that the beneficiary company shall bear only the obligations with respect to the assets invested by the beneficiary company among the obligations of the company to be divided. In such cases, if the divided company survives after division (Article 530-9(2) and (3) of the Commercial Act), the beneficiary company shall bear only the obligations that are not the beneficiary company if the divided company survives after division (Article 530-9(2) and (3) of the Commercial Act). In such cases, the company to be divided shall take the procedures for protecting creditors, such as peremptory notice to file an objection within a specified period, if any, within two weeks from the date the general meeting of shareholders approves the division (Articles 530-9(4), 530-11(2) and 5-5) of the Commercial Act).

Where a divided company and a beneficiary company do not jointly and severally support the debt of the company prior to the division, there is a change in the debtor's property and has a significant influence on the creditor's interest, so that the creditors known to the company that is divided for the protection of creditors can be given peremptory notice. Therefore, the change in the debt relationship between the divided company and the beneficiary company into the divided debt relationship should be viewed as the requirement that the divided company had properly completed individual procedures for creditors known to the creditors. If such individual peremptory notice is omitted, the division debt relationship cannot be effective against the creditors, and in principle, the company and the beneficiary company are jointly and severally liable for repayment (see Supreme Court Decision 2003Da25973, Aug. 30, 2004).

In light of the legislative intent of the Commercial Act to protect creditors who are aware of the company's right to raise an objection and to individually notify the creditors known to secure its effectiveness in order to protect creditors who change the company's responsible property due to division or merger through division, "creditors known to the company" refers to creditors whose claims are creditors, whose claims are known to the company, or whose claims are known to the company, and whether the company is known to the company shall be determined by comprehensively taking into account all the circumstances in each case. It is reasonable to view that the company's name and address are known to the company by the company's account books and other grounds as well as creditors whose representative director is known to the company.

2. According to the reasoning of the judgment of the court below, the defendant company was established for the purpose of electrical construction business, maintenance of fire-fighting facilities, construction business, etc., and the non-party company was issued one promissory note in blank on April 23, 2007 (hereinafter "the promissory note of this case"), which was the representative director of the non-party company at the time of the division and merger, with the plaintiff as the first endorsement, and the non-party 2 was the non-party 3, and the non-party 3 were the non-party 4 and the non-party 4 were the non-party 6 company's non-party 7 company's non-party 7 company's non-party 7 company's non-party 6 company's non-party 2's non-party 7 company's non-party 7 company's non-party 2 company's non-party 6 company's non-party 7 company's non-party 2 company's non-party 4 company's non-party 7 company's non-party 2 company's non-party 6 company's non-party 7 company's non-party 2 company's non-party 7 company's non-party 2 company's non-party 6 company's non-party

3. We examine the above facts in light of the legal principles as seen earlier.

The company subject to division must make individual peremptory notices to creditors known within 2 weeks from the date of a resolution of approval of the general meeting of shareholders with respect to the merger by split. Thus, individual peremptory notices should be given within 2 weeks from June 2, 2007, which is the date of approval of the general meeting of shareholders with respect to the merger by split-off of the non-party company, and the creditors known to the non-party company within that period shall be subject to individual peremptory notices given by creditors who are known to the non-party company. The Promissory Notes in this case were issued on April 23, 2007 and were presented by the non-party 4, which is the last holder on June 5, 2007, and were refused to pay, and thereafter the plaintiff performed the duty of recourse against the non-party 4 and again possessed the Promissory Notes in this case, it is recognized that the plaintiff was in the status of creditors

Furthermore, we examine whether the plaintiff is a creditor known to be the subject of individual peremptory notice.

The following facts revealed in the above facts and records: (a) the non-party company assumes an absolute obligation to pay the amount of the Promissory Notes as the issuer of the Promissory Notes; (b) the non-party company agreed to exclude joint and several liability other than the rights and obligations related to the electrical construction business and the specialized fire-fighting system construction business that was concluded with the defendant; (c) the non-party company knew that the obligation to pay the amount of the Promissory Notes was not transferred to the defendant and was borne only by the non-party company after the division; and (d) the status of the plaintiff, which can be grasped by the non-party company, the representative director of the non-party company, as the owner of the Promissory Notes or the non-party company transferred the Promissory Notes to a third party, shall be deemed the status of the non-party company as the endorser who acquired the Promissory Notes in this case or the non-party company's transferee of the Promissory Notes in this case. Even if the non-party company was aware of the plaintiff as the holder of the Promissory Notes in this case, the plaintiff's right should have been aware of the right under the non-party company's bill.

Therefore, the non-party company omitted individual peremptory notice in order to ensure the exercise of the Plaintiff’s right to submit an objection, which may have a significant impact on the rights under the Promissory Notes due to the merger after division, and thus, the exclusion of joint and several liability with respect to the obligations of the Promissory Notes does not apply. In principle, the defendant is jointly and severally liable with the non-party company for the repayment of the obligations of the Promissory Notes.

4. Nevertheless, the lower court dismissed the Plaintiff’s claim in this case on the grounds that the Plaintiff does not fall under “a known creditor” under Article 527-5(1) of the Commercial Act. In so determining, the lower court erred by misapprehending the legal doctrine on the procedures for protecting creditors and creditors known to the Plaintiff under Articles 530-9(4) and 527-5(1) of the Commercial Act, thereby adversely affecting the conclusion of the judgment. The ground of appeal assigning this error is with merit.

5. 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 on the bench.

Justices Lee In-bok (Presiding Justice)