[1] The method of calculating the purchase price where a shareholder who objects to a merger or transfer of business of the company requests the company to purchase non-listed stocks

[2] Whether the transaction price of shares can be deemed as the market price of shares where shares are transferred with management rights of the company (negative)

[3] Whether the net asset value of an unlisted corporation includes the value of business rights held by the pertinent corporation (affirmative)

[4] The method of properly assessing the objective value of shares of a corporation conducting cable broadcasting business

[5] In a case where the sales price of unlisted stocks is calculated by comprehensively taking into account various evaluation factors such as market value, net asset value, profit value, etc., whether the reflection ratio of the said evaluation factors should vary depending on the situation of the pertinent company or the characteristics of the relevant business (affirmative)

[1] In a case where a shareholder opposing the merger or transfer of business of a company requests the purchase of non-listed stocks with respect to the company, the transaction price of the stocks shall be deemed the market price and the purchase price of the stocks shall be determined. However, in the absence of such transaction cases, a variety of appraisal methods such as market value methods generally recognized as to the appraisal of non-listed stocks, net asset value methods, and profit value methods, etc. However, the relevant laws and regulations governing the appraisal method of non-listed stocks apply different standards according to their purpose of enactment. Thus, any one appraisal method (e.g., the method of appraisal under Article 84-7 (1) 2 of the Enforcement Decree of the Securities and Exchange Act, or the method of appraisal under Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act) shall not be determined at all times. The fair price shall be determined

[2] Where shares issued by a company are transferred with the management right of the company, the transaction price cannot be deemed as the market price that reflects the objective exchange value when only shares are transferred.

[3] The net asset value of an unlisted corporation includes, as a matter of course, the value of the business right of the corporation.

[4] In the case of cable broadcasting businesses, large-scale investment in facilities such as the installation of broadcasting equipment and broadcasting network is required at the early stage, but there is no need for additional expenses other than personnel expenses, and there is a characteristic that a certain number of subscribers secure stable revenues equivalent to monthly user fees when securing more than a certain number of subscribers, so future return on the basis of the number of subscribers, capacity of transmission network, and monopoly in the region is an important factor in assessing corporate value or stock value. Furthermore, if the number of subscribers of a corporation operating a comprehensive excursion ship business gradually increases, it is more appropriate to calculate the profit-making value of stocks by comprehensively taking into account whether the corporation is able to operate a business exclusively at the base point of time, the situation and prospects of the cable broadcasting business, macroeconomic outlook, internal management situation of the company, business plan or management plan, etc.

[5] When a company intends to calculate the purchase price of unlisted stocks by comprehensively taking into account various evaluation factors, such as market value, net asset value, and profit value, the ratio that reflects the evaluation factors, depending on whether the pertinent company’s situation or business type characteristics, whether the aforementioned evaluation factors can appropriately reflect the objective value of stocks, and whether there is any error in the valuation by the method.

[1] Articles 374-2(5) and 530 of the Commercial Act; Article 84-7(1)2 of the Enforcement Decree of the Securities and Exchange Act; Article 36-12(2) and (3) of the Enforcement Decree of the Securities and Exchange Act; Article 63(1)1(c) of the Inheritance Tax and Gift Tax Act; Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act / [2] Articles 374-2(5) and 530 of the Commercial Act; Article 63 of the Inheritance Tax and Gift Tax Act / [3] Articles 374-2(5) and 530 of the Commercial Act; Article 59(2) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act / [4] Articles 374-2(5) and 530 of the Commercial Act; Articles 54(1) and 56 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act / [5] Articles 374-2(5) and 530 of the Commercial Act;

[1] Supreme Court Decision 2005Do856 Decided April 29, 2005 (Gong2005Sang, 902), Supreme Court Decision 2003Da69638 Decided October 28, 2005 (Gong2005Ha, 1847) / [2] Supreme Court Decision 88Nu9565 Decided July 25, 1989 (Gong1989, 1306), Supreme Court Decision 89Nu558 Decided January 12, 1990 (Gong190, 471), Supreme Court Decision 2001Du9394 Decided June 13, 2003 (Gong203Ha, 1545) / [3] Supreme Court Decision 2004Du30439 decided July 29, 204; 2004Du373945)

[Defendant-Appellant] 1 and 4 others (Law Firm Seol, Attorneys Seo-sik et al., Counsel for defendant-appellant)

Dlim C&S Co., Ltd. (Law Firm Sejong, Attorneys Im-ho et al., Counsel for the plaintiff-appellant)

Seoul High Court Order 2004Ra282 dated October 28, 2004

The order of the court below is reversed. The case is remanded to Seoul High Court.

The grounds of reappeal and the grounds of reappeal of the principal of the case are examined together.

1. Where a shareholder opposing the merger or transfer of business of a company requests the purchase of non-listed stocks with respect to the company, the transaction price shall be deemed to be the market price and the purchase price of the stocks shall be determined. However, if there are no such transaction cases, various methods such as market value method, net asset value method, profit value method, etc. which are generally recognized as to the assessment of non-listed stocks, but the relevant laws and regulations governing the appraisal method of non-listed stocks apply different standards according to their legislative purposes. Thus, it cannot be readily concluded that any one method of evaluation (e.g., the method of appraisal under Article 84-7 (1) 2 of the Enforcement Decree of the Securities and Exchange Act, or the method of appraisal under Article 54 of the Enforcement Decree of the Inheritance Tax and Gift Tax Act) shall not be applied at all times, and fair price shall be determined by comprehensively taking into account the situation of the company in question or the characteristics of the business type (see, e.g., Supreme Court Decisions 2005Do856, Apr. 29, 2005).

On the other hand, where shares issued by a company are transferred with the management right of the company, the transaction price cannot be deemed as the market price that reflects the objective exchange value when only shares are transferred (see Supreme Court Decision 88Nu9565 delivered on July 25, 1989).

According to the reasoning of the judgment of the court of first instance cited by the court below, the court below acknowledged the fact that the Korea Cable Broadcasting Co., Ltd. (hereinafter referred to as the "Korea Cable Co., Ltd.") was the largest shareholder of 349,250 won per share of 69,250 won per share of 28,633 won by purchasing the 349,250 won per share of 69.85% of 19,000 won from 199,000 won from 20,000 won, considering that the above amount includes not only the general market price, but also the market price of shares, net asset value, profit value of the shares, and share price of 25,00 won from 30,000 won from 29,000 won per share of 28,6333 won from 20,000 won from 30,000 won from 25,000 won from 25,000 won from 30.

It is inappropriate for the court below to acknowledge the above 22,025 won as the market price reflecting the legitimate exchange value of the shares of Eunpyeong Broadcasting. However, it is just in conclusion to consider it as a single factor calculating the purchase price of shares, and there is no error in the misapprehension of legal principles as to the market price of the shares as a criterion for determining the purchase price of the shares of the non-listed shares. The grounds for reappeal of this part by the applicant and the principal

2. The net asset value of the unlisted corporation includes, as a matter of course, the business rights of the corporation in question (see Supreme Court Decision 2002Du9322, 9339 delivered on July 22, 2004).

According to the facts and records acknowledged by the court below, Eunpyeong Broadcasting was able to run a CATV broadcasting business in the Eunpyeong-gu Seoul Metropolitan Government, and since the amount equivalent to the cost of operating rights and management rights transfer of Eunpyeong Broadcasting at the time of the merger with the Eunpyeong Broadcasting Co., Ltd. and the Eunpyeong Broadcasting is assessed to be KRW 9,681,810,688, it is reasonable to calculate the net asset value including the above operating rights.

Nevertheless, the court below erred by misapprehending the legal principles as to the net asset value per share of the Eunpyeong Broadcasting without considering the business rights of the Eunpyeong Broadcasting, thereby adversely affecting the decision. Of the grounds for reappeal by the applicants, the part pointing this out is with merit.

3. In the case of cable broadcasting businesses, large-scale investment in facilities, such as the installation of broadcasting equipment and broadcasting network, is required at the early stage. On the other hand, additional expenses are not required in addition to personnel expenses, and there are characteristics that a certain number of subscribers secure stable revenues equivalent to monthly user fees. Therefore, the number of subscribers, the volume of transmission network, the volume of transmission network, whether the rate of return in the future is monopoly in the region, etc. are important factors to assess the corporate value or the stock value (see Supreme Court Decision 2005Do856, Apr. 29, 2005).

According to the records, since the number of subscribers of Eunpyeong Broadcasting gradually increased to 15,843 in 198, 299, 25,254 in 199, and 42,080 in 200, it is more appropriate to calculate the profit value of stocks by comprehensively taking into account whether it was possible for Eunpyeong-gu to operate an exclusive CATV broadcasting business in Seoul at the standard point of time, the current status and prospects of CATV broadcasting business, macroeconomic outlook, company's internal management situation, business plan or business plan, etc.

Nevertheless, the court below erred by misapprehending the legal principles as to the calculation of profit value per share of the emulpary broadcast for the past three years pursuant to Articles 54(1) and 56(1) of the Enforcement Decree of the Inheritance Tax and Gift Tax Act, solely on the ground that there is no circumstance to deem that the emulpary broadcast does not have enough management status to the extent that it has been accumulated in the capital erosion for three years at the time of the merger, and that there is no reason to deem that the emulpary value of the emulpary broadcast does not exceed the current emulpary value of the emulpary in light of the past business performance or current status. The portion of the grounds for re-appealing this point is with merit.

4. When it is intended to calculate the purchase price of unlisted stocks by comprehensively taking into account various evaluation factors, such as market value, net asset value, and earnings value, the ratio that reflects the evaluation factors, depending on the situation or characteristics of the relevant company or type of business, whether the aforementioned evaluation factors may appropriately reflect the objective value of stocks, and whether there is any error in the valuation by the method.

As seen earlier, D&C contains 349,250 shares of H&C, which are 69.85% of the shares of H&C. 31 January 31, 2001, and 28,633 won for transfer of management rights. However, such transaction was made at the time of the resolution of the board of directors regarding the merger, and the amount obtained by deducting the amount equivalent to the transfer price of management rights from the above trading price is determined as appropriate. However, the lower court did not err in its determination of net asset value of H&C shares at KRW 1,386, and profit value at KRW 00,750,000,000, which is difficult to calculate the sale price of shares at KRW 475,000,000,000,000,000 won for 205,000,000 won for 3.75,000,000,000 won for each share.

Nevertheless, the court below erred by misapprehending the legal principles as to the reflection ratio of the evaluation factor at the time of determining the purchase price of unlisted stocks, which affected the decision, on the ground that the court below's calculation of the purchase price of Eunpyeong Broadcasting as KRW 7,803 is not possible on the grounds that it is not possible to find grounds to seek an average by simply adding any of the three factors among the three factors such as market value, net asset value, and profit value calculated as above. The part pointing this out among the grounds for reappeal by the applicants is with merit

5. Therefore, the order of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Nung-hwan (Presiding Justice)