Gangwonland Co., Ltd. (Attorneys Lee Han-hun et al., Counsel for the plaintiff-appellant)

Defendant 1 and eight others (Bae, Kim & Lee LLC, Attorneys Cho Byung- Line et al., Counsel for the defendant-appellant)

Taek-si (Law Firm Hanjin, Attorneys Kim Chang-hoon et al., Counsel for the plaintiff-appellant)

July 1, 2016

Seoul Western District Court Decision 2014Gahap37507 Decided July 16, 2015

1. The defendants' appeal is dismissed.

2. The costs of appeal are assessed against the Defendants.

[Claim]

The Defendants jointly pay to the Plaintiff 4,00,000,000 won with the amount of KRW 15,000,000 and the amount of KRW 4,000,000,000 from August 14, 2012, with the amount of KRW 4,000,000 from November 15, 2012, KRW 4,000,000 from December 31, 2012, KRW 3,00,000 from August 21, 2013 to the date of delivery of a duplicate of the complaint of this case, and KRW 5,00 per annum from the following day to the date of full payment.

【Purpose of Appeal】

The part against the Defendants in the judgment of the first instance is revoked, and the Plaintiff’s claim against the Defendants corresponding to the above revocation part is dismissed.

1. Basic facts

A. Based on the Special Act on the Assistance to the Development of Abandoned Mine Areas (hereinafter “The Abandoned Mine Area Act”), the Plaintiff is a corporation established on June 29, 1998 for the purpose of casino business, tourist hotel business, etc. Based on the said Act. The Defendants, around 2012, were employed as an executive officer of the Plaintiff; Defendant 1 at the time, as the Plaintiff’s representative director; Defendant 2 as the Plaintiff’s standing director; Defendant 3 and Defendant 6 as the Plaintiff’s non-standing director; Defendant 4, Defendant 5, Defendant 7, Defendant 8, and Defendant 9 as the

B. On June 2, 1998, the Coal Industry Rationalization Business Bureau (the “Korea Mine Reclamation Corporation” under the Mining Damage Prevention and Restoration Act refers to the rights, obligations, and succession of property; hereinafter “Korea Mine Reclamation Corporation”), Gangwon-do Development Corporation, static-gun, Taeg-si, Samg-si, Samg-si, and Young-si (hereinafter “Joint Venture Investment Party”) concluded a joint investment agreement which invests in the establishment of the Plaintiff and aims to acquire the Plaintiff’s shares (hereinafter “Joint Venture Investment Agreement”), and thereby, performs the obligation to make investments and acquires the Plaintiff’s shares. The main contents of the Joint Venture Agreement are as follows.

본문내 포함된 표 제1조 (목적) ① 당사자들은 카지노리조트사업을 수행할 상법상의 주식회사를 설립한다. ② 당사자들은 본 계약에서 정한 바에 따라 회사가 카지노리조트사업을 운영하는데 필요한 자본을 공동으로 출자한다. 제5조 (정관) 회사는 별지 1과 같은 정관을 채택하여야 한다. 본 계약과 정관 사이에 일치하지 아니하는 사항이 있는 경우에는 본 계약이 우선하며, 당사자들은 정관이 본 계약에 일치되도록 정관을 수정하는데 협력한다. 제6조 (자본납입) ① 회사설립시의 수권자본은 기명식 보통주식 일천구백사십사만 주(19,440,000주), 금 일천구백사십사억 원(\194,400,000,000)으로 하고, 회사설립시의 납입자본은 기명식 보통주식 사백팔십육만 주(4,860,000주), 금 사백팔십육억 원(\48,600,000,000)으로 한다. ③ 각 당사자들이 인수하는 주식의 수와 그 납입가액 및 민간부문 출자 후의 각 당사자들의 지분비율은 다음에서 정하는 바에 의한다. 다만, 민간부문 출자자들에 대한 지분비율은 특별법이 정하는 바에 따른다. 1. 회사설립시 자본납입 석탄산업합리화사업단: 삼백육십만 주(36.00%) 삼백육십억 원(\36,000,000,000) 강원도개발공사: 육십육만 주(6.60%) 육십육억 원(\6,600,000,000) 정선군: 이십오만 주(2.50%) 이십오억 원(\2,500,000,000) 태백시: 일십이만 오천 주(1.25%) 일십이억 오천만 원(\1,250,000,000) 삼척시: 일십이만 오천 주(1.25%) 일십이억 오천만 원(\1,250,000,000) 영월군: 일십만 주(1.00%) 일십억 원(1,000,000,000) 계: 사백팔십육만 주(48.60%) 사백팔십육억 원(\48,600,000,000) 2. 회사설립 후 자본납입 민간부문 출자자들: 사백구십만 주(49.00%) 사백구십억 원(\49,000,000,000) 정선군: 이십사만 주(2.40%) 이십사억 원(\2,400,000,000) 계: 오백일십사만 주(51.40%) 오백일십사억 원(\51,400,000,000) 3. 합계: 일천만 주(100.00%) 일천억 원(\100,000,000,000) 제9조 (이사 및 이사회) ② 각 당사자는 다음 사항이 이루어지는데 필요하고 적절하도록 각각의 의결권을 행사하고, 이에 필요한 조치를 취한다. 1. 이사회는 3인 이상의 이사로 구성한다. 2. 이사들은 당사자들에 의하여 지명된다. 단, 사업단은 총 이사수의 과반수에 해당하는(예 : 총 이사가 10명인 경우 6명, 총 이사가 11명인 경우 6명) 상근 또는 비상근이사를 지명한다. 사업단을 제외한 각 당사자는 각 비상근이사 1명씩을 지명한다. 당사자들은 이사 선임결의 시 당사자들이 위와 같은 원칙에 따라 지명한 자가 이사로 선임될 수 있도록 의결권을 행사한다. 3. 당사자가 자신이 지명한 이사를 교체하고자 하는 경우에는, 다른 당사자들은 이사의 교체가 이루어질 수 있도록 의결권을 행사한다. 단, 교체를 요청한 당사자는 그로 인하여 발생한 모든 손해와 비용에 대하여 회사와 다른 당사자들에게 손해가 없도록 보장하고 손해가 있으면 이를 보상한다. 4. 회사의 이사가 결원이 된 경우에는 당사자들은 결원이 된 이사를 지명하였던 당사자가 지명하는 자가 후임이사로 선임되도록 의결권을 행사한다. ⑤ 이사회는 재적이사 과반수의 출석으로 의사정족수를 구성하며, 당해 회의에서 의사정족수를 갖추지 못한 경우에는 어떠한 이사회도 유효하게 성립될 수 없다. 본 계약에 별도의 정함이 있는 경우 외에는 이사회에서의 모든 결의나 활동은 재적이사 과반수의 출석과 출석이사 과반수의 찬성으로 결의되고 채택된다. 제10조 (대표이사) ① 회사의 대표이사는 1인으로 하고, 이사회의 결의로 선임한다. 사업단은 대표이사를 지명하고, 다른 당사자들은 이사회에서 그와 같이 지명된 자가 대표이사로 선임되도록 한다. 제12조 (감사) ① 회사는 1인의 감사를 두며, 사업단을 제외한 나머지 당사자들이 감사를 지명한다. 당사자들은 주주총회에서 그와 같이 지명된 자 중 1인이 감사로 선임되도록 의결권을 행사한다.

C. On December 2001, Thai-si established Taecheon Tourism Development Corporation (hereinafter “the instant construction”) by investing in the private company jointly with the private company to carry on the cooking business, and the instant construction and operation of a large-scale golf course, skiing ground, and accommodation facilities was carried out under the name of “○○○ Shipbuilding”. However, the instant construction and operation of the instant construction were directed to the financing due to additional expenditure of the project cost and ○○○○○○ Membership Membership Sales Group, etc., and requested the Plaintiff to lend or contribute the operating fund of the instant construction and operation fund of the instant construction.

D. Resolution on donation to the plaintiff's Taek-si

1) On March 2012, Defendant 9, the director of the Plaintiff, who was appointed by Taecheon City under a joint venture agreement, proposed the Plaintiff’s 109th board of directors to contribute 15 billion won as the project cost for a closed mine area, but the purpose of the donation was designated and deposited as the fund for the emergency operation of the instant construction project (hereinafter “instant donation”). However, the Plaintiff’s 109 board of directors held on March 29, 2012, the resolution on the instant donation was postponed on the ground that the Plaintiff’s 109 board of directors, who was held on March 29, 2012, had an opinion against the validity of the instant donation between the Plaintiff’s directors, and there was a possibility of recognition of occupational breach of trust if the instant donation was resolved.

2) Defendant 9 again proposed the instant donation proposal to the 110th board of directors held on June 27, 2012 at the Plaintiff’s 110th board of directors. However, in order to secure the time for the review of the members of the board of directors on the additional data submitted at Tae Tae-si, the resolution on the instant donation was postponed to the

3) On July 12, 2012, the board of directors of the 1111st meeting of the Plaintiff proposed the instant proposal again by Defendant 9 again, and deliberated on the instant proposal. While 12 of the 15 registered directors present at the meeting, Defendant 3, Defendant 4, Defendant 5, Defendant 6, Defendant 7, Defendant 8, and Defendant 9 (hereinafter “Defendant 9, etc.”) agreed to the instant proposal of donation and opposed Nonparty 1, Nonparty 2, and Nonparty 3, and Defendant 1 and Defendant 2 passed a resolution on the instant proposal with the affirmative votes of 7, dissenting votes, 3, and 2 of the 12 members present at the meeting (hereinafter “instant resolution”).

E. In accordance with the resolution of this case, the Plaintiff donated the sum of KRW 15 billion in total of KRW 3 billion on August 14, 2012, KRW 4 billion on November 15, 2012, KRW 4 billion on December 31, 2012, KRW 3 billion on August 21, 2013, and KRW 15 billion on August 21, 2013 (hereinafter “the donation of this case”), and KRW 15 billion on July 21, 2013, the Plaintiff sent it to the construction of this case for use as operational funds, such as human resources management expenses.

F. Commencement of rehabilitation procedures of the instant construction

On August 27, 2014, the Seoul Central District Court rendered a decision to commence rehabilitation proceedings for the Corporation on August 27, 2014 (2014 Gohap10057) upon the application for commencement of rehabilitation proceedings with respect to unpaid wage claims of its employees (2014 Gohap10057).

[Ground of recognition] Facts without dispute, Gap 1, 2, 3, 8 through 13, 15 through 22, Eul 5 through 8, 10, 11 (including branch numbers, hereinafter the same shall apply), and the purport of the whole pleadings

2. Occurrence of liability for damages;

A. Whether the donation of this case violates the statutes or the articles of incorporation

1) Whether the donation of this case constitutes a self-transaction under Article 398 of the Commercial Act

A) The plaintiff's assertion

Since it is a major shareholder of the Commercial Code, the donation of this case constitutes a self-transaction between the Plaintiff and the Thai City regulated under Article 398 of the Commercial Act. Accordingly, in order for the Plaintiff to make the donation of this case to Thai City, the approval of the board of directors is required by the approval of more than 2/3 of the registered directors at Thai City under Article 398 of the Commercial Act and the proviso of Article 33-2(1) of the Articles of Incorporation, but the resolution

B) Determination

(1) In order for a director or a major shareholder under Article 542-8(2)6 of the Commercial Act to engage in a transaction with a company on his/her own account or a third party’s account, the board of directors shall, in advance, clarify the important facts relating to the transaction and obtain approval from the board of directors. In this case, approval from the board of directors shall be at least two-thirds of the registered directors, and the details and procedures of the transaction shall be fair (Article 398 Subparag. 1 of the Commercial Act). In this case, “major shareholder” under Article 542-8(2)6 of the Commercial Act refers to a shareholder who, regardless of his/her name, owns more than 10/10 of the total number of issued and outstanding shares, excluding nonvoting shares, or exercises de facto influence over the major affairs related to the management of the listed company, such as the appointment and dismissal of directors, executive directors, and auditors. In addition, the articles of incorporation provides that the Plaintiff shall have at least two-thirds of the directors’ resolution on a matter pertaining to

(2) We examine whether it constitutes “a shareholder who exercises de facto influence over major management matters of listed companies, such as appointment and dismissal of directors, executive directors, and auditors,” and falls under a major shareholder.

In addition to the statement in Gap 2, 24, 27, 28, Eul evidence, Eul 6, 7, and 8, the parties to a joint venture (hereinafter referred to as the "joint venture") are more than the purport of the entire pleadings. ① The Korea Mine Corporation in the instant joint venture agreement shall nominate a full-time director or a part-time director equivalent to a majority of the total directors, and the remaining joint venture investors shall exercise their voting rights so that each person designated at the general meeting of shareholders may appoint a director at the general meeting of shareholders. In the event a joint venture party intends to replace a director designated by himself, the remaining parties to the joint venture agree to exercise voting rights at the general meeting of shareholders so that the director can replace the director at the general meeting of shareholders. ② Korea in the Plaintiff's share as of the end of 2012 is 36.27%, Gangwon-do Development Corporation, 6.34% of the Plaintiff's shares, 1.25% of the number of directors at the general meeting of shareholders, and 1.5% of the parties to the Plaintiff's share in the joint venture.

However, comprehensively taking account of the following circumstances acknowledged by the evidence supra, it is difficult to view the fact of recognition alone as a major shareholder, who exercises de facto influence over the Plaintiff’s major affairs of management, such as appointment and dismissal of directors, executive officers, and auditors. Therefore, the Plaintiff’s assertion that the donation of this case is a major shareholder, on the premise that it falls under the major shareholder, and that the donation of this case is subject to regulation under Article 398 of the Commercial Act, and that the special

(A) The purpose of the Commercial Act regulating self-transaction is to prevent a director or a major shareholder who may affect the decision making of a company from engaging in a direct transaction with the company or engaging in a transaction between the company and a third party for the benefit of a director or a major shareholder, thereby seeking the benefit of a director or a major shareholder, and from causing damage to the company or a shareholder. The amendment of the Commercial Act in 2011, while regulating only the self-transaction of a director, has also been subject to the application of the major shareholder. However, even if the major shareholder is not in the position of a director, if he/she trades with the company, he/she has a high possibility of determining the contents of the transaction disadvantageous to the company by exercising influence on the decision-making of the company. Therefore, considering the purport of the regulation on self-transaction, the major shareholder prohibited from self-transaction is a shareholder who

(B) In relation to major shareholders, the former Securities and Exchange Act provides that "a person who holds 10% of the total number of outstanding stocks" or "a person prescribed by Presidential Decree as a shareholder who exercises de facto influence over major affairs of management of the corporation by means of appointment, dismissal, etc. of executives" or "a person prescribed by Presidential Decree" shall be "a shareholder who has appointed a representative director or a majority of directors by agreement, contract, etc. with other shareholders" or "a shareholder who is recognized as exercising controlling influence over major decision-making or business execution, such as management strategy, reorganization, etc." and the Financial Investment Services and Capital Markets Act provides that "a person prescribed by Presidential Decree as a shareholder who exercises de facto influence over important matters of management of the corporation by means of appointment, dismissal, etc. of executive officers" and the Enforcement Decree provides that "a shareholder who has appointed a representative director or a majority of directors by agreement, contract, etc. with other shareholders" or "a shareholder who holds 1% or more of the total number of voting stocks issued by a person who has dominant influence over major decision-making or business execution."

In contrast, while other company-related Acts and subordinate statutes stipulate major shareholders as “a shareholder who has appointed a representative director or a majority of directors by agreement, contract, etc. with other shareholders,” or “a person who is deemed to exercise dominant influence over major decision-making or business performance, such as management strategy, change, etc., regardless of his/her own account,” the Commercial Act only stipulates major shareholders as “a shareholder who owns more than 10/10 of the total number of issued and outstanding shares other than nonvoting shares on his/her own account, or who exercises de facto influence over the major management matters of the listed company, such as the appointment and dismissal of directors, executive directors, and auditors,” and there is no separate enforcement decree that limits the scope thereof. Therefore, the Commercial Act, unlike the former Securities and Exchange Act, does not interpret that the former Securities and Exchange Act is limited to a person who appoints

However, Article 398 of the Commercial Act regulates not only listed companies but also unlisted companies. Considering that the scope of major shareholders excessively expands, the scope of self-transaction regulation is wide, which may undermine the stability of transactions, and major shareholders “ownership of more than 10/100 of the total number of issued and outstanding shares other than nonvoting shares on their own account,” or “shareholders who exercise de facto influence over major management matters of listed companies, such as the appointment and dismissal of directors, executive directors, and auditors,” under the legal text, “shareholders who exercise de facto influence over major management matters of listed companies, such as the appointment and dismissal of directors, executive directors, and auditors,” is construed as those who hold at least 10% of voting shares, and thus, it is reasonable to interpret the same as those who hold at least 10% of voting shares to the extent corresponding to their own intent even if they do not exercise dominant influence over major management matters under the Commercial Act.

(C) In addition, “the appointment and dismissal of directors, executive directors, and auditors” under the legal text is merely an example, and thus, a shareholder who exercises de facto influence over the company’s “major management matters” is deemed to be a major shareholder.

(D) However, Tae Jong-si has only 1.25% of the Plaintiff’s shares, and only 15 directors have the right to nominate one part-time director among the 15 directors, and it cannot be deemed that it has an influence to lead the Plaintiff’s major management issues, such as the appointment of another director, etc., accordingly.

The Plaintiff asserts that, as a member of the joint venture party who can appoint and replace directors in fact more than a majority of the market price, only one director may decide on the Plaintiff’s major management matters with other joint venture parties, it constitutes a major shareholder. However, as the Korea Mine Reclamation Corporation has the right to nominate a majority director and appoint a representative director, the board of directors may make an independent decision, and the remaining joint venture parties may not lead to their own decision if they agree with the Korea Mine Reclamation Corporation. In fact, the Korea Mine Reclamation Corporation represents the interests of the central government and conflicts of interest with the Gangwon-do Development Corporation, Gangwon-do Development Corporation, Hamhae-si, Mag-si, Mag-si, and Young-si, etc., representing the interests of abandoned mine areas. The other joint venture parties have the same interest at all, and may not have any influence on the other joint venture parties’ decision-making, and the Korea Mine Reclamation Corporation, regardless of the total number of directors, may not have any influence on the Plaintiff’s major management matters by securing and maintaining a majority of the board of directors at the time of directors’s decision-making.

(E) The fact that a joint venture agreement gives the right to nominate directors to the joint venture parties is nothing more than to secure the right to speak and influence on the Plaintiff of the local government in abandoned mine areas, including Thai City.

2) Whether the donation of this case violates the Act on the Operation of Local Government-Invested or -Funded Institutions

A) The plaintiff's assertion

As long as the construction of this case is determined as an institution subject to the promotion of privatization, it cannot provide financial support to the construction of this case pursuant to the Act on the Operation of Local Government-Invested and -Funded Institutions (hereinafter “Local Government-Invested and -Invested Institutions”), but the Defendants decided to make the donation of this case through the resolution of this case. Thus, the resolution of this case is unlawful in violation of Articles 20(2) and 24(2)4 of the Local Government-Invested and -Invested Contributions Act. Accordingly, the resolution of this case by the Defendants and the donation of this case therefrom constitute an act violating the statutes

B) Determination

The Local Government-Invested Contributions Act does not apply to local government-invested public corporations under Articles 2, 3, and 4 of the Local Public Enterprises Act (Article 2(2)1 of the Local Government-Invested Contributions Act), and Article 2(2)42 of the same Act provides that the Corporation is a local government-invested public corporation established pursuant to Articles 3 and 49(1) of the Local Public Enterprises Act, in full view of the overall purport of the pleadings, the provisions of the Local Government-Invested Contributions Act do not apply to the instant public corporation. Accordingly, the Plaintiff’s assertion that the instant donation was made against the instant public corporation, which is the institution subject to the promotion of privatization, is without merit.

B. Whether the Defendants violated the Defendants’ duty of care

1) The plaintiff's assertion

The Defendants have a duty to perform the duty of due care as a director. Nevertheless, the Defendants’ resolution to donate 15 billion won to the instant construction project without sufficient review of the validity of the instant donation constitutes an act of violating the duty of good faith beyond the scope of directors’ discretion to contribute to the instant construction project.

Therefore, the Defendants neglected the duty of care of directors to approve the donation of this case, thereby causing damages equivalent to 15 billion won in the amount of the donation of this case to the Plaintiff. Thus, the Defendants shall jointly and severally pay 15 billion won in the Plaintiff with compensation for damages under Article 399 of the Commercial Act.

2) Determination

A) Relevant legal principles

(1) Directors' liability for damages caused by breach of directors' duty of care

If a director neglects his duties intentionally or by negligence, he shall be jointly and severally liable for damages to the company (Article 399(1) of the Commercial Act); and if the act referred to in the preceding paragraph is committed by a resolution of the board of directors, any director who consented to such resolution shall also be liable under the preceding paragraph (2) (Article 399(2)). In addition, a director who participated in a resolution referred to in the preceding paragraph and who does not include an objection in the minutes shall be presumed to have consented to such

Meanwhile, when a director of a company lends funds to an affiliated company without being in violation of laws and regulations, or acquires new stocks issued by the affiliated company through the subscription for new stocks, the company’s act is within the discretionary scope of permitted business judgment, and thus, the company is not liable for damages as to the company since its director’s contribution to its business, the amount of adequate funding required for the rehabilitation of the affiliated company, the financial burden of the affiliated company, the possibility of rehabilitation of the affiliated company, the possibility of insolvency, and the degree of anticipated profits and disadvantages to the company if not supported by the affiliated company, etc., are sufficiently collected, investigated, and examined necessary information to the extent reasonably usable. Based on such procedures, the company’s decision was made based on reasonable trust and good faith that conforms to the maximum interests of the company, and its contents are considerably unreasonable, and thus, the company’s act is within the scope reasonably selected at the time of ordinary director’s own discretion, and thus, the company’s decision cannot be held liable for damages as to the company. However, the director’s decision by the board of directors through this process merely maintains the company’s financial assistance within 130.

(2) Contribution and duty of care

In the event a company makes a contribution to another company or a self-supporting organization, the company’s unilateral expenditure is generated, unlike an ordinary transaction based on benefit in return. Therefore, in the case of a contribution act, it incurs losses equivalent to the amount of contribution to the company short-term, but from a long-term perspective, it can expect indirect profits such as enhancing the company’s image and community trust and promoting the company through the contribution from a long-term perspective. Therefore, unlike an ordinary transaction, the director should determine whether the director violated the duty of care in relation to the contribution act on the basis of whether the director sufficiently compared and considered the financial loss, indirect and long-term interests of the company

Specifically, the determination of whether a contribution act violates the principle of good faith should be made based on the following factors: (i) whether the contribution act was made for the purpose of contributing to the public interest; (ii) whether the contribution act was made in a reasonable and appropriate manner to contribute to the public interest; (iii) whether the indirect and long-term profit such as improving the company’s image through the contribution act is expected; (iv) whether the contribution amount is within a reasonable scope in light of the company’s financial status; (v) whether the disbursement of expenses equivalent to the contribution amount may be considered within a reasonable scope in comparison with the company’s interest in comparison with the company’s interest; and (vi) whether the contribution act was made within the discretion of the directors, taking into account whether it

B) Whether the Defendants violated the Defendants’ duty of care

(1) Whether the donation of this case was made for the purpose of contributing to the public interest

In full view of the following circumstances, Gap 1, 8, 9, 11, 24, 26 evidence, Eul 6, 7, 8, 26, 29, 30, 31 evidence, and Eul 6, 7, 26, 29, 30, and 31 evidence, it is reasonable to view that the donation of this case was made with the purpose of preventing the financial crisis of Tae Tae si-si, and contributing to the balanced regional development through the economic promotion of the abandoned mine area and the enhancement of residents' living through the improvement of the residents' living through the economic development of the abandoned mine area, in the event the Corporation becomes bankrupt, and there is a risk that it will be accompanied by Tae si-do, which guaranteed the financial obligations of the Corporation of this case.

(A) In accordance with the purport of the Abandoned Mine Area Economic Revitalization Act, which was enacted to promote the economy of underdeveloped mine areas and promote balanced regional development and improving the living conditions of the residents, the Plaintiff was established by investing 51% of the capital in the Korea Mine Management Corporation, the Gangwon-do Development Corporation, the power-driven Army, the Taek-si, the Taek-si, the Taek-si, the Young-si, and the Young-si, and the local governments related to the coal industry and the abandoned mine areas. The Plaintiff’s articles of incorporation also has the same purpose as the legislative purpose of the Abandoned Mine Area Act, “to promote the balanced development between the regions and improve the living of the residents by promoting the economy of the abandoned mine areas that have come behind due to the decline of the coal industry” as the Plaintiff’s business objective. The Plaintiff’s

(B) The instant construction project also has been established around December 2001 by investing 57.4% of its capital in order to run a business for the revitalization of the abandoned mine area economy. The instant construction project carried out the business of constructing and operating ○○○ Shipbuilding for the purpose of developing tourism resources in the area of Taecheon-si and revitalizing the regional economy. However, the instant construction project, however, the instant construction project took up KRW 1,44.1 billion (48.6%) compared to the initially anticipated project cost due to changes in design, price, exchange rate increase, etc. following the prolonged construction of the ○○○○ Ri, while the sales of ○○○○○ Ri’s membership was low in management, while the sales of ○○○○○○ Ri’s membership was conducted at a low level. The net asset ratio was 364,305,486,813,347,46,476,976,97,9757,510,500 won per share in the year immediately preceding the instant resolution, 2011.

(C) On the other hand, Thai City guaranteed the payment of the loans of KRW 149 billion to the agricultural cooperatives of this case. The budget of Tae Tae Tae City in 201 was KRW 295 billion (general accounts KRW 264.7 billion, special accounts KRW 30.4 billion) and the above amount to be borne by the above amount to KRW 149.5% of the budget, and the amount to be borne by the above amount to KRW 149.5% of the budget, which is a local government-invested public corporation in Thai City, was designated as a financial crisis as prescribed by the Local Finance Act in excess of six times of the net asset. The fiscal self-sufficiency level in Thai City as of the year 2011 is more than 31.5%, and the general property was more than KRW 38.0 billion, and therefore, the assets were not able to meet the above amount to be repaid with its financial ability in Thai City.

(D) Defendant 9, a director nominated at Thai City, proposed the instant donation proposal, and as the reason for the proposal, “the Plaintiff was established pursuant to the Waste Mine Support Act enacted to promote the economy of the abandoned mine area with the aim of promoting balanced regional development and improving residents’ living conditions, and, based on the Waste Mine Support Act, a national is obligated to provide support for abandoned mine areas. Since the instant project is not normal, it may be designated as a local government in financial crisis. As the instant project may be designated as a local government in the absence of normalization, Defendant 9 stated that the instant donation needs to be made in order to prevent the bankruptcy in the process of deliberation on the instant donation, and stated another director, appointed by the local government of the abandoned mine area, and made a statement to consent to that purport. In addition, Nonparty 4, a member of the local council, also requested that the Plaintiff make a resolution to grant the instant donation to the local directors of the Plaintiff to recover the Plaintiff’s economy before the board of directors, prior to the regional council.

(2) Whether the instant donation is a substantial method for ensuring balanced regional development and improving residents’ living conditions through the economic promotion of abandoned mine areas

In full view of the following circumstances acknowledged by Gap, 9, 23, 24, 26, 33, 49, Eul, 10, 11, 20, 21, 21, 22, 22, 27, 28, 56, 76, 77, and 78 of the court of first instance as a result of the inquiry by the court of first instance, and the purport of the entire pleadings, it cannot be said that even if the donation of this case was made for the purpose of balanced development between regions through the promotion of the economy of abandoned mine areas and improvement of residents' livelihood, it is reasonable and appropriate to achieve such public interest.

(A) According to the Abandoned Mine Area Development Act and the Enforcement Decree thereof, the Plaintiff shall provide 25/100 of the profits to the Abandoned Mine Area Development Fund established pursuant to the Gangwon-do Municipal Ordinance so that it can be used for tourism promotion and regional development related to the Abandoned Mine Area. The Abandoned Mine Area Development Fund shall use the funds for alternative industry support projects, infrastructure projects, such as roads, education, cultural and art promotion projects, environmental improvement projects, etc. (Article 11(5) of the Abandoned Mine Area Act, and Article 16(2) and (3) of the Enforcement Decree of the Abandoned Mine Area Development Fund Act). In addition, the Plaintiff has contributed to the revitalization of the regional economy by preferentially employing local residents, preferentially purchasing local food materials, and conducting the education and culture support projects, environmental ecological projects, etc.

As such, the Plaintiff already provides for a large amount of contribution for the development of abandoned mine areas. Considering the method and purpose of contribution under the Abandoned Mine Area Development Fund Act, it is reasonable to view that the Plaintiff should take more careful consideration in order to make contribution separately from the amount that was contributed to the Abandoned Mine Area Development Fund, and that the Plaintiff should comply with the purpose and procedure corresponding to the provisions of the Abandoned Mine Area Development Fund Act. Accordingly, in relation to the donation that is made separately from the Abandoned Mine Area Development Fund, the Plaintiff appears to have determined whether to pay the contribution by the review body, including “whether the Plaintiff is linked with the contribution made in the direction of social contribution and management environment, overlaps with the existing social contribution projects and the relevant departments, the purpose of the project, the object of the project, the object of the project, the feasibility of the project plan and budget plan, the beneficiary’s satisfaction, the effectiveness of the support, and whether the Plaintiff contributed to enhancing the image of the Closed Mine Area Development Fund.” However, the instant contribution was ordinarily executed by the Plaintiff beyond the scope of the contribution and its execution criteria.

(B) From 2005 to 2014, the Plaintiff provided a total of KRW 1,172,064,000,000, and was allocated KRW 183,947,00,000, out of which was 15.7%, among them. In addition, Thai-si received KRW 28 billion from the Plaintiff through education scholarship, Buddhist relationship assistance, and regional cooperation projects, etc. for the period of 2015, and was paid KRW 23 billion from 2000 to 2014.

(C) On April 13, 2001, the Gangwon coal mine balanced development council: (a) distributed 4 billion won for regional cooperative project to four neighboring Sis and Guns (Sae, saun, saun, and Young months); (b) established a plan for balanced development of the entire coal mine area by constructing related facilities to neighboring Sis and Guns with casino business earnings, etc.; (c) established a youth training facility; (d) an employee training center in the field; and (e) an employee training center in the Tae Yan-si; and (e) an employee training center in the field of Tae Yan-gun to develop the integrated coal mine area. On July 2001, the Plaintiff, according to the said plan, donated 4 billion won each Si/Gun, under the name of the project for cooperation in the development of the abandoned mine area; (e) established a plan for the balanced regional development of the 1.5 billion won total of 00 billion won to build the above tourist golf course in lieu of its revenue.

As such, the Plaintiff contributed to the economic revitalization of abandoned mine areas by investing considerable amount of casino revenues in the business led by local governments of abandoned mine areas.

(D) The beneficiary of the instant donation ultimately is the Corporation. Although the public interest nature is strong unlike other companies, the Plaintiff, in essence, is a profit-making enterprise, may raise the question of whether to contribute a large amount of money without any consideration to the instant Corporation, which is a profit-making enterprise, on the grounds that it is beyond the payment of closed mine area mine funds for economic revitalization, public interest donation in the region, and business investment in the abandoned mine area. Furthermore, even though the instant public corporation is operating a normal business, there is a continuous decline in sales, and there was no operation of incidental facilities, such as restaurants. As such, the beneficiary was not obliged to pay public charges such as rental fees, electricity charges, etc., and there was no need to pay wages and interest of its employees for the instant services necessary for the operation of cooking, such as passenger cleaning, security services, etc., and it is difficult to view the instant investment funds to be directly implemented for the purpose of the implementation of the instant tourism project to achieve the investment ratio of 21% prior to the completion of the rehabilitation procedure.

On the other hand, the Defendants asserted that the instant donation was reasonable measures to ensure that not for the normalization of the management of the instant corporation, but for the sale of ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ was made by the instant donation. However, among the shares of the instant corporation, the instant donation was made by the shareholders of KRW 25.9% of the instant corporation’s share, namely, KRW 8.6% of the instant corporation’s share, KRW 8.3% of the gold-ho corporation’s share, KRW 3.8% of the amount of the instant corporation’s share, and KRW 3.8% of the amount of the instant corporation’s share. However, it is difficult to view the remainder of the shareholders, other than Thai City’s share of the instant corporation’s share in the management of the instant corporation’s share.

(E) Even if it is designated as a local government in a financial crisis due to the financial crisis, it should, in principle, be resolved through the establishment and implementation of an appropriate financial soundness plan in accordance with the procedures prescribed in the Local Finance Act and the financial support from the National Treasury. It cannot be said that the Plaintiff, a profit-making corporation, bears the duty of public interest to compensate for losses incurred by the local government due to the failure of investment

(3) Whether the donation of this case is helpful to the plaintiff's interest from a long-term perspective

Considering the following circumstances, it is difficult to view that the instant donation would be significantly beneficial to the Plaintiff’s interest from a long-term perspective, taking into account the following circumstances acknowledged by comprehensively taking account of the descriptions of evidence Nos. 7, 8, 25, and 10, 13, and 17.

(A) Since ○○○○○○ Shipbuilding operated by the instant construction project is competition with each other, it is difficult to view that even if the instant construction project’s operation is normalization by making contributions to the instant construction project, it may have a positive effect on the Plaintiff’s business.

The Defendants asserted that, although ○○○○ Lighting and Cargo Lighting are the types of business overlapping with each other, it may bring about win-win effects due to clean posters effects, etc., and thus, if the instant construction project is recovered through the donation of this case, the Plaintiff would also have considerable interest in the Plaintiff. Although the 108th board of directors held on February 28, 2012, the Plaintiff, at the 108th board of directors, decided to develop the integrated products of abandoned mine area where the Plaintiff is able to use the entire emult (e.g., summer, ○○ e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., the e., a closed mine area.

In addition, since the donation of this case is not used to create a new business area or expand its business, but used as an emergency operational fund to solve the financial difficulties of the project of this case, it cannot be said that the plaintiff can obtain a long term business opportunity or gain an additional benefit related to the plaintiff's business through the donation of this case.

(B) It seems that the Plaintiff had a positive corporate image to contribute to the relocation of abandoned mine areas through the instant donation to the residents in Thai City or the residents in abandoned mine areas. However, as seen earlier, the Plaintiff has been actively engaged in the activities to revitalize the abandoned mine area economy. As such, the Plaintiff’s positive image improvement effect of the instant donation is not increasing. On the other hand, there is a negative evaluation that the Plaintiff’s management might fall on the Plaintiff’s business image, such as making a contribution to the instant donation to profit-making enterprises, which were in the bankruptcy crisis due to business failure, without possibility of recovery.

(C) The Defendants asserted that, if the management of the instant corporation is not normal, it would be impossible for the Plaintiff to receive the convertible bonds already acquired by the Plaintiff, and the new stocks to be acquired by conversion would dance. However, if the instant corporation continues to exist through the instant donation, the Plaintiff, as the Plaintiff, may continue to secure the possibility of receiving the convertible bonds of the instant corporation already acquired. However, on December 31, 2010, the Plaintiff converted the amount of KRW 15 billion, which is the total amount of the subscription bonds of the instant corporation, into stocks after disposing of losses. However, even if the management of the instant corporation was normal and the said shares can be recovered to a certain extent, it cannot be said that the possibility of collecting the subscription funds of the instant corporation would justify the instant donation.

(4) Whether the donation of this case was excessively excessive in light of the Plaintiff’s financial status

Comprehensively taking account of the overall purport of the pleadings as to Gap 9, 14, 24, 27, 28 evidence, Eul 3, 5, 16, 21, 19, and 22 evidence, the plaintiff considered that as of December 31, 2012, assets were 2.9,06.6 billion won, debt amount of 5,34.6 billion won, capital amount of 2.37 billion won, net income amount of 306.2 billion won, and as of December 31, 2011, the amount of 2.7,11.4 billion won, debt amount of 4,54 billion won, capital amount of 2.5 billion won, 2.4 billion won, 3,81 billion won, and 2.8 billion won, total amount of donations of 2.4 billion won per year, 15 billion won, and 2.4 billion won per year, it is difficult for the plaintiff to recognize the amount of cash dividends of 2.8 billion won per year, 15 billion won per year,

(5) Whether the Defendants had sufficiently examined the proposal of this case’s donation

Comprehensively taking account of the following circumstances acknowledged in Gap evidence Nos. 4 through 7, 8, 10, 11, 14, 24, 26, and Eul evidence Nos. 18 and 24, it is difficult to view that the defendants sufficiently reviewed the effect of promoting the public interest of the donation of this case at the time of the resolution of this case, whether the donation of this case is excessive, and whether the plaintiff can obtain tangible and intangible profits proportional to losses equivalent to the amount of the donation of this case through the donation of this case, and thus, it is difficult to view that the defendants sufficiently reviewed whether the donation of this case within a reasonable scope.

(A) Review of the effect of promoting the public interest of the instant donation

① On July 10, 2008, the Plaintiff subscribed to convertible bonds of an amount equivalent to KRW 15 billion issued by the instant Corporation. On July 15, 2012, the Plaintiff converted convertible bonds into a common share of KRW 3 million (11.7%) on July 15, 2012. On December 31, 2010, the date of conversion, the possibility of redemption of the said convertible bonds was uncertain, and on the grounds that the estimated value of the converted shares is remarkably low, the Plaintiff disposed of the total amount of KRW 15 billion subscription bonds on the account book.

② Defendant 9 proposed to the Plaintiff’s 97th board of directors a loan to lend KRW 30 billion operating funds to the instant construction project until the instant construction project sells its assets. As to this, the Plaintiff’s board of directors decided on October 28, 2010 that “the Plaintiff shall conduct an appraisal based on the security offered by the instant construction project and prepare detailed matters within the scope of the amount to be recovered as above to the extent of KRW 30 billion.” Since the instant construction project conducted several appraisals and additional appraisals on land, buildings, etc. offered by the instant construction project, the Plaintiff’s board of directors did not hold any further discussions on the loan of funds.”

③ On November 23, 2011, the Ministry of Knowledge Economy requested the Minister of Knowledge Economy to cooperate with the Plaintiff to take over the ○○○○ Shipbuilding, and on March 19, 2012, the Plaintiff requested on March 19, 2012, the Minister of Knowledge Economy rejected all of them.

④ As such, since the proposal for the instant construction project was not fully implemented, it is because of the normalization of the instant construction project, and the Defendants did not determine that subsidies could be recovered due to such subsidization. Although all other subsidizations at the time of the instant resolution were not brought about for such reason, there is no clear evidence to deem that there was sufficient review and discussion as to what positive effects could arise in the normalization of the instant construction project, unlike other subsidizations, whether the instant donation may bring about a positive effect on the normalization of the instant construction project, whether the instant construction project and the solar white paper may be financially stable, and accordingly, whether the overall public interest in abandoned mine areas could be helpful.

(B) Examination of the feasibility of the rehabilitation plan in Taekk-si

In order to explain the effectiveness of the instant donation to the Defendants prior to the instant resolution, ○○○ Ordinance, stating that “as of December 31, 201, the Plaintiff’s convertible bonds acquired as of December 31, 201 shall be converted to shares; KRW 58.2 billion unpaid construction expenses shall be charged to agricultural cooperatives; KRW 14.7 billion shall be charged with interest on loans from the agricultural cooperatives; KRW 15 billion shall be charged from Thai City to 2018; KRW 15.0 billion shall be additionally charged from the Plaintiff; KRW 15 billion shall be contributed from the Mine Reclamation Corporation; KRW 15.0 billion shall be contributed from the Plaintiff; the said rehabilitation plan shall be charged to the Defendants; however, the said rehabilitation plan was formulated in a way to improve the financial status of the instant construction project; and it was not prepared by the Defendants at the time of the instant implementation of the plan; and it was not prepared by agreement among the relevant parties to the instant rehabilitation plan. Nevertheless, it was not possible to present the said plan.

(C) Review of the plaintiff's interest that can be acquired as the donation of this case

In addition, at the time of the resolution of this case, the Defendants did not review the tangible or intangible interests, such as the business opportunity and expectation interest, or the improvement of positive corporate image, etc. that the Plaintiff could obtain through the donation of this case.

(D) Decision-making upon request of Thai City

Meanwhile, prior to the resolution of this case, public officials belonging to Thai City requested the Plaintiff to purchase ○○○ Ordinance Membership, purchase or commission management of ○○ Ordinance, loan of funds, etc. Before the resolution of this case, the Plaintiff and the working-level council was held several times to discuss this. However, upon the occurrence of the total amount, Nonparty 5, who is a local administrative officer in charge of the economic policy and regional economy, proposed to receive donations from the Plaintiff and proposed the proposal to the Plaintiff as the proposal of the Plaintiff’s board of directors after consultation with the Defendant 9. In addition, even if public officials belonging to Thai City were to distribute the proposal to the Plaintiff’s director of this case, ○○○○ Ordinance Ordinance on the Settlement of Abandoned Mine Area, ○○ Ordinance, and ○○○ Ordinance Ordinance on the Settlement of Abandoned City, National Assembly Members, etc. were to request the Plaintiff to cooperate directly on the date of holding the Plaintiff’s board of directors’ meeting, and even if it was difficult for the Plaintiff to obtain an additional resolution on the donation, it was difficult for the Defendants to obtain an additional resolution on the resolution of this case.

(6) Sub-committee

The instant donation was made for the public interest of balanced regional development and improvement of residents’ living conditions through the economic promotion of abandoned mine areas. Even if the amount of the donation is not large amount in light of the Plaintiff’s financial status, the degree of contributing to the promotion of the public interest of the entire abandoned mine areas, and the Plaintiff’s interest from the instant donation is not large, and it is difficult to deem that the instant donation was made in a considerable way to achieve the public interest in light of the object and place of use of the donation. Moreover, it is difficult to deem that the Defendants made

Therefore, the resolution of this case where the Defendants approved the donation of this case is in violation of the duty of care as a director, which deviates from the scope of discretion on management as a director.

C. Sub-committee

Therefore, the resolution of this case that the Defendants approved the donation of this case constitutes a case where the directors under Article 399(1) of the Commercial Act neglected to perform their duties, and thereby, the Plaintiff sustained damages equivalent to 15 billion won of the donation of this case.

Defendant 9 et al. participated in the resolution of this case and expressed the consent to the proposal of this case, and Defendant 1 and Defendant 2 did not assert or prove that they have raised an objection in the minutes (only stated as a complex establishment authority). Thus, it is presumed that they approved the resolution of this case (Article 399(3)). The Defendants are jointly and severally liable to compensate the Plaintiff for damages therefrom pursuant to Article 399(2) and (3) of the Commercial Act.

3. Scope of damages.

A. Where a director acts in violation of Acts and subordinate statutes or the articles of incorporation or neglects his/her duties and thereby is liable to compensate the company for damages, the scope of the compensation for damages may be limited in light of the ideology of the fair compensation system, taking into account all the circumstances such as the content and nature of the business, the background leading up to the violation of the director's duties and the manner of the violation of his/her duties, the objective circumstance or degree involved in the occurrence and expansion of the company's damages, the degree of contribution to the ordinary director's company, the degree of contribution to the company, the profit accrued from the violation of duties, the existence of the company's organizational structure, and the establishment of the risk management system (see Supreme Court Decisions 2002Da60467, Dec. 10, 2004; 205Da51471, Dec. 11, 2008).

B. The following circumstances acknowledged based on the aforementioned evidence: (i) the Plaintiff was a corporation established for the economic promotion and balanced development of abandoned mine areas pursuant to the Abandoned Mine Area Act; (ii) was responsible for the economic development of abandoned mine areas; and (iii) was designated as a public institution pursuant to the Act on the Management of Public Institutions; and (iv) half of the shareholders were composed of government agencies or local governments of abandoned mine areas; and (iii) the Plaintiff appears to have obtained an intangible benefit of enhancing the image of the enterprise supporting the community through the instant donation; and (iii) was used as the fund for emergency operation of the instant ○○○○ Shipbuilding; (iv) the instant donation was not normalization due to the instant donation, namely, the instant corporation was sold through rehabilitation procedures; and (v) the Defendants were unable to determine the amount equivalent to the Plaintiff’s maximum amount of compensation for damages, taking into account the following factors:

At this time, taking into account the fact that Defendant 9, as a director appointed by Tae-si, proposed the agenda of the instant donation in the 109th, the 110th Council, and the instant resolution, actively advocateing the instant donation, etc., Defendant 1, Defendant 2, Defendant 2, Defendant 3, Defendant 4, Defendant 5, Defendant 6, Defendant 7, and Defendant 8’s liability for damages is limited to 10%, respectively.

C. Therefore, Defendant 9 is liable to the Plaintiff for damages of KRW 3 billion (i.e., KRW 15 billion x KRW 20 billion x KRW 20 billion x KRW 400 million x Defendant 10 billion 5 billion x (i.e., KRW 4 billion x KRW 20% ; ii) Defendant 2 is jointly liable to pay damages of KRW 300 million 4 billion x (i.e., KRW 4 billion 5 billion ; ii) annual damages of KRW 500 million x annual damages of KRW 15 billion ; and (ii) Defendant 2 is jointly liable to pay damages of KRW 40 billion x 40 billion 5 billion x (i.e., KRW 300 million x 200 billion ; and (iii) Defendant 1 is liable to pay damages of KRW 500 million 5 billion x 700 billion 5 billion x 2013 x 2005.

4. Conclusion

Therefore, the plaintiff's claim against the defendants is justified within the scope of the above recognition, and each of the remaining claims is dismissed as it is without merit, and the judgment of the court of first instance is justified as the conclusion is consistent with this, and it is so decided as per Disposition.

Judges Kim Jong-chul (Presiding Justice)