2014Nu3640 Revocation of revocation of designation as a business group subject to limitations on mutual investment

1. A;

2. B stock company:

Fair Trade Commission

June 11, 2015

July 23, 2015

1. On April 1, 2014 and April 1, 2015, the respective dispositions that the Defendant designates as a member company of an enterprise group subject to limitations on mutual investment that the Plaintiff is the same and identical company to C, D, E, F, G, H, H, I, and J, shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Basic facts and circumstances of dispositions;

A. Circumstances of each of the dispositions in this case;

1) On April 1, 2014, pursuant to Article 14(1) of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”), the Defendant designated 26 affiliates, including Plaintiff B, C Co., Ltd., D Co., Ltd., Ltd., E Co., Ltd., F Co., Ltd., G Co., Ltd., H Co., Ltd., H Co., Ltd., Ltd., I Co., Ltd., J Co., Ltd., and J Co., Ltd., Ltd. (hereinafter “Plaintiff B”), “C”, “E,” “H,” “H, I, and “J,” and notified the Plaintiff of the designation of 26 affiliates, including 8 affiliates, including Plaintiff B, etc., as Plaintiff A (hereinafter “F of a business group”).

2) In accordance with Article 14(1) of the Fair Trade Act on April 1, 2015, the Defendant designated 26 affiliates, including Plaintiff B, C, D, E, F, G, H, I, and J, as Plaintiff A and notified the same person as Plaintiff A (hereinafter referred to as “instant Disposition 2,” and combined with the instant Disposition 1, “each of the instant dispositions”).

(b) Status of K and C of an enterprise group;

1) A conglomerateK, as of April 2014, as of approximately 17:37 billion won, the total sales are approximately KRW 18:221 billion, and around April 2015, as of April 201, as of 26 affiliated companies, the total assets of 26 affiliated companies are approximately KRW 18:8,28 billion, the total sales are approximately approximately KRW 16:8,35 billion. (2) Plaintiff B is the representative company of a conglomerate which has a limitation on mutual investment, and is responsible for integrating and publicly announcing the disclosures of the company to which the restriction on mutual investment belongs, as the Plaintiff B’s representative company of a conglomerate which has a limitation on mutual investment.

3) Based on April 2014 and April 2015, the shareholding status of shareholders of C (other than preferential shareholders) in C is as listed below:

C Current shareholders status of C

A person shall be appointed.

[Reasons for Recognition] Unsatisfy, Gap evidence 1, 16, 17, Eul evidence 12, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The same plaintiff A does not own any equity interest in eight companies, such as C, and eight companies, such as C, are independently managed by M as follows, and eight companies, such as C, etc., are not included in the conglomerate K under Article 2 subparagraph 2 of the Fair Trade Act.

1) Requirements for equity ratio (Article 3 subparag. 1 of the Enforcement Decree of the Fair Trade Act)

Plaintiff A and his children sell all the shares of C around November 201, 201, and up to now, the shares of C are not owned only one share. The ratio of shares of C owned by M and N, a relative of a person related to the same person, is less than 30%. In addition, since C’s own shares are not included in the calculation of the above shares ratio, Plaintiff A cannot meet the requirements for shares ratio of not less than 30/100 against C.

(ii) the control requirements (Article 3(2) of the Enforcement Decree of the Fair Trade Act) are not satisfied;

① The Plaintiff did not enter into a contract or agreement with other shareholders so as to appoint at least 50% of the representative director or officers of 8 companies, including C, etc.; ② there is no personnel exchange between 18 companies actually controlled by Plaintiff A and 8 companies, such as C, among 26 affiliated companies of the 26 affiliated companies of the 26 affiliated companies of the 26 affiliated companies of the 18 enterprise group, including C, etc.; ③ eight companies, such as C, etc. do not engage in financial transactions exceeding the ordinary scope with other affiliated companies of the enterprise group, or use the company K, etc. of the 8 company group; and thus, the 8 companies, such as C, etc. uses a separate building, shall not be deemed as one economic entity under generally accepted social norms; ④ Since the 18 companies with which the Plaintiff was regularly designated and the 8 companies controlled by M, etc., are separated and independent management; and thus, the Plaintiff cannot be deemed to exercise dominant influence over the decision-making or business execution of the 8 company through M, a related party.

B. Relevant provisions

The provisions of the attached Table shall be as specified in the attached Table.

C. Determination

Article 14 (1) of the Fair Trade Act provides that "the Fair Trade Commission shall designate a conglomerate that has restricted mutual investments and a conglomerate that has restricted debt guarantees (hereinafter referred to as " conglomerates, etc.") under the conditions as prescribed by the Presidential Decree and notify the company that belongs to such conglomerates of such designation." Thus, in order to designate a specific company as included in a certain conglomerate, etc. that has restricted mutual investments, such specific company shall first be included in a conglomerate that

However, according to Article 2 subparagraph 2 (b) of the Fair Trade Act, an enterprise group refers to a group of two or more companies substantially controlling the business by the same person according to the standards prescribed by the Presidential Decree. Article 3 of the Enforcement Decree of the Fair Trade Act provides that "the standards prescribed by the Presidential Decree" under Article 2 subparagraph 2 of the Fair Trade Act refers to a company falling under any of subparagraphs 1 and 2, and "the same person" under Article 3 subparagraph 1 of the Enforcement Decree of the Fair Trade Act excludes 30/10 or more of the total number of shares issued (excluding shares without voting rights under Article 370 of the Commercial Act) by the same person and persons related to the same person as the same person, as well as persons related to the same person under each item of subparagraph 1 of Article 3 of the Presidential Decree." Article 2 subparagraph 2 (a) through (d) provides that a company falling under each item of subparagraph 2 of the same Article, which is the largest shareholder, shall meet the requirements for share ratio under Article 3 subparagraph 1 of the Enforcement Decree of the Fair Trade Act, or shall meet the control requirement.

In accordance with these legal principles, it is examined whether 8 companies, including C, meet the requirements that can be designated as affiliated companies of a business group K.

1) Determination as to C

A) Whether the equity ratio requirements (Article 3 subparagraph 1 of the Enforcement Decree of the Fair Trade Act) are met

(1) According to the facts established earlier, Plaintiff A does not own C’s shares as of April 2014 and April 2015, and excluding non-voting shares under Article 370 (Non-voting Shares) of the former Commercial Act, Plaintiff A’s blood relative within the sixth degree of relationship within the Plaintiff A’s six degree of relationship as of April 2014, and as of April 2015, N’s 2,030,964 shares, as of April 2014, and as of April 2015, 2,138,120 shares, as of April 20, 2015, as of April 201 and as of April 2, 2015 and as of April 2015, Plaintiff A owns 3,046 shares, 70% of the total shares issued by Plaintiff A and 46% of the shares, 76% of the shares owned by the same person and 46% of the shares owned by Plaintiff A, 2636, 7460.6% of the shares.

(2) The Defendant asserts that C’s shares, including the shares of the same person and persons related to the same person, exceed 30% when calculating its shares.

(A) However, shareholders and companies are separate legal entities, and Article 3 subparagraph 1 of the Enforcement Decree of the Fair Trade Act is only based on "share ratio owned by the same person or persons related to the same person" and does not include shares owned by the company in calculating equity ratio. Therefore, there is no legal basis to regard C's own shares as shares owned by the same person, plaintiff A or persons related to the same person.

However, according to Article 7-2 of the Fair Trade Act, the acquisition or ownership of shares is based on the actual ownership relationship regardless of the name of acquisition or ownership. Therefore, in cases where C’s own shares are deemed to be owned by the same person or owned by interested persons, etc., it shall be deemed that C’s own shares may be included in the shares of the same person, the same person, or persons related to the same person, as the shares owned by the same person, or, inasmuch as there is no evidence to acknowledge it, C’s own shares shall not be deemed to

(B) Meanwhile, according to Article 3 subparag. 1 (d) of the Enforcement Decree of the Fair Trade Act, the company whose business is substantially controlled under Article 3 subparag. 1 (d) of the same Enforcement Decree shall be included in “stocks owned by the same person and persons related to the same person.” However, in order to consider C as a person related to the same person of the same person, the total share ratio of Plaintiff A and persons related to the same person shall exceed 30% with respect to C, or the same person shall exercise controlling influence over C’s management in compliance with the requirements under Article 3 subparag. 2 of the Enforcement Decree of the Fair Trade Act. The same person’s share ratio of Plaintiff A and persons related to the same person, including Plaintiff A and persons related to the same person, as of April 2014, is less than 24.26%, and as of April 38, 2015, the same person’s share ratio cannot be deemed to be included in “A’s shares as the same person’s shares.”

(3) In addition, the defendant asserts that Article 2 subparagraph 1 of the Enforcement Decree of the Fair Trade Act excludes only non-voting shares under Article 370 of the former Commercial Act from the shares issued by the company, so the company's own shares should be included in the shares owned by the same person and persons related to the same person.

On the other hand, Article 2 subparagraph 1 of the Enforcement Decree of the Fair Trade Act provides that the stocks shall be excluded from non-voting stocks under Article 370 of the former Commercial Act in calculating the equity ratio of the same person and persons related to the same person, so priority holders, who are non-voting stocks under Article 370 of the former Commercial Act issued by the relevant company, shall be excluded from the total issued stocks regardless of their titles, and the remaining stocks except this shall be included in the total issued stocks including treasury stocks held by the relevant company. However, even under this provision, even under this provision, the company's own stocks owned by the relevant company shall be included in the total issued stocks, and the equity ratio including the stocks of the same person and persons related to the same person shall not be calculated.

(4) Therefore, since the shares of C owned by the same person, Plaintiff A and M related persons, etc. fall short of 30/100 of total issued shares as of April 2014 and as of May 2015, the Plaintiffs’ assertion that the shares ratio requirements for inclusion Plaintiff A into C are not satisfied is with merit.

B) Whether the control requirements (Article 3 subparagraph 2 of the Enforcement Decree of the Fair Trade Act) are met

(1) Facts of recognition

(A) Circumstances leading to the division of affiliates C

① On January 6, 2010, the creditor financial institutions of Plaintiff B and T Co., Ltd (hereinafter referred to as “T”) commenced the procedures for joint management by creditor financial institutions pursuant to Article 8(1) of the former Restructuring Promotion Act (amended by Act No. 10684, May 19, 201) with respect to Plaintiff B and T.

(2) On December 2009, the Korea Development Bank (the Governor of the Korea Development Bank (the Governor of the Financial Services Commission's notice) requested the controlling shareholders of the enterprise group K such as plaintiffs A and M to provide their assets as security, such as their shares, etc. around December 2, 2009. In the situation where the withdrawal of the agreement is delayed due to the difference between the controlling shareholders, the plaintiff A entered into an agreement between the controlling shareholders and the controlling shareholders of the credit group to promote the management normalization of the company's affiliates under the direction of the plaintiff A, because it is not possible to lead the agreement between the three household (house, household, household, M side, and household) under the direction of the plaintiff A, and the credit group was in contact with each other of the three household systems.

③ During the process of concluding the above agreement, M opposed to the Plaintiff’s exercise of the right to manage the K Group entirely, and expressed the position that the Plaintiff cannot respond to the demands of the claim group, such as security of collateral, unless the independent management of the C-affiliated is guaranteed.

④ On January 1, 2010, the Korea Development Bank prepared a draft on the method of exercising the management rights of each affiliated company and the method of arranging the equity relationship for exercising the management rights of the affiliated company C. The draft was accepted on January 20, 2010 on the part of the Plaintiff A, and on February 20, 2010 on the part of the first police officer, the draft was drafted a final agreement.

⑤ As above, each agreement entered into between the Korea Development Bank and the Plaintiff A and M shall include the following:

Matters concerning the management of affiliate companies of Article 4 of the Agreement signed by the Plaintiff A and the Bonds Association.

(A) The Credit Union shall cooperate with A to assign a honorary president in relation to the normalization of B’s management normalization, and shall cooperate so that a person recommended by A in the proceedings, such as a resolution of the Council of Creditor Council and the General Meeting of Shareholders, may be appointed as a representative director B.

Article 5 Additional Measures for Management Normalization

(A) The controlling shareholder (the plaintiff A, his L; hereinafter the same shall apply) shall, where the existing secured party consents with respect to C's shares (the total issued shares) provided as security after the reduction of capital and conversion of investment into equity to T, dispose of them as soon as possible as possible and acquire T's remaining shares in the amount appropriated for the amount of the secured debt out of the disposal proceeds, and provide them as security to the bond group as stipulated in Article 1 of this Agreement.

(C) The controlling shareholders shall cooperate to the maximum extent possible to restore U.S. shares purchased by C from B on December 21, 2009 and December 21, 2009 (12.7% of the total issued shares) through due process, such as the approval of the bond group and the resolution of the relevant board of directors, and shall cooperate to the maximum extent possible so that C can dispose of the remaining U.S. shares (14.0% of the total issued shares) owned by C through prior sale,

(D) The controlling shareholder shall cooperate to the maximum extent possible to dispose of the shares held by C through the market sale, etc. of the shares after the debt-equity swap was conducted in the course of the management normalization of T, through appropriate procedures, such as the approval of the delegation, resolution of the board of directors

Article 4 Matters concerning the management of affiliate companies

(A) The Credit Council shall cooperate with the controlling shareholders (M and N. hereinafter the same shall apply) in exercising C’s management right for three years from the time of conclusion of the management normalization implementation agreement (MU) between C and the Credit Council, jointly with C’s major shareholders by way of a resolution, etc. by the C Creditor Bank Council or the general meeting of shareholders. However, the Credit Council shall cooperate with C’s management right for a limited period of two years where there are justifiable grounds recognized by the Credit Council, such as implementation of the management normalization plan, etc.

Article 5 Additional Measures for Management Normalization

(A) A controlling shareholder shall cooperate to the maximum extent possible to restore U.S. shares purchased by C from B on December 21, 2009 (12.7% of the total issued shares) through due process, such as approval by the bond group, resolution by the relevant board of directors, etc., and shall cooperate to the maximum extent possible so that C can dispose of the remaining U.S. shares (14.0% of the total issued shares) owned by C through prior sale, etc.

(B) The controlling shareholder shall cooperate to the maximum extent possible to dispose of the shares held by C through the sale of the market, etc. after the debt-equity swap was conducted in the procedure for the normalization of T’s management through due process, such as the approval of the delegation, resolution of the board of directors

(B) The separate process of C’s affiliates, such as sale of shares

① From September 201, M demanded the Korea Development Bank to perform as soon as possible the agreed terms and conditions with major shareholders, such as selling C shares held by Plaintiff A, and Plaintiff A sold all shares of C around November 201.

② The bond group decided to terminate the security for U shares of C and demanded C to sell U shares to C on April 3, 2012. However, on May 2, 2012, C sent a letter of public notice stating that “U shares held by C cannot be sold at the market price or at a price lower than that without a premium of management rights with a share of management rights.”

③ On November 2, 2012, the Korea Development Bank demanded the sale of U’s shares to C, however, C was denied on the ground that “A is incapable of purchasing shares in consideration of Plaintiff B’s finance and liquidity” on November 22, 2012, or “U’s recent U share price is significantly drop compared to that of Plaintiff B’s previous two years, so there is concern for low-price sale if disposing of shares that are likely to be sold at a short time,” and “a situation in which there is no need for unreasonable disposal of said shares because C’s financial status is good and liquidity is bad.” On December 5, 2012, the Korea Development Bank demanded C to make a binding sale plan for U’s shares.

④ C still holds shares equivalent to 12.61% of U.S.

(C) On February 24, 2012, C’s affiliates withdrawn delegation to Plaintiff A on the ground that “chemical affiliate does not belong to the same enterprise group as Plaintiff B.” As to the submission of data on “the current situation of designating a business group subject to limitations on mutual investment” under Article 14(4) of the Fair Trade Act. In addition, C, on June 21, 2012, reported the reason for reporting to the Financial Services Commission and the Korea Exchange on its own, and entered the reason for reporting as “a separate report” (see Article 147(1) of the Capital Market and Financial Investment Services and Capital Markets Act, Article 153(4) of the Enforcement Decree of the same Act).

(D) M uses the position of C Group Chairperson.

(E) On January 5, 2015, Plaintiff B received prior notification from the Defendant that it would impose a fine for negligence of KRW 5 million on eight companies, including C, on the ground that Plaintiff B was the representative company of an enterprise group K, but failed to perform its duty of disclosure by combining the details of disclosure, such as the current status of enterprise groups with respect to eight companies. Accordingly, Plaintiff B notified Plaintiff B, on January 9, 2015, eight companies, including C, etc., of the document stating that it would claim damages equivalent to the fine for negligence, on the ground that Plaintiff B was not subject to the said disposition of fine for negligence due to the failure to provide materials and information necessary for the publication of the current status of enterprise group in 2014. After that, the Defendant imposed a fine for negligence of KRW 5 million on Plaintiff B on March 5, 2015.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 4, 5, 6, 8, 9-1, 3, Gap evidence Nos. 12 through 20, Eul evidence No. 1-2, and the purport of the whole pleadings

(2) Determination

In full view of the aforementioned facts and the following circumstances that can be recognized based on the evidence, there is insufficient evidence to acknowledge that the Plaintiff A actually controlled the business through M, a person related to the same person, and there is no evidence to acknowledge otherwise. Therefore, the Plaintiff’s assertion on this part is with merit.

(A) On January 2010, when major affiliates of the enterprise group K were incorporated into the workout program or the debt group autonomous agreement system, M actively demanded the creditor group to manage the company's independent in the course of the agreement for the normalization of management. During the agreement, M appears to have recognized the management right of M for the creditor group and the plaintiff A in the process of the agreement. In Article 4 (a) of the Agreement between the creditor group and the controlling shareholders for the promotion of the normalization of the company's management with M, "M shall exercise the management right of C for three consecutive years from the conclusion of the agreement for the implementation of the management normalization program with the creditor group and cooperate within two consecutive years if it is deemed that there is a justifiable reason." However, it seems that M's exercise of management right continues to be separated and independent until the expiration of the agreement between C and the debt group and the self-regulation agreement by providing that "M shall exercise the management right of M for three consecutive years from the conclusion of the agreement with the creditor group."

(B) Since around 2010, eight companies, including C, are separately operating with the affiliates of the remaining enterprise group K, the trade name of "V", "V" is used, but the route of the enterprise group K (the CD is not used, since 2012, the company's house is used separately, and eight companies, including C, publish the current status of the enterprise group separately from the enterprise group K, it is reasonable to deem that eight companies, including C, are operating separately with the existing enterprise group K.

(C) Although C did not completely cut down the ownership structure connection with U’s shares, it is insufficient to recognize that Plaintiff A exercises a dominant influence over C’s management only by reason of such fact, and rather C appears in the U’s general meeting of shareholders held on March 27, 2014, seeking to appoint Plaintiff A as an in-house director, and there is a motive to maintain U’s influence over C, rather, as C appears to have a move to oppose C. Accordingly, it is difficult to deem that it can be a single circumstance indicating C’s control over U, and solely on such circumstance, it is difficult to deem that Plaintiff A actually controls eight companies, including C, through M, a person related to the same person.

(D) As seen earlier, Article 7-2 of the Fair Trade Act provides that the acquisition or ownership of shares shall be based on the actual ownership relationship. However, there is no evidence that the Plaintiff actually acquired or owned the shares of the Plaintiff C according to such relaxed standards.

(E) The Defendant asserts that each of the instant dispositions is lawful because it does not meet the requirements for affiliated division under Article 3-2 of the Enforcement Decree of the Fair Trade Act, such as meeting the requirements for separation of relatives. However, Article 3-2 of the Enforcement Decree of the Fair Trade Act, which provides for the exclusion from a business group, does not stipulate exceptional requirements that can be excluded from a business group despite the fulfillment of the requirements for a business group under Article 3 of the Enforcement Decree of the Fair Trade Act, but does not provide for the exceptional requirements that can be excluded from a business group. Thus, it cannot be deemed that the Defendant satisfies the requirements for a business group under each subparagraph of Article 3-2 of the Enforcement Decree of the Fair Trade

(f) In addition, there is no evidence to prove that the same person participates in the appointment of the representative director or executive officer of C, or directly or indirectly involvement in the decision on important matters, and there is no evidence to prove that the business contents of C are controlled, and there is no other evidence to prove otherwise.

2) Determination as to the remainder of seven buildings other than C

A) Generally, in seeking the revocation of an administrative disposition by asserting the illegality of the administrative disposition, the administrative agency claiming that the disposition was lawful has the burden of proving the legitimate grounds, such as the grounds for the disposition that it claims (see, e.g., Supreme Court Decision 84Nu515, Jan. 22, 1985).

B) In light of the above legal principles, the fact that 7 companies except C among 8 companies, such as health departments and C, are the subsidiaries or sub-subsidiarys of C, are without dispute between the parties, and that the plaintiff cannot be deemed to have controlled the business of C. Thus, the defendant, unless the defendant asserts and proves otherwise that A has de facto control over the remaining 7 companies, each of the dispositions of this case that the above 7 companies are included in the business group K of the business group should also be deemed to be unlawful. Accordingly, the plaintiffs' assertion on this is well-grounded.

3. Conclusion

Therefore, the plaintiffs' claims shall be accepted with due reason, and it is so decided as per Disposition.

Judges of the presiding judge, Yellow Judge

Judges Hun-Ba

Judges Kim Gin-ran

1) As the Commercial Act was amended by Act No. 10600, Apr. 14, 2011, Article 370 was deleted and issuance of non-voting shares is non-voting shares.

Article 344 of the Enforcement Decree of the Fair Trade Act provides that Article 370 of the Commercial Act shall apply.

The term "non-voting shares" refers to shares without voting rights under Article 370 of the Commercial Act before the amendment.

In this regard, Article 370 of the Commercial Code is ‘Article 370 of the former Commercial Code'.

2) The same shall apply in calculating the equity ownership and equity ratio below.