Plaintiff 1 and one other (Law Firm Barun, Attorneys Park Jae-min et al., Counsel for the plaintiff-appellant)

New Industry Co., Ltd. (Law Firm Seoul and one other, Counsel for the plaintiff-appellant)

July 7, 2016

Suwon District Court Decision 2015Kahap6264 Decided November 20, 2015

1. The part against the defendant in the judgment of the first instance is revoked.

2. The plaintiffs' primary and primary claims against the defendant are dismissed, respectively.

3. Ascertainment that at a special general meeting of shareholders held by the Defendant on December 1, 2014, a resolution of the appointment of Plaintiff 1 as an internal director, and Plaintiff 2 as an auditor is valid.

4. 10% of the total litigation cost incurred between the plaintiffs and the defendant shall be borne by the plaintiffs, and 90% by the defendant respectively.

1. Purport of claim

The primary purpose of the claim is to confirm that the plaintiff 1 is the defendant's inside director and the plaintiff 2 is the defendant's audit status.

The first preliminary claim: The defendant will make the plaintiff 1 to conclude the in-house director appointment contract, and make the plaintiff 2 to make each declaration of intention to conclude the audit appointment contract.

The claim of the second preliminary claim is as stated in paragraph (3) of this Article.

2. Purport of appeal

Of the judgment of the first instance, the part against the defendant is revoked. The plaintiffs' claims against the defendant are dismissed in entirety.

1. Basic facts

(a) Status of parties;

1) The Defendant is a corporation that mainly runs the business of manufacturing and selling electrical appliances, related organizations, etc. and is listed on the Korea Stock Exchange.

2) Co-defendant 2 of the first instance trial of △△ was appointed as the Defendant’s internal director on March 19, 2010, and thereafter appointed as the Defendant’s representative director, and Co-defendant 3 of the first instance trial of △△△ was appointed as the Defendant’s internal director on March 27, 2009 (On the other hand, registered on the Defendant’s joint representative director on December 2, 2014, and registered on the Defendant’s corporate register) and Co-defendant 4 of the first instance trial of △△△△△ was appointed as the Defendant’s auditor on March 28, 2007 (hereinafter “Co-defendant of the first instance trial”). The name of Co-defendant 2 of the first instance court is omitted, and when the above three persons are called together, “Co-Defendant 2 of the first instance trial and other two persons”).

B. The defendant's articles of incorporation regarding shareholders' general meeting

The provisions of the defendant's articles of incorporation concerning the general meeting of shareholders relating to this case are as follows:

Article 15 (Convocation of General Meeting of Shareholders) (1) (1) of the Table included in the main text of this Act shall be convened within three months after the end of each period for the settlement of accounts, and extraordinary general meeting of shareholders shall be convened as prescribed by the resolution of the board of directors or other Acts and subordinate statutes as necessary. The voting rights of shareholders shall be held for each share of stocks, except as otherwise provided for in Acts and subordinate statutes and the articles of incorporation.

(c) Decision on permission to convene a special general meeting;

On September 16, 2014, Nonparty 3, Nonparty 4, and Nonparty 2 (hereinafter collectively referred to as the “Plaintiffs”), who are the Defendant’s shareholders, filed an application for a special general meeting of shareholders with the Suwon District Court 2014 non-hap105, which is the Suwon District Court. On October 17, 2014, Nonparty 3 and Nonparty 2 (hereinafter referred to as “the Defendant’s shareholders”), decided to permit the Defendant’s temporary general meeting of shareholders, which is the Defendant’s purpose of the meeting, to convene a meeting (hereinafter referred to as “instant decision to permit the convocation of the meeting”).

D. Public notice of convening the general meeting of this case and provisional disposition prohibiting access by the general meeting of this case

1) The Plaintiffs, according to the instant permission decision, announced the convocation of a general meeting of shareholders on November 12, 2014.

2) On November 18, 2014, the Co-Defendant 2 and the Defendant’s partial shareholders, including Co-Defendant 3 of the first instance trial (hereinafter “Co-Defendant 2 of the first instance trial”) (hereinafter “Co-Defendant 2 of the first instance trial”), against the Plaintiffs, the Suwon District Court No. 2014Kahap10147, Nov. 18, 2014 prohibited the Plaintiffs from interfering with the Plaintiffs’ attending the shareholders’ meeting and confirming the authenticity of power of attorney, etc., and filed an application for provisional disposition to the effect that they would appoint a person who would be responsible for holding the general meeting and appointing the Speaker pro tempore. On November 28, 2014, the said court made a request for provisional disposition to the effect that “the respondent and the third party would be interfering with the entry of the applicants (Co-Defendant 2 of the first instance trial) and the applicants’ representatives as their proxy, and that they would not interfere with the Defendant’s temporary shareholders’ meeting or their representative’ representative’ representative’s exercise of voting rights.”

E. Holding of the general meeting of this case

1) On December 1, 2014, around 09:00, the Defendant’s temporary general meeting of shareholders (hereinafter “instant general meeting of shareholders”) was held at the ○○ ○ ○ 1st floor wedding hall underground (hereinafter “general meeting”).

2) From 07:00 on the same day to maintain the order within the general meeting place, the Plaintiffs asserted that from 07:00 on the same day, the number tickets were issued to the shareholders subject to attendance at the entrance of the general meeting place, and the number tickets and power of attorney were obtained, and then one person confirmed whether or not the shareholders were the shareholders, and that part of the shareholders including the co-defendant 2 and the two (2) of the first instance trial (hereinafter collectively referred to as “the first instance trial co-defendant 2 and the two”) were admitted in one order. From 08:13 on the same day, the Plaintiffs’ above measures interfere with the entry of the shareholders of the first instance trial, the Co-defendant 2 and the two (2) and were deprived of the Defendant’s representative director’s authority to convene the general meeting of the first instance trial, the Co-defendant 2 of the first instance trial refused to attend the meeting of the first instance court’s second instance court’s 7th day before the date they were deprived of the Plaintiffs’ right to attend the general meeting of the second instance.

3) Meanwhile, around 09:10 on December 1, 2013, Nonparty 5, an agent of the Plaintiffs, who is the person entitled to convene the instant general meeting of shareholders, opened the instant general meeting of shareholders, and immediately referred to the case of appointing the Speaker pro tempore. Nonparty 6 was appointed as the Speaker pro tempore with the consent of the majority of the shareholders present. Accordingly, Nonparty 6 notified that the instant general meeting of shareholders was duly constituted, as the Speaker pro tempore, and declared the opening of the general meeting of shareholders, and followed the intent as a matter of the proposed general meeting of shareholders permitted by the court.

4) At the time of November 5, 2014, the date of the instant general meeting of shareholders, the Defendant’s total number of outstanding shares was 54,256,324 shares. On December 1, 2014, the instant general meeting of shareholders held on December 1, 2014, the shareholders of 25,771,840 shares, equivalent to 47.5% of the above outstanding shares, were present at the meeting. The shareholders present at the meeting of shareholders, who were 25,730,348 shares of 25,730,348 shares, among the voting shares of the shareholders present at the meeting, resolved to agree with the agenda that they dismiss the Defendant’s co-defendant 2,940,416 shares from the Defendant’s auditor and appoint the Plaintiff as the latter auditor. The resolution of the instant general meeting of shareholders meets the quorum under the Articles of incorporation or the Commercial Act.

F. Demanding the conclusion of appointment contracts according to the resolution of the general shareholders' meeting of this case

On April 1, 2015, the Plaintiffs sent to the Defendant a written statement demanding the Plaintiffs to conclude a contract for appointment of directors or auditors in accordance with the resolution of the instant general meeting of shareholders.

(g) Process of provisional disposition suspending the execution of duties;

1) Meanwhile, on December 10, 2014, Nonparty 3, the Defendant’s shareholder, filed an application for provisional disposition against Defendant 2 and two other co-defendant 2 in Suwon District Court 2014Kahap10164, the said court rendered a decision on February 4, 2015 that “Co-defendant 2 in the first instance court, the Defendant’s representative director and directors, the co-defendant 3 in the first instance court, the Defendant’s representative director’s duties, and the co-defendant 4 in the first instance court, shall not perform the Defendant’s audit’s duties (hereinafter “instant provisional disposition order”), and that Nonparty 7 in the first instance court as co-defendant 2’s representative director and acting director, and that Nonparty 8 as co-defendant 4 in the first instance court’s representative director shall be appointed as co-defendant 2, 2015, and each of the co-defendant 3 in the first instance court and the second instance court’s decision on February 15, 2016.”

2) As to the instant provisional disposition order, the co-defendant 2 and two other co-defendant 2 of the first instance court filed an application for provisional disposition with Suwon District Court 2015Kahap10022, but the said court approved the instant provisional disposition order on March 10, 2015. Accordingly, the first instance court’s co-defendant 2 and two other co-defendant 2 filed an appeal with Seoul High Court 2015Ra20218, but the said court dismissed the appeal on September 21, 2015. Accordingly, the first instance court re-appealed by the Supreme Court 2015Ma4370, but the Supreme Court dismissed the reappeal on January 18, 2016.

3) However, on March 24, 2016, Co-Defendant 2 of the first instance trial expired the Defendant’s representative director and director. Accordingly, on March 24, 2016, the Defendant held a regular general meeting of shareholders on March 24, 2016 and appointed Nonparty 9 as a new director, and held a board of directors on April 20, 2016 and appointed Nonparty 9 as the Defendant’s representative director by a resolution of the board of directors. Co-Defendant 3 of the first instance trial was registered as the Defendant’s representative director’s resignation on April 20, 2016.

4) Accordingly, Co-Defendant 2 of the first instance court and Co-Defendant 3 of the first instance court filed an application for revocation of their respective parts of each of the instant decisions with the above court No. 2016Kahap1013, May 19, 2016, and the above court rendered a decision to revoke each of the instant decisions with respect to Co-Defendant 2 of the first instance court and Co-Defendant 3 of the first instance court.

[Reasons for Recognition] The facts without dispute, Gap evidence Nos. 1, 2, 4, 5, 7, 8, 18, Eul evidence Nos. 1, 3 through 6, 7, and 8, and the purport of the whole pleadings

2. Judgment as to the main claim

A. The parties' assertion

1) The plaintiffs

The general meeting of shareholders of this case duly decided to appoint Plaintiff 1 as the Defendant’s internal director, and Plaintiff 2 as the Defendant’s auditor, and thereby, the Plaintiffs acquired the Defendant’s internal director and auditor’s status as the Defendant’s internal director. As such, the Plaintiffs sought confirmation against the Defendant.

2) Defendant

At the time of the general meeting of shareholders of this case, some of the shareholders including Co-Defendant 2 of the first instance court at the time of the general meeting of shareholders were unfairly restricted, which violates the principle of shareholder equality and the decision of provisional disposition prohibiting access to the general meeting of shareholders. In addition, even a temporary general meeting of shareholders convened by minority shareholders, in principle, a person prescribed by the articles of incorporation of the company should be the Speaker prior to the appointment of Speaker pro tempore. Thus, prior to the appointment of Speaker pro tempore, Non-Party 2, a representative director of the defendant, should be the Speaker pursuant to the provisions of the defendant's articles of incorporation. However, Non-Party 5, a representative of the plaintiffs, exercised his authority after the opening of the general meeting of shareholders of this case.

Even if the resolution of appointment of internal directors and auditors made at the general meeting of shareholders of this case is valid, as long as the plaintiffs did not conclude an appointment contract with the defendant's representative director or acting director, the above resolution alone cannot be deemed to have acquired the status of the defendant's internal director and auditor.

B. Whether the resolution of the general meeting of shareholders of this case is valid

First, we examine whether the resolution of the general meeting of shareholders of this case is valid, in which the plaintiff 1 and the plaintiff 2 are appointed respectively as the defendant's auditor.

1) As to the chairman of the general meeting of shareholders of this case

A) Even in a general meeting of shareholders convened by minority shareholders, the court appoints the Speaker at the request of interested parties or ex officio pursuant to Article 366(2)2 of the Commercial Act, or the Speaker at the general meeting of shareholders pursuant to the court’s decision to permit the convocation of the general meeting of shareholders (see Supreme Court Order 2000Ma3536, Mar. 29, 2001), barring special circumstances, the Speaker shall be entrusted to the person designated by the articles of incorporation of the company. However, as seen above, Article 16(1) of the Defendant’s articles of incorporation provides that “the representative director shall be the Speaker at the general meeting of shareholders.” Since the court did not separately appoint the Speaker at the general meeting of shareholders, in the case of the general meeting of shareholders of this case convened and held by the Plaintiffs, the representative director at the first instance court, who was the Defendant’s representative director at the general meeting of shareholders, at the general meeting of shareholders, at the general meeting of shareholders, with the authority of the Speaker at the general meeting of shareholders of this case, until the second instance, the president at the defendant’s general meeting of this case was held.

However, in full view of the following circumstances acknowledged earlier and the purport of the entire arguments, and the circumstances leading up to the opening of the general meeting of shareholders of this case and the joint defendant 2 of the first instance court and the joint defendant 2 of the second instance court, it is reasonable to deem that the joint defendant 2 of the first instance court voluntarily renounced the president’s authority pursuant to the provisions of the defendant’s articles of incorporation by refusing to attend the general meeting of shareholders of this case without any justifiable reason. In such a situation, it is difficult to view that there is any defect in the resolution of the general meeting of shareholders of this case on the ground that Nonparty 5

① As seen earlier, the Suwon District Court only ordered the prohibition of partial interference with the exercise of voting rights against the application for provisional disposition prohibiting interference with access by the president of the general meeting of shareholders brought by Codefendant 2, etc. of the first instance court, and dismissed the remaining application for the purport that the appointment of a person to proceed with the opening of the general meeting of shareholders and appointment of

② Accordingly, for the orderly operation of the general meeting of shareholders, the Plaintiffs, the person holding the authority to convene the general meeting of this case, issued a number list when verifying the status of the shareholders who want to enter the general meeting of this case in the presence of the police officers, and did not prohibit the entry of the shareholders of the first instance co-defendant 2 and 2 of the first instance trial. The Plaintiffs’ co-defendant 2 and 2 of the first instance trial, who were the joint Defendants 2 and 2 of the second instance trial, were allowed to avoid the change of the general meeting at the entrance of the general meeting of this case. They refused to attend the general meeting of this case, and the joint Defendants 2 of the first instance trial, who were the joint Defendants 2 and 2 of the second instance court, did not have the authority to convene the general meeting of this case on the same agenda as the agenda for which the general meeting of this case has been permitted, and decided to reject or discard all the agenda items of the general meeting of this case by convening the general meeting of this case without the consent of the second instance court.

B) Even if Nonparty 5, an agent of the Plaintiffs, exercised the authority of the Speaker temporarily for the preliminary procedure for the appointment of the Speaker pro tempore, this does not constitute grounds for non-existence of a resolution, but constitutes grounds for revocation of a resolution (see Supreme Court Decision 76Da2386, Sept. 28, 197). The Defendant’s shareholder, director, or auditor, who is the Defendant’s shareholder, director, or auditor, filed a lawsuit for revocation of the resolution of the general meeting of shareholders within two months as prescribed by Article 376(1)3 of the Commercial Act, which is the date of the resolution of the general meeting of shareholders, is not recognized, so the said resolution is valid.

2) As to whether the principle of equality of shareholders and the decision of provisional disposition prohibiting interference with entry by the general meeting of shareholders has been violated

In light of the aforementioned circumstances and the developments leading up to the holding of the shareholders’ general meeting of this case and the joint defendants 2 and 2 of the first instance court, the evidence submitted by the Defendant alone is insufficient to recognize that the instant general shareholders’ meeting of this case is nonexistent because the procedure, etc. of the instant general shareholders’ meeting violates the principle of equality of shareholders and the decision of provisional disposition prohibiting access by the shareholders’ general shareholders’ general meeting of this case.

C. Whether the Plaintiffs acquired the Defendant’s inside director and auditor status immediately by a resolution of the general meeting of shareholders of this case

1) Relevant legal principles

Since a resolution of a general meeting of shareholders on the appointment of directors and auditors is merely an internal decision of the company to the effect that the persons to be appointed shall be appointed as directors or auditors, a general meeting of shareholders shall not immediately acquire the status of directors or auditors on the ground that there was a resolution of appointment of directors or auditors at a general meeting of shareholders, but shall be able to perform the duties as directors or auditors by taking office by the representative agency of the company upon receiving an offer of an appointment contract and accepting the appointment contract in accordance with the appointment resolution at a general meeting of shareholders. Thus, only the resolution of appointment of directors or auditors was made at a general meeting of shareholders, and those who did not conclude an appointment contract with the company shall not be deemed to have acquired the status as directors or auditors (see Supreme Court Order 2005Ma541, Nov. 8, 2005; Supreme Court Order 94Da31440, Feb. 28, 199

2) Determination

A) In light of the above legal principles, there is no dispute between the parties as to the facts that the defendant's representative director or his/her agent did not make an offer to appoint an internal director or auditor to the plaintiffs. Accordingly, the general meeting of shareholders of this case only decided to appoint the plaintiffs as an internal director or auditor, but it cannot be deemed that the appointment contract has been concluded between the plaintiffs and the defendant. Thus, the plaintiffs cannot be deemed to have acquired the status as the defendant's internal director

B) Meanwhile, contrary to the aforementioned legal principles, the Plaintiffs’ appointment of internal directors or auditors at a general meeting of shareholders constitutes a single act subject to the consent of the appointed party. Even if it is necessary to appoint internal directors or auditors, the resolution of the general meeting of shareholders of this case, which appoints the Plaintiffs as the Defendant’s internal directors or auditors, constitutes an offer of appointment contracts, and thus, the Plaintiffs asserted that they acquired the status of the Defendant’s internal directors or auditors, but it is difficult

① As the legal relations between an internal director and an auditor are delegation, it is more natural to view that a contract for appointment with the nature of delegation contract under the Civil Act should be concluded through an offer and acceptance is more natural in light of the general principles of expression of intent and contract. Furthermore, it is reasonable to deem that a resolution of a general meeting of shareholders is merely an internal decision of the company. Furthermore, it is reasonable to deem that a legal act, such as an offer of a representative director according to a resolution of the general meeting of shareholders for appointment of an internal director or auditor, is necessary. On the contrary, just because a resolution of the general meeting of shareholders, which is an internal decision of the company, has been adopted, it is difficult to deem that a contractual relationship between the company and a third party is established, and it is considerably natural to view that a company, without

② In a case where it is necessary to conclude an appointment contract with an internal director and an auditor, and it is deemed that the representative director of the company should accept an application for appointment contract with the appointed officer, there is room for de facto nullifying the resolution of the general meeting of shareholders by unfairly refusing to conclude the appointment contract with the appointed officer. However, this is likely to hold the representative director responsible for damages under Article 401 of the Commercial Act or illegal acts under Article 750 of the Civil Act; if the representative director is selected by demanding the suspension of the performance of duties of the representative director at the court of △△△, he shall have the representative director take the procedure for appointment; or if the representative director is selected by demanding the change of the acting director at the court (in a case where the acting director refuses to conclude the appointment contract unfairly, he shall also be required to change the acting director by requesting the change of the acting director at the court). Furthermore, it is difficult for the △△△△ to have the new representative director conclude the appointment contract with the new representative director, or the representative director or the representative director, who has difficulty in signing the contract with the general representative director at the court.

D. Sub-committee

Therefore, the plaintiffs' above assertion is without merit.

3. Determination as to the first preliminary claim

A. The plaintiffs' assertion

Since the plaintiffs were appointed as directors or auditors at the general meeting of shareholders of this case, the defendant is obligated to make the plaintiffs 1 to conclude the in-house director appointment contract and the plaintiff 2 to express their intention to conclude the audit appointment contract.

B. Determination

The above-mentioned facts and the evidence submitted by the plaintiffs alone are insufficient to recognize that the defendant bears the duty to express its intent to conclude an in-house director or auditor appointment contract with the plaintiffs according to the resolution of the general meeting of shareholders of this case, which is merely an internal decision of the defendant, and there is no other evidence to acknowledge this. Therefore,

4. Determination as to the second preliminary claim

As seen earlier, the resolution that the Defendant appointed Plaintiff 1 as an internal director and Plaintiff 2 as an auditor at the general meeting of shareholders of this case is valid. In addition, if the validity of the above resolution is confirmed between the Plaintiffs and the Defendant, the newly appointed representative director shall not refuse the conclusion of an internal director or audit contract with the Plaintiffs, barring any special circumstances. As long as the Defendant contests the validity of the above resolution, the Plaintiffs have a benefit to seek confirmation.

Therefore, the second preliminary claim by the plaintiffs is reasonable.

5. Conclusion

Therefore, the plaintiffs' primary claims and the primary claims against the defendant are all dismissed as they are without merit, and the second preliminary claims against the plaintiffs against the defendant should be accepted as reasonable. However, since the judgment of the court of first instance is unfair with different conclusions, the part against the defendant in the judgment of first instance is partially accepted, and the part against the defendant in the judgment of first instance is revoked, the primary claims against the plaintiffs and the first preliminary claims against the defendant are dismissed, and the plaintiffs' second preliminary claims against the defendant are accepted.

Judges Cho Jong-jin (Presiding Judge)

1) The Defendant’s board of directors decided to appoint co-defendant 3 as a co-representative on December 2, 2014. However, in the Suwon District Court 2014Kahap10164, which was brought against Co-Defendant 2, Co-Defendant 3, and Co-Defendant 4, the Defendant’s shareholder, the Suwon District Court 2014Kahap10164, which was brought against the Co-Defendant 2, Co-Defendant 3, and Co-Defendant 4, and the Suwon District Court 2015Kahap1022, and the appeal case at the Seoul High Court 2015Ra20218, each of the above courts determined that the above resolution was null

(2) Article 366 (Demand for Convocation by Minority Shareholders) (2) If a request under paragraph (1) is made without delay and fails to take the procedure for convening the general meeting, the shareholder who has demanded it may convene the general meeting with the permission of the court. In this case, the Speaker of the general meeting of shareholders may appoint the court upon the request of interested persons or ex officio

(3) Article 376 (Lawsuit for Revocation of Resolution) (1) If a procedure for convening a general meeting or method of resolution is in violation of Acts and subordinate statutes or the articles of incorporation or is remarkably unfair, or if contents of such resolution are in violation of the articles of incorporation, shareholders, directors or auditors may bring an action for revocation of resolution within two months