New Walls Market Co., Ltd. (Law Firm Line, Attorneys Gyeong-kum et al., Counsel for the plaintiff-appellant)

IMD Co., Ltd. (Law Firm Shinsung, Attorney Lee Dong-soo, Counsel for the plaintiff-appellant)

August 9, 2017

Busan District Court Decision 2016Da44946, 2016Gahap4953 decided December 29, 2016

1. All appeals filed by the Plaintiff (Counterclaim Defendant) and the Defendant (Counterclaim Plaintiff) are dismissed.

2. The costs of appeal shall be borne by each party.

1. Purport of claim

A. Main suit: The Defendant (Counterclaim Plaintiff; hereinafter “Defendant”) confirmed that the shares of the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) were not shareholders of 10,000 shares.

B. Preliminary counterclaim: The plaintiff shall pay to the defendant 50 million won with 5% interest per annum from March 20, 2014 to the date of this decision, and 15% interest per annum from the next day to the date of full payment.

2. Purport of appeal

A. The plaintiff

The main part of the judgment of the first instance is amended as stated in the plaintiff's main part of the lawsuit.

B. Defendant

Of the judgment of the first instance, the part against the defendant as to the principal lawsuit shall be revoked, and the plaintiff's claim corresponding to the revocation shall be dismissed

1. Basic facts

In this part, the reasons for this court's entry are as follows: (a) the third party's first and third parties' first to third parties' written judgments are as stated in the "1. Basic Facts" of the court of first instance; and (b) thus, they are cited by the main text of Article 420 of the Civil Procedure Act.

○ Parts of the garment

B. On October 12, 2012, the Plaintiff entered into the following enforcement agency contract (hereinafter “instant enforcement agency contract”) with the Defendant to which all of the operations of the instant project is delegated to the Defendant.

2. Determination on the main claim

A. Summary of the plaintiff's assertion

The Defendant did not have any substantial amount of investment on behalf of the Plaintiff, and 2,000 shares owned by the Defendant under the instant implementation agency contract were paid to the Defendant on the condition that the Defendant completed the instant implementation agency business. Since the Plaintiff terminated the instant implementation agency contract on March 18, 2014, it does not belong to the Defendant no longer than 2,00 shares that are premised on the maintenance of the instant implementation agency contract. Moreover, regarding 8,00 shares out of the Plaintiff’s shares, the Plaintiff was placed in the name of the Defendant in order to allocate to the investors who would purchase the project site, and the Defendant did not actually hold the said shares. Moreover, since the Defendant transferred all 10,00 shares of the Defendant’s shares to Nonparty 1 on November 2012, the Defendant did not have any right to 10,000 shares of the Plaintiff’s shares.

B. The premise of judgment

1) A person who is legally entered in the register of shareholders may exercise shareholders’ rights, such as voting rights, in relation to the company. A company may not deny the exercise of shareholders’ rights by shareholders listed in the register of shareholders, regardless of whether it was known that there was another person who actually acquired or intended to acquire shares, other than those listed in the register of shareholders, or not, and may not recognize the exercise of shareholders’ rights by those who did not complete the entry in the register of shareholders. Cases where shareholders’ rights can be exercised in relation to the company without completing the entry in the register of shareholders are limited to cases where extremely exceptional circumstances are acknowledged, such as where the entry in the register of shareholders or the request for transfer of shareholders was unreasonably delayed or rejected (see, e.g., Supreme Court en banc Decision 2015Da24

2) In the instant case, the Plaintiff was established with 14,00 shares issued. At the time of its establishment, the Plaintiff’s register of shareholders was listed respectively as holding 2,00 shares, 2,00 shares by Nonparty 2, 2,00 shares by Nonparty 2, and 10,00 shares by the Defendant, but the Plaintiff’s register of shareholders by November 12, 2012 was listed as holding 12,00 shares and 2,00 shares by Nonparty 2, respectively.

Meanwhile, comprehensively taking account of the evidence as seen earlier, Gap evidence Nos. 7 through 9 and Eul evidence Nos. 12 through 15 and the testimony of non-party Nos. 12 through 4 of the first instance trial witness, the plaintiff, around March 2013, borrowed KRW 450 million from ○○ Agricultural Cooperative for the business of this case. The plaintiff clearly prepared the plaintiff's shares issued as "non-party Nos. 12,00 shares, non-party No. 22,00 shares" for the convenience of loan examination; however, there was no separate share transfer contract between the defendant and non-party No. 1 at the time; however, it was discovered that the defendant prepared an agreement under the name of the plaintiff No. 3 in the process of receiving investment in the business of this case from the non-party No. 3, the representative of the plaintiff and the defendant No. 100 after the termination of the project of this case; the plaintiff's lawsuit against the non-party No. 10 and the defendant No. 10 after the termination of the project of this case. 10.

In light of the above circumstances, Nonparty 1’s request for change of the shareholder registry by taking advantage of Nonparty 1’s status as the representative director and seeking confirmation against the Defendant in the name of the Plaintiff that the Defendant was not in the shareholder registry of this case on the basis of the entry in the shareholder registry without refusal of the request for change of the Defendant’s shareholder registry should not be deemed to unreasonably delay or refuse the entry in the shareholder registry of this case. Therefore, it is reasonable to deem that there is an exceptional circumstance where it is impossible to determine whether the Plaintiff is a shareholder solely by the formal entry in the

Therefore, in the case of this case, only the formal entry of the shareholder registry dated November 12, 2012 in the form alone cannot impose the status of shareholder of 10,000 shares of this case, and the relationship of actual ownership of shares should be examined.

(c) Fact of recognition;

1) In the original land of this case, △△△△△△△△, which was a customary market managed by △△△△△△△△ Council, was owned by Nonparty 6, Nonparty 7 (number 1 omitted), Nonparty 2 (number 2 omitted), Nonparty 8 (number 3 omitted), Nonparty 4 (number 4 omitted), Nonparty 9 (number 5 omitted), and Nonparty 10 (number 6 omitted) in around 201.

2) Since 2011, the Defendant began to acquire the market merchants and the land owners of the instant case after seeking reimbursement for the instant business.

3) The defendant suggested that the land owner of this case will build a new commercial building at the cost of the defendant, but will allocate 14 stores to be newly constructed when the land was invested in the business.

4) The Defendant’s proposal consented by the △△△△△△△△△△ Council (representative Nonparty 1) and Nonparty 2, but the remaining four parcels of land owners proposed that they refuse to participate in the project and purchase their own land.

5) Accordingly, around August 2012, the Defendant, the △△△△△△ Council, and Nonparty 2 established a stock company and carried out the instant project. ② The △△△△△△△ Council, and Nonparty 2 invested land in kind; the Defendant is not only liable for the business expenses such as realizing the investors in the remaining four parcels, but also responsible for implementing construction permission, etc.; ③ In the event that one parcel of land is invested in kind or invested in kind, 14 stores shall be compensated for, and 14 stores shall be paid to the Defendant, and ④ the newly established stock company shall issue 14,00 shares and allocate 2,00 shares to each parcel of land investors, investors, and the Defendant, and the Defendant agreed to allocate 10,000 shares to four parcels of land to the Defendant (hereinafter “instant agreement”).

6) Accordingly, Defendant, Nonparty 1, and Nonparty 2, the representative of the △△△△△△ Council, participated in the articles of incorporation as promoters, prepared the articles of incorporation, and issued 14,00 new shares. Of them, Nonparty 1, 2,000 shares, Nonparty 2, and the Defendant acquired 10,00 shares of this case, and the Plaintiff was established on August 17, 2012. As seen earlier, at the time of incorporation, the shareholders were Nonparty 1 (2,00 shares), Nonparty 2 (2,00 shares), and Defendant (10,000 shares).

7) After October 12, 2012, the Defendant entered into the instant implementation agency contract with the Plaintiff on behalf of October 12, 2012, and performed various duties necessary for the progress of the instant project on behalf of the Plaintiff, such as holding a project explanation meeting, building design, borrowing of funds from financial institutions, permission for construction, designating a contractor, purchasing land, conducting surveys, etc.

[Reasons for Recognition] The aforementioned evidence, Gap evidence Nos. 10, 11, Eul evidence Nos. 9, 10, 12, 13, 14, 16, and 19, and the purport of the whole testimony and arguments of non-party No. 4 of the first instance court

D. Determination

1) First, we examine the Defendant’s 2,00 share shares (hereinafter “2,00 share shares”) that the Defendant acquired at the time of the establishment of the Plaintiff determined to allocate to the Defendant under the instant agreement among the 10,000 share shares that the Defendant acquired.

A) The Plaintiff alleged to the effect that 2,00 shares were acquired by the Defendant under the instant enforcement agency contract with the Plaintiff, but in light of the following circumstances known by the facts as seen earlier, the Defendant cannot be deemed to have acquired 2,00 shares from the Plaintiff pursuant to the instant enforcement agency contract with 2,00 shares.

① In the instant agreement between the Defendant, △△△△△ Council, and Nonparty 2, the Defendant agreed to assign 2,000 shares of the stock company to be established as compensation for seeking investors in the instant project implementation and acting as an agent for the implementation of the project. According to the agreement, the Defendant, △△△△△ Council, and Nonparty 2 constituted a promoters association. The Defendant, as a member of the promoters, subscribed 2,00 shares as new shares.

② On the other hand, the instant enforcement agency contract between the Plaintiff and the Defendant was concluded on October 12, 2012 after the Plaintiff was established, and it was made up of follow-up measures for the implementation of the agreement between the Defendant, △△△△△ Council, and Nonparty 2).

③ In principle, the Commercial Act prohibits the acquisition of treasury shares of a stock company, and exceptionally allows the Plaintiff to acquire treasury shares, and there is no evidence to deem that the Plaintiff had gone through the procedure for acquiring treasury shares. Therefore, it is difficult to expect the Plaintiff to acquire treasury shares for the instant execution contract and then distribute them to

B) As such, the Defendant acquired 2,00 shares of this case as promoters according to the instant agreement with the △△△△△△△△ Council and Nonparty 2. Thus, even if the instant enforcement agency contract was terminated thereafter with the Plaintiff, unless there is an express agreement that the Defendant’s shares be retired therefrom, it shall be deemed that the Defendant’s shareholder status for 2,00 shares of this case shall not be naturally lost or formally lost.

Therefore, it is difficult to accept the Plaintiff’s assertion that the Defendant lost its shareholder status as to 2,00 shares of the instant case since the instant enforcement agency contract was terminated, even without examining whether the instant enforcement agency contract was terminated or not.

C) As to this, the Plaintiff asserted that the Defendant’s acceptance of shares is invalid since the Defendant merely paid the best share price for 2,000 shares of this case, but did not actually pay it.

In the instant case, comprehensively taking account of the aforementioned evidence and the purport of the entire argument in the statement No. 17, the Defendant established the Plaintiff at the time of the establishment of the Plaintiff, by paying KRW 140,000,000,000, which is the full amount of the acquisition price of the Plaintiff’s issued stocks, to the bank account in the name of Nonparty 1 on August 17, 2012, and obtaining a share price payment certificate issued by Nonparty 1, and then withdrawing all the said payment.

However, the validity of the payment of shares cannot be denied even in the case of the so-called lump-called lump-sum payment of shares by withdrawing the shares immediately after taking the form of payment of shares with temporary loans and completing the company incorporation procedure (Supreme Court Decisions 97Da20649 delivered on December 23, 198, Supreme Court Order 93Ma1916 delivered on March 28, 1994). Thus, it is difficult to view that the defendant's acceptance of shares is invalid merely because the defendant took the form of the lump-sum payment as above.

D) In other words, the Plaintiff asserts that since the Defendant transferred 10,000 shares of this case to Nonparty 1 on November 12, 2012, the Defendant did not have the shareholder status even in the part on 2,00 shares of this case.

However, as seen earlier, around March 2013, the Plaintiff entered the Plaintiff’s shares issued on November 12, 2012 as “Nonindicted 12,000 shares, Nonparty 22,00 shares,” for the convenience of the loan examination. However, the Plaintiff did not enter into a separate share acquisition contract between the Defendant and Nonparty 1 at the time. As such, the Plaintiff’s shareholder registry as of November 12, 2012 was merely written differently from the fact for the purpose of submitting it to the financial institution, and it is insufficient to recognize that there was an agreement between the actual Defendant and Nonparty 1 solely based on the evidence submitted by the Plaintiff to the financial institution to transfer the shares in a genuine manner, and there was no degree of share acquisition accordingly.

E) Ultimately, the Plaintiff’s assertion disputing the status of shareholders of 2,000 shares of this case is difficult to accept.

2) Next, we examine the remainder of 8,00 shares (hereinafter “instant shares”) out of 10,00 shares acquired by the Defendant at the time of the establishment of the Plaintiff, excluding the share 2,00 shares (hereinafter “instant shares”).

A) In the instant agreement between the Defendant, △△△△△ Council, and Nonparty 2, the Co., Ltd. to be incorporated shall issue 14,00 shares, but the company shall allocate 2,00 shares to the investors who invest in the remaining four parcels of land who refused to participate in the business and agreed to allocate them preferentially to the Defendant who colors investors. Accordingly, the fact that the Defendant acquired the instant 8,00 shares as promoters is as follows. In full view of the overall purport of the arguments as seen earlier, it is recognized that, after the establishment of the Plaintiff, the Plaintiff was invested by Nonparty 3, etc., or obtained loans from financial institutions, and completed the registration of ownership transfer under the name of the Plaintiff, the Plaintiff entered into a new construction contract with Ak General Construction Co., Ltd. and the newly constructed commercial building construction project.

According to the above facts, 8,00 shares of this case were formally kept in the name of the defendant before the defendant transferred to a person who made an investment or contribution in the business site of this case for the purpose of facilitating the execution of the business of this case. It is difficult to view that the defendant is in the actual shareholder status as to 8,00 shares of this case. Furthermore, since the plaintiff purchased the remaining four parcels of land by means of receiving an investment or a loan from investors, it is necessary to allocate 8,000 shares of this case to investors.

Therefore, it is difficult to view that the Defendant is a genuine shareholder with respect to 8,00 shares of this case.

B) As to this, as long as the Defendant was registered as a 10,000 shareholder in the shareholder registry and the statement of changes in stocks, etc. on March 31, 2014 at the time of the Plaintiff’s establishment, the Defendant asserts that the Plaintiff cannot contest the status of the Defendant against the Plaintiff’s shareholder registry.

At the time of the Plaintiff’s establishment, Nonparty 1’s shareholder registry was listed as holding 2,00 shares, Nonparty 2’s 2,000 shares, and the Defendant was listed as holding 10,00 shares, but thereafter, Nonparty 1 was listed as holding 12,00 shares and Nonparty 2’s 2,00 shares in the Plaintiff’s shareholder registry on November 12, 2012. The instant case where there is a dispute between Nonparty 1 and the Defendant’s representative over the ownership of 10,00 shares, falls under the exceptional cases prescribed by the Supreme Court en banc Decision 2015Da248342 Decided the Plaintiff’s 10 shares, and thus, the relationship of actual ownership of shares should be examined as seen earlier.

As can be seen, in this case where the Plaintiff’s shareholder registry at the time of establishment and the shareholder registry at November 12, 2012 thereafter exist, as long as the validity of the formal entry in the shareholder registry as of November 12, 2012 is recognized and the actual ownership relationship is examined, it cannot be determined solely on the validity of the formal entry in the previous shareholder registry, and thus, the Defendant’s allegation in this part is difficult to accept.

In addition, the facts stated by the Defendant as the 10,000 shareholders in the shareholder status of the Plaintiff’s statement on the change of stocks, etc. on March 31, 2014 do not conflict between the parties. On the other hand, according to the evidence No. 9, the above statement on the change of stocks, etc. was made by the Defendant voluntarily transmitted to the National Tax Service through the tax accounting office, so it is difficult to view the above facts alone as the true shareholder of the 8,000 shareholders.

E. Sub-decision

Therefore, the defendant does not have a shareholder's right as to 8,00 shares out of 10,000 shares of this case, and as long as the defendant contests the existence of the above shareholder's right, the plaintiff has a benefit to seek confirmation of non-existence of the shareholder's right.

3. Judgment on the conjunctive counterclaim

The judgment of the court of first instance dismissed the Defendant’s preliminary counterclaim. At the court of first instance, the Defendant stated that the Plaintiff’s preliminary counterclaim is not subject to the judgment of the court of first instance, in case where it is confirmed that at least 2,00 shares of the shares for which the Plaintiff seeks as the principal counterclaim are shareholders of at least 10,000 shares, the Defendant did not appeal the part of the dismissal of the preliminary counterclaim. As seen earlier, the Plaintiff’s claim for the principal counterclaim is with merit only for 8,00 shares of this case, and thus, the part of the preliminary counterclaim

4. Conclusion

Therefore, the plaintiff's claim of the principal lawsuit shall be accepted within the scope of the above recognition, and the remainder of the principal lawsuit shall be dismissed as it is without merit. Since the judgment of the court of first instance is justified as the conclusion is consistent with this, all appeals by the plaintiff and the defendant are dismissed. It is so decided as per Disposition.

Judges Soh-ho (Presiding Judge) Constitution of Kim Jong-ho

1) At the date of the first pleading of the trial, the Defendant made it clear that the preliminary counterclaim is a counterclaim seeking a trial on the condition that the entire shares will be accepted in the claim of the principal lawsuit, i.e., where the whole shares are not recognized as the defendant's rights, if it is confirmed that the plaintiff is at least 2,000 shares for which the plaintiff seeks as a shareholder of the 10,000 shares for which the principal lawsuit is sought.

2) Article 1 of the enforcement agency contract of this case provides that "the defendant shall simultaneously establish the plaintiff and simultaneously register the plaintiff 1/7 shares (2,00 shares) of the plaintiff, and the plaintiff shall delegate the implementation affairs to the defendant, and the plaintiff shall entrust the defendant with all duties (the review of feasibility of administrative support, such as authorization and permission, the selection of designer, work executor, etc., and the formulation and sale of management and disposal plans), and the defendant shall be responsible for all expenses incurred in the implementation, and the defendant shall perform the implementation affairs in accordance with the following conditions." This appears to be written to the purport that the enforcement agency contract was concluded by agreement between the defendant and the △△△△△△△△△△△△ and the non-party 2 and the defendant's rights and duties should be clarified. In addition, the meaning of Article 1 of the enforcement agency contract of this case cannot be properly understood.

(3) As long as new shares are subscribed under a new shares subscription contract, barring an explicit agreement on the retirement of new shares, see Supreme Court Decision 201Da92923, Jan. 27, 2012, 201;

4) The contents of the instant agreement are as follows: (a) the △△△△△△ Council and Nonparty 2 make an investment in kind in land; (b) the Defendant establishes the Plaintiff, a stock company, and implements the instant project by investing labor services, such as raising business costs other than land, and the distribution ratio of profits therefrom is equal to the number of shares (2,000 shares). As such, a partnership agreement with both parties to which both parties jointly invest land, etc. and jointly establish and operate a stock company, and jointly manage the company according to the share ratio, and the sharing of profits and expenses incurred in the joint management of the company is premised on the joint business between the parties in their name and external and internal relations in accordance with the legal principles of a stock company; and (c) the liquidation thereof shall also be conducted in accordance with the provisions of the Commercial Act on the liquidation of a stock company. Therefore, as long as the company is established pursuant to such a partnership agreement and its substance has been equipped, liquidation procedures should be conducted in accordance with the Commercial Act on the liquidation of a stock company (see, e.g., Supreme Court Decision 2003Do77373).