[1] Whether the provisions of the Commercial Act concerning the internal relations of an unlimited partnership are voluntary provisions (affirmative in principle), and where the articles of incorporation of an unlimited partnership provide for internal relations differently from the Commercial Act, the standard for determining whether the relevant articles of incorporation excludes the application of the relevant provisions

[2] Method of losing the power of a partner or managing member of an unlimited partnership company under the Commercial Act / Whether a partner of an unlimited partnership company may lose the power of managing another partner or managing member by any of the methods under Article 205(1) of the Commercial Act and Article 708 of the Civil Act applied mutatis mutandis by Article 195 of the Commercial Act (affirmative in principle)

[3] The matters to be considered when interpreting the articles of incorporation or relevant provisions regarding the loss of executive authority by an employee or executive partner of an unlimited partnership company

[4] In a case where the articles of incorporation of the partnership company Gap provided that "if a managing member is clearly unfit for managing affairs or he/she has committed a serious violation of his/her duties, he/she may lose his/her executive authority by a resolution of all the members, the case holding that the order of the court below that the articles of incorporation is a provision excluding the application of Article 205 (1) of

[1] Article 195 of the Commercial Act / [2] Articles 195 and 205 (1) of the Commercial Act, Article 708 of the Civil Act / [3] Articles 195, 205 (1), and 212 of the Commercial Act, Article 708 of the Civil Act / [4] Articles 195, 205 (1), and 212 of the Commercial Act, Article 708 of the Civil Act

Creditors

The debtor

Busan High Court Order 2014Kahap7 dated July 10, 2014

The order of the court below is reversed, and the case is remanded to Busan High Court.

The grounds of reappeal are examined.

1. Article 195 of the Commercial Act provides that “The provisions of the Civil Act concerning an association shall apply mutatis mutandis to an internal relationship of a partnership company, unless otherwise provided in the articles of association or this Act, with respect to an internal relationship of the partnership company.” In light of the above provisions, the provisions of the Commercial Act concerning an internal relationship of the partnership company, in principle, is a discretionary provision and the articles of association are allowed to be provided differently from the provisions of the Commercial Act. In cases where the articles of association provide otherwise with respect to an internal relationship of the partnership company, whether the provisions of the relevant articles of association exclude the application of the relevant provisions of the Commercial Act shall be determined by comprehensively taking into account all the circumstances,

2. Article 205(1) of the Commercial Act provides that, with respect to the internal relationship of an unlimited partnership company, “if a member is clearly unfit for the management of the company or has breached his material duties, the court may, upon the request of a member, adjudicate the forfeiture of the power to execute the company.” Article 11 of the articles of incorporation of the company of this case, which is the unlimited partnership company, provides that “if a managing member is clearly unfit for the management of the company or has breached his material duties, the managing member may lose his authority by a resolution of all the members.” The court below determined that the above articles of incorporation provisions substitute the above provisions of the Commercial Act, and determined that the above provisions of the Commercial Act substitute the provisions of the Commercial Act, and dismissed the above application on the ground that the creditor’s request for provisional disposition as a preservative measure to seek a declaration of the forfeiture of the power to perform the company by himself does not have any legal basis, or

3. However, the above judgment below is hard to accept for the following reasons.

A. The following two methods can be presented in the way of losing the power of a member or managing member of an unlimited partnership company under the Commercial Act. First, upon the request of another member pursuant to Article 205(1) of the Commercial Act, the method of losing the power of a court by a declaration of a court pursuant to Article 205(1) of the Commercial Act. Second, without the court’s declaration procedure pursuant to Article 708 of the Civil Act applied mutatis mutandis by Article 195 of the Commercial Act, all the members lose their power by dismissal

B. Since the above two methods are different from the requirements and procedures, it is difficult to view that Article 205(1) of the Commercial Act excludes the application of Article 708 of the Civil Act. Therefore, unless otherwise stipulated in the articles of incorporation, an employee of a partnership company may lose his/her authority to conduct business by another employee or managing member, even among two methods.

C. Meanwhile, a member of an unlimited partnership company shall be directly, jointly, and severally liable to the creditor of the company. If another member or managing member significantly improper or seriously violates his/her obligations in the course of performing his/her duties, such other member or managing member is likely to cause and increase his/her own liability. As such, whether the other member or managing member may be excluded from the course of performing his/her duties shall have a significant impact on the interests of each member. A member of an unlimited partnership company may protect himself/herself from the occurrence and increase of his/her liability by excluding any member or managing member significantly inappropriate or seriously violating his/her duties in the course of performing his/her duties through the system of loss of executive authority. Therefore, when interpreting the articles of incorporation or relevant provisions relating to the loss of executive authority, the above

D. According to Article 205(1) of the Commercial Act, each member of the company may file a petition with a court for adjudication of forfeiture of his/her executive authority with another member or managing member (see Supreme Court Decision 2010Da82189, Dec. 13, 2012). However, according to Article 11 of the Articles of Incorporation of the company of this case, a resolution of all the members is required to lose his/her executive partner’s executive authority. If interpreting that the provisions of the Commercial Act are excluded pursuant to the above Articles of incorporation, a member of the company of this case would not lose his/her executive partner’s executive authority unless there is a resolution of all the members, unless the above Articles of incorporation expressly excludes the application of Article 205(1) of the Commercial Act. However, there is no reasonable ground to limit the rights of members granted by the Commercial Act in relation to the forfeiture of executive

E. The lower court determined that the above provision of the articles of incorporation, which is a private self-governing norm, was excluded from the application of the above provisions of the Commercial Act, considering the fact that Article 11 of the articles of incorporation provides the reason common to Article 205(1) of the Commercial Act as the reason for loss of executive authority and requires the strict procedure of resolution by

1) The articles of incorporation of the instant company did not provide for the provisions concerning managing members or the provisions concerning the forfeiture of a member’s executive authority at the time of enactment on June 20, 197. However, the mere fact that there was no provision concerning the forfeiture of executive authority does not necessarily mean that the members of the instant company could lose their executive authority of another member. Rather, since the articles of incorporation did not provide for otherwise, it should be deemed that a member could have lost his/her executive authority of another member even by any of the two methods as seen earlier pursuant to Article 195 of the Commercial Act.

2) Following the amendment of the articles of incorporation, Article 10 of the managing member and Article 11 of the Act on the Loss of the managing member’s executive authority was newly established. Article 11 of the Articles of incorporation provide that the managing member may lose his/her executive authority by a resolution of all the members without a court’s declaration procedure, and that is similar to Article 205(1) of the Commercial Act, which provides that the said provision of the articles of incorporation provides for a manifest negligence or serious violation of duties as a reason for such loss. However, notwithstanding the similarity of the said reason for loss, the said provisions of the articles of incorporation, contrary to Article 205(1) of the Commercial Act, shall lose its executive authority by a resolution of all the members without undergoing the court’s determination procedure as to the said reason for loss, rather than by Article 205(1) of the Commercial Act, by analogy applying the Civil Act to the method of loss of executive authority as seen earlier.

3) Considering that the above two methods can be deemed to have been applied even if there was no provision in the articles of incorporation regarding the loss of executive authority, as seen earlier, it is difficult to interpret that the articles of incorporation was newly established by Article 11 similar to the method of loss of executive authority, which is not the court’s sentencing procedure, thereby excluding the method of loss of executive authority by the court’s declaration. In other words, Article 205(1) of the Commercial Act, notwithstanding the establishment of Article 11 of the articles of incorporation, still applies.

4. Nevertheless, the lower court determined otherwise by the articles of incorporation that Article 205(1) of the Commercial Act excluded the application of provisional disposition by an obligee from the application of provisional disposition. In so doing, it erred by misapprehending the legal doctrine on the operating authority of the managing partner of the unlimited partnership company, thereby adversely affecting the judgment

5. Therefore, without further proceeding to decide on the remaining grounds of reappeal, the order of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kwon Soon-il (Presiding Justice)