[1] In a case where a corporation and its officers and employees who have acquired shares of the company at par value enter into an agreement to compensate for the difference if the market price (applicable unit price) of the shares at the time of retirement falls below par value; and where the corporation established the special payment standard for retirement benefits and paid the amount corresponding to the invested loss as retirement allowances, whether the agreement and the special payment standard for retirement benefits are invalid because it violates the principle of shareholders equality under the Commercial Act (affirmative)

[2] Whether the standard for the payment of the agreement and the special payment of retirement allowance under the above [1] is invalid as it violates the prohibition of acquiring treasury shares under Article 341 of the Commercial Act (affirmative)

[3] Whether it constitutes a tort to induce a corporation to take over at a par value while promising to compensate for investment loss losses to its executives and employees whose par value falls short of the company's shares (affirmative)

[1] The criteria for the special payment of retirement benefits established by the resolution of the standing directors of a company and the agreement concluded by the president of the company with the head of the company shall provide employees of the company who will participate in the capital increase and acquire the status of shareholders with the amount equivalent to the amount of the investment loss in case where the market price (applicable unit price) at the time of retirement falls short of par value. The compensation for such investment loss would be an absolute guarantee of the recovery of the invested capital to the shareholders by the company, and it would be in violation of the principle of the equality of shareholders, since the company grants employees who participated in the capital increase a superior right

[2] Even if a company acquires shares in a third party’s name, if the funds for acquiring shares are made by the company’s contribution and the profits and losses accrued from the acquisition of shares are attributed to the company, such acquisition of shares constitutes the acquisition of treasury shares prohibited by Article 341 of the Commercial Act, since it is likely to endanger the company’s capital foundation by making out the company’s account, and thus, constitutes the acquisition of treasury shares, which is formally prohibited by Article 341 of the Commercial Act. Although the company’s capital was increased externally by making its executives and employees pay shares and allowing them to take over shares, the company’s capital was increased by 15 billion won. However, if the employees who paid shares retire, then the profits and losses accrued from the acquisition of shares will eventually be attributed to the company, which would eventually result in the acquisition of new shares issued by the company on their own account, and the company cannot actually hold its capital equivalent to the increased capital amount, and thus, constitutes a prohibition of acquisition of treasury shares under Article 341 of the Commercial Act.

[3] Notwithstanding the fact that the actual transaction price of the shares was 700 won at the time, the corporation demanded its employees to purchase 5,000 won per face value per class, allocated the amount of investment for each class, and suggested specific investment methods, such as conducting interim settlement of accounts for retirement benefits, and taking measures to terminate the trust account for individuals whose termination is prohibited. The president of the company actively induced employees to participate in the capital increase with capital increase, such as promising employees to compensate for losses incurred by the capital increase, and thereby, 1,575 employees among 1,575 employees and 1,512 employees participate in the capital increase with interim settlement of accounts for retirement benefits and participate in the capital increase in the above interim retirement benefits. Such inducement to increase the capital increase in the short-term period constitutes a tort.

[1] Articles 344, 345, and 370 of the Commercial Act; Article 52 of the Securities and Exchange Act / [2] Articles 341 and 625 subparagraph 2 of the Commercial Act / [3] Article 750 of the Civil Act

[2] Supreme Court Decision 2001Da44109 decided May 16, 2003 (Gong2003Sang, 1308) Supreme Court Decision 2001Da52919 decided May 16, 2003

State Won-young et al. (Law Firm Barun, Attorneys Seo-young et al., Counsel for the defendant-appellant)

Korean Credit Card Co., Ltd. (Attorney Lee Young-hoon et al., Counsel for the defendant-appellant)

Seoul District Court Decision 2001Da236609 Delivered on November 5, 2002

July 10, 2003

1. Of the judgment of the first instance, the part of the judgment against the defendant ordering payment of KRW 10,57,456 to the defendant and the part against the defendant who ordered payment of KRW 50,57,456 to the defendant as to the plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's plaintiff's damages

2. The defendant's remaining appeal is dismissed.

3. The total costs of the lawsuit are five minutes, which are one of which are borne by the plaintiffs, and the remainder by the defendant respectively.

1. Purport of claim

According to selective retirement claim based on the criteria for the special payment of retirement allowances, a claim for an agreed amount under the agreement made on June 26, 1998, or a claim for damages due to unlawful acts, the defendant shall pay to the plaintiffs each of 13,196,820 won and the plaintiff's paid-in capital from July 15, 201 with respect to the plaintiff's paid-in capital, from May 17, 2001 to May 31, 2003 with respect to the plaintiff's paid-in capital, from May 17, 2001 to May 31, 2003, and from the next day to the day of full payment with 20% interest per annum (the plaintiff reduced damages in the trial).

2. Purport of appeal

The part against the defendant in the judgment of the first instance is revoked, and all of the plaintiffs' claims corresponding thereto are dismissed.

1. Basic facts

The following facts are not disputed between the parties, or may be acknowledged by comprehensively considering the whole purport of the pleading in relation to Gap's evidence 1 through 5, Gap's evidence 8, Gap's evidence 10 through 16 (including paper numbers), Gap's evidence 18, Eul's evidence 18, Eul's evidence 1 through 4 (including paper numbers), and testimony by the witness Cho Nam-nam's testimony at the court of first instance, and there is no counter-proof.

A. Status of the parties

From June 30, 1992 to June 30, 2001, the plaintiff Lee Won-young served for the Co., Ltd. from October 26, 1992 to May 2, 2001, and on December 31, 2001, the Co., Ltd. changed its trade name to the Korea Credit Card Co.,, Ltd. (hereinafter referred to as the "Defendant") engaging in the issuance and management of credit cards under the Specialized Credit Financial Business Act due to the merger of the part of the banking business into Han-gu Co., Ltd.

(b) Particulars of capital increase;

(1) On February 26, 1998, the Defendant was ordered to improve management by the Financial Supervisory Service on the ground that the capital adequacy ratio of the Bank for International Settlements (BS) is less than 8%, and was promoted a capital increase plan to maintain the above capital adequacy ratio by the end of June of the same year, and it was difficult to implement a plan to increase the capital of 100 billion won, which aims to increase the capital of 15 billion won among them, but to participate in the 15 billion won. According to the above plan, although the actual transaction price of the Defendant’s shares at the time was 70 billion won per share, all executives and employees of the Defendant were required to purchase the Defendant’s shares at the face value of 5,00 won per share.

(2) Accordingly, on June 198, the Defendant, on the first day of 1998, proposed the method of investment to all executives and employees by class (i) allocating the amount of investment to each class, and proposed the method of investment (ii) required to make investments by the principal, (iii) making investments in short of the termination amount of a personal pension trust already paid, (iv) making interim accounts of retirement allowances, (iv) including the termination amount of a personal pension trust, and interim accounts of retirement allowances, and (v) demanding from the executives and employees to make investments.

(3) In addition, in order to enable executives and employees to raise their investments, the Defendant implemented an interim settlement system of retirement benefits, and implemented the system that, only employees who received interim settlement of retirement benefits to participate in the increase of capital, the amount of interim settlement of retirement benefits calculated from the date of entry to the date of retirement shall be paid as the final retirement allowance according to the rules of retirement benefits calculated from the date of retirement to the date of retirement. The Defendant took measures to terminate the personal pension trust account whose termination is prohibited by the rules on the operation of employee welfare pension.

(4) On June 23, 1998, the executive officers and employees of the defendant made an offer of shares, and the defendant strongly demanded that the defendant be able to guarantee losses incurred by the participation in capital increase as above. Accordingly, on June 26, 1998, the defendant's bylaws and the labor union made a written agreement on the payment of retirement allowances to the employees participating in capital increase, stating that "if an employee who participated in capital increase occurs in the amount of capital increase due to the fund received interim settlement of retirement allowances on June 26, 1998, the total amount shall be compensated."

(5) The Defendant’s executive officers and employees completed the payment of share price on June 27, 196 following the announcement of the above agreement.

(6) Ultimately, 1,512 of the Defendant’s officers and employees, including the Plaintiffs, purchased the Defendant’s shares at a face value and participated in the capital increase with capital increase as an interim retirement allowance. In the process, the Plaintiffs purchased each of the Defendant’s shares of KRW 2,730 out of the interim retirement allowance at KRW 13,650,00, respectively. At the time, the market price of the Defendant’s shares was limited to KRW 780 per share.

(c) Establishment of guidelines for the special payment of retirement allowances to employees participating in capital increase;

(1) After that, on August 17, 1998, the defendant decided to establish "the special payment criteria for retirement allowances for employees participating in capital increase (excluding executive officers)" in addition to retirement allowances in cases where the applicable unit price at the time of retirement falls short of the face value of the employees who participated in capital increase (excluding executive officers).

(2) Details of the special payment criteria for retirement benefits

In accordance with Article 6(4) of the Regulations on Retirement Allowance (for a person recognized by the president who has contributed significantly to the development of a bank and has caused property damage to an individual, a retirement allowance may be separately paid to him/her through a resolution of the Executive Committee) where the employee who has participated in the capital increase conducted as a part of the normalization of management of the defendant bank holds the shares issued on June 23, 1998 until the time of his/her retirement, the difference between the applicable unit price (the average price for the closing price of the shares issued in the last one month from the date of his/her retirement before the retirement) and the face value (5,00 won per week) shall be preserved. The main standard shall apply to all investors at the time of their retirement, regardless of the reasons for retirement, and the par value of the shares initially issued shall

D. Full reduction of the Defendant’s shares

(1) The Financial Supervisory Commission, on December 18, 200, selected the Defendant as an insolvent financial institution and requested the investment of public funds. On the other hand, the Defendant issued an order to reduce capital without compensation for all the previous shares, and the government acknowledged the appraisal right corresponding to the actual retirement for value with respect to the minor shareholders who are likely to cause a strike due to the above measure.

(2) Accordingly, the Plaintiffs exercised their appraisal rights against Defendant 2,730 shares. The Defendant purchased the said shares by applying 166 won per share with respect to the purchase price of the said shares, and then retired all without compensation. Ultimately, the amount of contribution loss incurred by the Plaintiffs in the offering of new shares is KRW 13,196,820 [the amount of contribution 13,650,000 - 453,180 won (2,730 won x 166 won).

2. Claim for retirement allowances according to the criteria for the special payment of retirement allowances, and agreed amounts under the agreement concluded on June 26, 1998.

A. As the cause of the claim by the plaintiffs, ① the defendant additionally pays the amount equivalent to the plaintiffs' investment loss as retirement allowance according to the above special payment standard of retirement allowance. ② Even if not, the defendant asserts that the defendant is liable to pay the agreed amount equivalent to the above investment loss according to the above agreement on June 26, 1998, the defendant asserts that the above special payment standard of retirement allowance and the above agreement are contrary to the principle of shareholder equality under the Commercial Act since the company entered into an agreement on guaranteeing losses and guaranteeing profits to some shareholders, and thus, it is in violation of Article 52 of the Securities and Exchange Act as it damages the basis of the principle of self-responsibility in the stock transaction, and it is in violation of the principle of good faith under Article 103 of the Civil

B. The principle of the equality of shareholders is formally treated as a shareholder in a legal relationship between a company and a shareholder, and in substance, the rights and obligations of each shareholder with respect to each company should be determined in proportion to the number of shares held. Under the Commercial Act, an exception provision on the principle of the equality of shareholders (Articles 344, 345, and 370 of the Commercial Act) is provided in the Commercial Act and strictly limited provisions are deemed to support the principle of the equality of shareholders as a basic principle under the Act on the Stock Companies. Therefore, the principle of the equality of shareholders is deemed to be a basic principle and mandatory law. In addition to the exceptions recognized under the Commercial Act, the provisions of the articles of incorporation, the resolution of the general meeting of shareholders, the resolution of the board of directors, or the execution of duties by the representative director of the company violates the principle of the equality of shareholders, regardless of good faith or bad

However, the criteria for the special payment of retirement benefits of this case, which was established by the resolution of the defendant's standing directors' council and the agreement concluded by the president of the defendant with the head of the defendant's bank, provides that the defendant's employees who will participate in the capital increase and acquire the status of shareholders shall be compensated for the total amount of losses incurred during retirement (the plaintiff did not agree in the status of shareholders with the defendant's employees, but the defendant's employees agreed on the special payment criteria for retirement benefits of this case and the agreement was made in the status of shareholders, and the defendant's employees reached an agreement on June 26, 1998 after the defendant's employees subscribed for shares on June 23, 1998. Accordingly, the payment of retirement benefits of this case was completed, and the following agreement was enacted on August 17, 1998, and therefore, the above agreement was concluded between the defendant's employees who are in the status of shareholders through the payment of shares and the share capital increase and thus, the defendant's employees' rights to the above shareholders are not recognized as violating the principle of capital increase.

C. In addition, since the acquisition of a company's own shares on its own account may endanger the company's capital foundation and undermine the interests of the company, shareholders and creditors, undermine the principle of equality of shareholders, and cause various harm, such as causing unfair control by the representative director, etc., in principle, the Commercial Act shall prohibit it uniformly for a general preventive purpose. Thus, the Commercial Act stipulates cases where the acquisition of a company's own shares is exceptionally classified and exceptionally defined in the case where the acquisition of a company's own shares is allowed, except where the acquisition of a company's own shares is explicitly permitted in Articles 341, 341-2, and 342-2 of the Commercial Act, or the Securities and Exchange Act, etc., and where it is evident that it is not possible to endanger the company's capital foundation or harm the interests of shareholders, etc., even in other cases, the acquisition of a company's own shares is exceptionally allowed, and in other cases, it is null and void as a matter of course, even if there are unavoidable circumstances to avoid serious damage that may arise to its shareholders, creditors, etc.

On the other hand, Article 625 subparagraph 2 of the Commercial Act provides that "the act of illegally acquiring stocks on the company's account, regardless of in the name of discount or regardless of whether they are held in the name of discount" is subject to punishment. In addition, even if a company acquires stocks in a third party's name other than the company, if the funds for acquiring stocks are made by contributions of the company and the profits and losses accrued from the acquisition of stocks belong to the company, the acquisition of such stocks is likely to endanger the foundation of the company's capital and thus constitutes the acquisition of treasury stocks prohibited by Article 341 of the Commercial Act (see Supreme Court Decision 2001Da4109 delivered on May 16, 2003).

However, although the defendant formally increases 15 billion won of the defendant's capital by allowing the defendant's officers and employees to pay shares and take over shares, the defendant's employees who paid shares to enter into the special payment criteria and agreement of retirement allowance in this case with the contents that compensates for the total amount of the amount of the investment loss upon retirement, the profits and losses accrued from the acquisition of shares will eventually be attributed to the defendant. Accordingly, this would result in the same result as acquiring new shares issued by the defendant on their own account, and it would result in the defendant's failure to hold shares in reality as much as the assets equivalent to the increased capital amount, which would pose a risk of undermining the defendant's capital foundation, and thus, it is reasonable to view that the defendant's acquisition of treasury shares prohibited by Article

(d) Conclusion

Therefore, the criteria and agreement for the special payment of retirement benefits of this case shall be deemed null and void in violation of the principle of shareholder equality, which is the basic principle of the Commercial Act, and the prohibition of acquiring treasury shares. Therefore, the plaintiff's claim without any further need to be determined by the remaining defendants

3. Claims for damages caused by unlawful acts;

(a) Occurrence of liability for damages;

However, according to the facts acknowledged above, the defendant demanded the defendant's employees, including the plaintiffs, to purchase the defendant's shares at a par value of 5,000 won per share, and allocated the amount of investment by class, and suggested specific investment methods such as interim settlement system, and measures to terminate the personal pension trust account where termination is prohibited. The defendant's president actively induced the defendant's employees to participate in the capital increase in the capital increase, such as promising to compensate for losses incurred to the capital increase, and thereby, 1,512 of the defendant's officers and employees among 1,575, participate in the capital increase in the above interim retirement allowance. Accordingly, the defendant's above defendant's participation in the capital increase in the capital increase in a short period of time constitutes a tort, and the defendant's tort, which eventually causes losses to the defendant's employees, such as 13,196, and 820 won.

B. Scope of liability for damages

Meanwhile, in light of the above-mentioned purport of the evidence, even though the plaintiffs knew that they were promoting capital increase in the process of raising the equity capital ratio by receiving an order for business improvement from the Financial Supervisory Service, and participated in capital increase in the management normalization of the defendant, it can be acknowledged that the defendant bank made an agreement with the head of the defendant bank to preserve the investment loss amount by strongly demanding the preservation of other shareholders and creditors' interests and the defendant's investment loss amount which may endanger the defendant's capital foundation. Thus, it is reasonable to deem that the plaintiffs' unreasonable demand for the compensation of the investment loss amount was the cause of the defendant's loss compensation liability. Thus, in calculating the defendant's compensation amount in accordance with the principle of equity and good faith, the plaintiffs' above negligence shall be considered, but the ratio shall be 20%, respectively.

(c) Conclusion

Therefore, the defendant is obligated to pay the plaintiffs' damages for each damages amounting to 10,57,456 won (13,196,820 won x 0.8) and the damages for delay at each rate of 20% per annum under the Civil Act from May 7, 2001 to July 31, 2003, each of which is the date of this decision, as claimed by the plaintiffs, as for the plaintiff's main damages amounting to 10,557,456 won (13,196,820 won x 0.8) and after the date of the tort in this case.

4. Conclusion

Therefore, the plaintiffs' claim of this case is accepted within the above scope of recognition, and the remaining claims are dismissed as it is without merit. Since part of the judgment of the court of first instance which has different conclusions is unfair, it is revoked, and the plaintiffs' claim corresponding to the revoked part is dismissed, and the defendant's remaining appeal is dismissed as it is without merit. It is so decided as per Disposition.

Judges Park Yong-ok (Presiding Judge)