A. Whether a director of a company A has violated Article 397(1) of the Commercial Act in cases where a director of the company A, who is concurrently a director or representative director of the company B for the same business purpose, resigns before the commencement of business activities of the company (affirmative)

B. Whether a director’s breach of duty to prohibit competitive business constitutes “material fact violating the relevant statutes” under Article 385(2) of the Commercial Act (affirmative)

A. The purport of Article 397(1) of the Commercial Act stipulating a director’s duty not to engage in competitive business is to prohibit directors from engaging in competitive business that is highly likely to infringe upon the interests of the company by pursuing their own personal interests by taking advantage of their position, thereby allowing directors to operate the company effectively and in a good faith manner with the care of a good manager to faithfully perform their duties. Therefore, it is not a “other company for the same type of business” under Article 397(1) of the Commercial Act, which is prohibited from engaging in competitive business on the ground that it is a company that is engaged in preparatory business, such as purchasing a factory site without commencing its business.

B. If a director of Company A establishes Company B for the same type of business as that company without the approval of the general meeting of shareholders and becomes the director and the representative director of Company B, even if the director and the representative director of Company B had resigned before commencement of business activities, this constitutes a case where a director and the representative director of the Company B breached the duty of prohibition of competitive business under Article 397(1) of the Commercial Act and there is a "material fact contrary to the Acts and subordinate statutes" under Article 385(2) of the Commercial Act concerning the dismissal of the director, unless

Articles 397(1) and 385(2) of the Commercial Act

Attorney Seo-young et al., Counsel for the defendant-appellant

Gyeong Jae-Gyeong

Seoul Civil District Court Order 90Ra73 dated August 20, 1990

The order of the court below is reversed.

The case is remanded to Seoul High Court.

The grounds of reappeal are examined.

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However, Article 397(1) of the Commercial Act provides, however, that directors shall not engage in transactions belonging to the same type of company or a third party's account without the approval of the general meeting of shareholders, or become partners with unlimited liability or directors of another company for the same type of business. The purport of the provision is to prohibit directors from engaging in competitive business with their own personal interests by taking advantage of their status and thereby infringing on the interests of the company, so that directors are able to effectively and effectively operate the company with due care and perform their duties in good faith (see, e.g., Article 382(2) of the Commercial Act, Article 681 of the Civil Act), so that directors are obliged to faithfully perform their duties (see, e.g., Article 382(2) of the Commercial Act, and Article 681 of the Civil Act). Thus, there is no reasonable ground to deem the "other company for the same type of business"

In addition, according to Article 385 (2) of the Commercial Act, "a shareholder who holds no less than 5/100 of the total issued and outstanding shares may file a claim with the court for the removal of the director, if the dismissal of the director is rejected at the general meeting of shareholders despite a misappropriation in connection with his/her duties or a serious violation of the laws and regulations or the articles of incorporation." Thus, as recognized by the court below, if the respondent establishes a Korean subordinate concrete for the same business purpose as the preferred concrete without the approval of the general meeting of shareholders and became the director and the representative director of the company, even if the respondent resigned from the office of the director and the representative director of the Korea subordinate concrete before the commencement of his/her business activities, this does not constitute a violation of the duty of prohibition of competitive business under Article 397 (1) of the Commercial Act and, barring any special circumstance, it does not constitute a case where the dismissal of the director violates the laws and regulations under Article 385 (2) of the Commercial Act.

Therefore, even if only the facts acknowledged by the court below are based on the premise, the applicant's application for provisional disposition to suspend the performance of duties of directors, etc. of this case can be deemed sufficient to prove the right to be preserved. However, the court below dismissed the applicant's application without examining and determining whether there is a need to preserve the right to be preserved. Thus, the court below's order does not contain an error of law by misapprehending the legal principles on the duty to prohibit the competitive business of directors and the removal of directors under the Commercial Act, and it is obvious that such illegality affected the decision.

Therefore, the order of the court below shall be reversed and the case shall be 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.

Justices Lee Jae-sung (Presiding Justice)