In a case where Gap corporation Eul et al. proposed that "the additional appointment of directors, other than two directors currently in office," as the subject matter of a general meeting of shareholders, but the board of directors of Gap corporation proposed "the propriety of the additional appointment of directors, other than two directors currently in office," which changed the above proposal as an agenda item, and the agenda item was rejected, and the resolution for appointment of directors with respect to one director whose term expires separately was adopted, and sought the revocation of the resolution for appointment of directors on the ground of the violation of shareholder proposal right, the case holding that Eul et al. cannot seek the revocation of the resolution for appointment of directors

In a case where Gap corporation Eul et al. proposed that "the new appointment of directors and two other directors currently in office" shall be the subject of the general meeting of shareholders; the board of directors of Gap corporation proposed "the propriety of the additional appointment of directors, other than the currently in office," the amendment of the above proposal as an agenda item, and sought the revocation of the resolution of appointment of directors on the ground of the violation of shareholder proposal right, the case held that Eul et al. cannot seek the revocation of the resolution of appointment of directors on the ground that Eul et al.'s proposal was made by the board of directors of Eul et al., for the reason that Eul et al.'s proposal was unfairly rejected and not included in the subject of the general meeting of shareholders, the resolution of appointment of directors pursuant to Article 635 (1) 21 of the Commercial Act shall not be related to the agenda item, and since Eul et al.'s proposal was not related to the agenda item.

Article 363-2 of the former Commercial Act (Amended by Act No. 12591, May 20, 2014); Articles 376 and 635(1)21 of the Commercial Act; Article 750 of the Civil Act; Article 12 of the Enforcement Decree of the Commercial Act

Plaintiff 1 and four others (Law Firm Professor, Attorneys Yellow-gu et al., Counsel for the plaintiff-appellant)

Korea Tourism Development Co., Ltd. (Law Firm Sejong, Attorneys Choi Gyeong-gyeong et al., Counsel for the defendant-appellant)

March 30, 2015

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

A resolution made by the Defendant on March 26, 2014 regarding the appointment of the directors of the proposal set forth in subparagraph 2 at the ordinary shareholders' meeting of shareholders (including the case as to whether the appointment of the directors of two directors, other than the current directors, is made in accordance with the proposal of shareholders) is revoked.

1. Facts of recognition;

A. Status of the parties

1) The defendant is a company for the tourist hotel business, etc., whose total number of shares issued in the corporate register is 1,796,490 shares and the total amount of capital is 8,982,450,000 won.

2) The Plaintiffs are the Defendant’s shareholders. As of December 31, 2013, the Defendant’s shareholder registry stated that Plaintiff 1, 170,000 shares, Plaintiff 2, 190 shares, Plaintiff 3, and Plaintiff 4 owned respectively 113,30 shares, and Plaintiff 5 owned 28,335 shares.

B. The defendant's articles of incorporation

Article 21 of the defendant's articles of incorporation provides for the appointment of officers as follows:

(1) A defendant company shall have three or more directors and one or more auditors, who are appointed at a general meeting of shareholders (Article 21 (1)).

(2) Resolutions for election of directors shall be made with the attendance of shareholders who hold stocks corresponding to a majority of the total number of issued stocks (Article 21 (2)).

C. Resolution of the Defendant’s general shareholders’ meeting on March 26, 2013

1) At the time of March 26, 2013, the Defendant’s director held office with a total of five persons, who were Nonparty 1, Nonparty 2, Nonparty 3, Nonparty 4, and Plaintiff 3, and Nonparty 1 concurrently held office as the Defendant’s representative director.

2) On March 26, 2013, the Defendant held a regular general meeting of shareholders. Since the term of office of Nonparty 2, Nonparty 3, Nonparty 4, and Plaintiff 3 was expected to expire on March 29, 2013, the “case of the appointment of directors” was presented as an agenda item.

3) Nonparty 2, Nonparty 3, Nonparty 4, Nonparty 5, Nonparty 6, and Plaintiff 3 were recommended as the candidates for directors, and among which Nonparty 3 and Nonparty 4 were elected as directors, Nonparty 3 were elected as directors. The remaining candidates including Plaintiff 3 were dismissed. Accordingly, the Defendant’s director became three persons as Nonparty 1, Nonparty 3, and Nonparty 4.

D. The plaintiffs' right to make shareholders' proposal

1) On February 12, 2014, the Plaintiffs’ agent is the receiver, who is the Defendant, Nonparty 1, and Nonparty 4, who is the Defendant’s representative director, and the Plaintiff is excluded from the Defendant’s management even if the Plaintiff is a shareholder holding 34.2% of the Defendant’s total issued shares. The Plaintiff wishes to appoint a shareholder who can represent the Plaintiffs as the Defendant’s director for transparent management and protection of the Plaintiffs’ rights and interests. In accordance with Article 363-2(1) and (2) of the Commercial Act and Article 21(1) of the Articles of Incorporation, the Plaintiffs presented a letter of proof that “The Plaintiffs shall appoint two additional directors other than the current directors, and propose that “the Plaintiff 2 and Plaintiff 4 shall be proposed as the subject matter and agenda of the ordinary general meeting of shareholders.”

2) On March 6, 2014, the Defendant sent to the Plaintiffs’ agent on March 6, 2014, “The cases of the appointment of additional directors among the matters proposed by the Plaintiffs are considered to be “the cases of the appointment of directors,” and it is reasonable to determine whether to appoint multiple directors or not only the number of directors whose terms of office expire should be determined through discussions and resolutions on the day. In addition, since the number of directors to be appointed is determined and the recommendation of the candidates for directors has the right to recommend all shareholders, so long as the direct recommendation is permitted, it seems inappropriate to limit the name of the candidates to the proposal.”

(e) Notice, etc. of convening a regular general meeting of shareholders on March 26, 2014;

1) On March 26, 2014, the Defendant sent a notice of convening a regular general meeting of shareholders to shareholders, including the Plaintiffs. The above notice contains the following items: (a) the proposal No. 2 concerns the appointment of directors (including the cases as to the legitimacy of the appointment of directors, other than the current director, pursuant to the shareholder proposal) as the subject matter of the meeting; and (b) the proposal No. 5 states “cases as to other shareholders’ proposal.”

2) On March 10, 2014, the proxy of the Plaintiffs sent to the Defendant’s agent, “the Plaintiff proposed an additional appointment of directors, other than the incumbent director,” and “the propriety of the additional appointment of two directors, other than the incumbent director,” rather than suggesting “the propriety of the additional appointment of directors.” The above notification is a notice of convening a general meeting of shareholders, which disregards the Plaintiffs’ proposal and is illegal as the purpose of the Plaintiffs’ proposal is, and thus, seeks to send a legitimate notification of convening a general meeting of shareholders. On the other hand, when appointing two additional directors, the Plaintiff requested to appoint directors by means of a concentrated

F. The Defendant’s resolution at a general shareholders’ meeting on March 26, 2014

1) On March 26, 2014, the Defendant held a regular general meeting of shareholders and deliberated on the agenda by Nonparty 1, a representative director, while holding 15 shareholders holding 1,796,490 shares of total number of outstanding shares, the Defendant deliberated on the agenda under the proceeding of Nonparty 1, a representative director.

2) On March 26, 2014, the minutes of the ordinary shareholders’ meeting held on March 26, 2014 indicate “cases concerning the appointment of directors” of the Bill No. 2 as follows:

① Nonparty 1, the president, reported that his term of office expires on March 29, 2014. The Plaintiffs proposed “cases of additional appointment of directors and two other directors,” and notified the Plaintiffs that they requested the appointment of directors by means of cumulative voting at the time of multiple appointment of directors, and publicly notified that there was a request for the implementation of cumulative voting system in the Seoul National University Education Foundation and the Seoul National University Development Fund, which is the educational research foundation and foundation of the Seoul National University.

② After discussing the pros and cons on the necessity of the appointment of additional directors, it is declared that the voting for the propriety of the “cases of the appointment of additional directors and two other directors,” proposed by some shareholders,” and the “cases of the appointment of additional directors and two other directors,” was rejected as 794,95,95, 44.26%, and 55.66%, respectively.

③ Article 21(1) of the Articles of Incorporation provides that “The party members shall be appointed at a general meeting of shareholders by three or more directors, and the minimum number of directors is three, and the term of office of Nonparty 1 director expires, and thus, one director is present at the meeting. The Speaker requested each shareholder to recommend candidates for directors. In addition, since the number of directors to be appointed at a general meeting of shareholders expires, the cumulative voting system requested by some shareholders will not be implemented. Then, Nonparty 4 shareholders shall be appointed as candidates for Nonparty 1, and Plaintiff 3 (Plaintiff 3) shareholders shall recommend Plaintiff 4 as candidates for candidates.

3) After that, the voting on the appointment of directors was made by Nonparty 1’s appointment method of the highest support rate, and Nonparty 1 obtained Nonparty 1’s affirmative votes of 5.66%, Plaintiff 4794,99, and 44.26%, respectively. Accordingly, at the ordinary shareholders’ meeting on March 26, 2014, a resolution was made by Nonparty 1 to be appointed as a director.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 9, Eul evidence 3 (including a tentative number), the purport of the whole pleadings

2. The parties' assertion

A. The plaintiffs' assertion

For the following reasons, a resolution adopted at a general shareholders’ meeting on March 26, 2014 with respect to the appointment of a director under subparagraph 2 (hereinafter “instant resolution”) is in violation of the law, and thus, the convocation procedure or the method of resolution is in violation of the law, so the resolution must be revoked

1) Under Article 363-2(1) of the Commercial Act, the Plaintiffs proposed that the “additional Selection and Appointment of Two Directors, other than the present directors,” as the subject matter of the meeting and that the said director be selected as a concentrated voting system. Therefore, the Defendant should set the subject matter of the general meeting of shareholders and appoint two directors as a concentrated voting system.

However, the defendant neglected the plaintiffs' proposal, and decided on "the propriety of appointment of directors and two additional directors, including the case of recommendation for appointment of directors and two additional directors according to the shareholders proposal", and "the propriety of appointment of directors and two additional directors".

As above, the defendant infringed the shareholders' right to proposal and the right to appoint directors by the centralized voting system, and made an illegal notification of convocation.

2) In proposing as above, the Plaintiffs filed a claim for entry of the summary of the agenda containing “Plaintiff 2 and Plaintiff 4 as candidates” in the convocation notice of a general meeting of shareholders pursuant to Article 363-2(2) of the Commercial Act. Therefore, the Defendant must enter the name, address, career, etc. of the candidates recommended by the Plaintiffs in the convocation notice of a general meeting of shareholders. However, the Defendant did not enter the summary of the agenda proposed by the Plaintiffs in the convocation notice of a general meeting of shareholders, and issued an illegal convocation notice.

3) In the appointment of directors, a stock company that does not exclude the cumulative voting from the articles of incorporation must state the number of directors to be appointed in the notice of convening a general meeting of shareholders and the public notice of the appointment of directors. Therefore, the Defendant must notify the convocation of a general meeting of shareholders with the purport of “three directors appointment” including appointment of Nonparty 1 whose term expires. However, the Defendant did not state the number of directors to be appointed in the notice of convening a general meeting of shareholders, stating only the “case of appointing directors”

B. Defendant’s assertion

1) The Defendant has accepted the agenda items of the meeting proposed by the Plaintiffs and thus did not infringe on the Plaintiffs’ right to proposal. The Defendant clarified the number of directors to be additionally appointed by stating that “the case of appointing directors (including the case of recommendation of additional appointment of directors, other than the current director according to the proposal)” was “the case of appointing directors” in the notice of convening a general meeting of shareholders.

On the other hand, the authority to form an institution shall belong exclusively to the general meeting of shareholders. Therefore, it is natural in view of the legal principles of the Company Act to pre-determination of whether two directors should be appointed in addition, prior to the appointment of two directors in accordance with the proposal by the plaintiffs. The recommendation by the plaintiffs for the candidates for additional senior directors is not stated in the summary of the agenda, and thus, it cannot be viewed as a defect in the convocation procedure merely because it did not state it in the notice

2) Since there was no multiple directors appointment itself, it cannot be deemed that the right to request the appointment of directors under a concentrated voting system has been infringed.

3. Determination

(a) Relevant statutes and the details thereof;

1) Relevant laws and regulations (the following provisions are as listed in the annexed sheet):

Article 363-2 (Stockholder's Right to Make Proposal) of the Commercial Act before the amendment (Amended by Act No. 12591, May 20, 2014)

Article 12 (Refusal of Shareholders' Proposal under Enforcement Decree of the Commercial Act)

Article 382-2 (Cumulative Voting in Commercial Act)

Article 635 (Offences Subject to Fine for Negligence in Commercial Act)

2) Details of the relevant legislation

Article 363-2 of the Commercial Act prior to the amendment recognizes the right to make a proposal to the shareholders' general meeting of shareholders, i.e., the right to make a proposal to the shareholders. In this case, under paragraph (1), a shareholder's proposal to propose the matters to be referred to as the object of the general meeting of shareholders shall be referred to as "an agenda", and under paragraph (2), a proposal to propose the gist of the agenda may be referred to as "an agenda". The board of directors shall present the contents of the proposal to the general meeting of shareholders unless the contents of the proposal are in violation of Acts and subordinate statutes or the articles of incorporation or fall under the grounds for rejection prescribed in Article 12 of the Enforcement Decree of the Commercial Act.

On the other hand, Article 382-2 of the Commercial Code introduced a concentrated voting system, which does not limit the number of voting rights of shareholders to each candidate when the general meeting of shareholders makes a resolution on the appointment of two or more directors.

B. Whether the Defendant infringed the Plaintiffs’ right to make proposal

1) The Plaintiffs are shareholders holding shares equivalent to at least 3/100 of the total number of the Defendant’s outstanding voting shares (the total amount of the Defendant’s shares owned by the Plaintiffs is about 614,95 shares and about 34.2% of the total number of issued shares), and on February 12, 2014, on March 26, 2014, the amount invested by the amount invested by the Plaintiff at least 48 on March 26, 2014, “the appointment of two additional directors other than the directors currently in office” as the subject matter of the general meeting of shareholders. The Plaintiffs proposed that the subject matter should be the candidates for Plaintiff 2 and Plaintiff 4, who are seven days prior to the date of the general meeting of shareholders. In addition, the Plaintiffs claimed to appoint directors by means of a concentrated vote, while appointing two directors in writing on March 10, 2014.

2) The Defendant’s articles of incorporation do not stipulate the upper limit on the number of directors, other than that that the number of directors must be three or more, and does not stipulate any provision excluding the concentrated voting system. There is no other evidence to deem the proposed contents by the Plaintiffs as violating the statutes or the articles of incorporation, or as a ground for rejection under Article 12 of the Enforcement Decree of the Commercial Act. Therefore, the Defendant’s board of directors should submit the “matters concerning additional appointment of two directors other than those currently in office” as they are proposed by the Plaintiffs as the agenda items of the general meeting of shareholders, and accordingly, a notice of convening the general

3) However, the Defendant Council did not present the agenda proposed by the Plaintiffs as it is to the general meeting of shareholders, and presented the Plaintiffs’ proposal to “patch the appointment of additional directors, other than the incumbent directors,” by modifying the contents proposed by the Plaintiffs. Accordingly, the “patch the appointment of additional directors, other than the incumbent directors,” should be resolved at the general meeting of shareholders, but the “patch of additional appointment of two directors, other than the incumbent directors,” should be resolved by the general

4) Ultimately, the proposal for the appointment of two directors, other than the incumbent director, which was modified and proposed as above, was rejected, and it was impossible for the Plaintiffs to take a concentrated vote on the candidates recommended by the Plaintiffs. As can be seen, the presentation of the modified agenda by the Defendant’s board of directors deviates from the purpose of the provision of the shareholder proposal right and concentrated voting, and it cannot be deemed that the Plaintiffs proposed the agenda as the subject of the general meeting of shareholders.

C. Whether the resolution in this case can be revoked on the ground of the violation of shareholder's right to proposal

1) Criteria for determination

If a shareholder refuses to make a shareholder proposal through legitimate procedures but the board of directors refuses it, the validity of the resolution of the general meeting of shareholders shall be considered.

A) In a case where the board of directors rejected a shareholder’s proposal, namely, where a shareholder proposed a proposal in addition to the matters to be the subject of the meeting, and where a shareholder did not raise a proposal made by the shareholder while dealing with the agenda and did not state it in the notice, the resolution is an unlawful resolution in violation of Article 363-2 of the Commercial Act. Accordingly, a resolution that disregards a proposal may be revoked in accordance with Article 376 of the Commercial Act.

B) On the other hand, in the event that the board of directors unfairly rejected the agenda itself proposed by the shareholders and did not present it as the agenda of the general meeting of shareholders, there is no resolution corresponding to the proposal because the agenda itself is not dealt with at the general meeting of shareholders. Therefore, even if the shareholder's right to proposal was unfairly infringed, the validity of other resolution made by the general meeting of shareholders does not affect the validity of the other resolution made by

2) Determination on the validity of the instant resolution

Although the Plaintiffs proposed an agenda of “the appointment of additional directors and two other directors,” they did not deal with the agenda at the regular shareholders’ meeting on March 26, 2014. In the instant resolution, the appointment of Nonparty 1 as a director is based on the arrival of the expiration of the term of office of Nonparty 1, one of the three directors of the Defendant, who was in office at the time of the general shareholders’ meeting on March 26, 2014, and is not related to the “the appointment of additional directors of Nonparty 1, who was one of the three directors of the Defendant, who was in office at the time of the general shareholders’ meeting.” The Plaintiffs’ proposal is not related to the “the appointment of the additional directors of Nonparty 1, who was in office

Therefore, the Plaintiffs cannot seek the revocation of the instant resolution itself on the ground that the shareholder proposal was unfairly rejected and was not included in the subject matter of the general meeting of shareholders, apart from whether a director claims civil damages against a director, or is subject to a fine for negligence not exceeding five million won pursuant to Article 635(1)21 of the Commercial Act.

D. Determination on other plaintiffs' assertion

1) In the appointment of directors, a corporation that did not exclude the centralized voting system in the articles of incorporation shall state the number of directors to be appointed when it gives a notice of convening a general meeting of shareholders on the appointment of directors. The reason is that it is determined whether to demand cumulative voting according to the number

If a stock company, which did not have a provision excluding concentrated voting in the articles of incorporation, stated “the case of the appointment of directors” as the subject matter of the meeting, such provision shall be deemed to have decided to appoint a single director, barring any special circumstances, and the number of such directors shall be indicated in the case of the appointment of multiple directors. Since the instant resolution appoints one director, the failure of clearly stating the number of directors to be appointed in the notice of convening the general meeting of shareholders shall not be deemed to be a defect in the procedure

2) Since the instant resolution does not constitute appointment of more than two directors, it is not problematic whether to implement a concentrated voting system.

3) Other defects in the convocation procedure asserted by the Plaintiffs are all the grounds for infringement of the Plaintiffs’ right to proposal. Therefore, it cannot be viewed as the grounds for revocation of the instant resolution without any resolution corresponding to the Plaintiffs’ proposal.

4. Conclusion

Since the plaintiffs' claims are without merit, they are dismissed. It is so decided as per Disposition.

[Attachment] Relevant Provisions: omitted

Judges Jeon Jong-Un (Presiding Judge)