Whether delay in the performance of corporate obligation constitutes an act of neglect in the director's duties under Article 401 of the Commercial Act (negative)

The act of a director who is jointly and severally liable for damages to a third party is an act of violating the duty of care and good faith of a director, which is an act of violating the duty of care and good faith of a director. It cannot be deemed an unlawful case where a director neglects the duty of care on the sole basis of the fact that he/she causes damage to the other party merely due to the fact that he/she was able to perform his/her duty

Article 401 of the Commercial Act

Supreme Court Decision 84Meu2491 Decided Nov. 12, 1985 (Dong)

[Defendant-Appellant] Cho Sung Industrial Co., Ltd., Counsel for defendant-appellant-appellant

Defendant-Appellant Doctrine et al.

Seoul High Court Decision 84Na694 delivered on November 15, 1984

The judgment below is reversed and the case is remanded to Seoul High Court.

The defendant's attorney's grounds of appeal are examined.

1. According to the reasoning of the judgment below, the plaintiff acquired mining right transfer registration from the above 7th executive officer of the mining area as stated in its ruling that the above 7th executive officer should dispose of the above 8th executive officer of the mining area because it is likely that mining damage would occur from the above 8th executive officer. On January 19, 1982, the court below decided that the above 10th executive officer of the mining area should sell the above 8th executive officer of the mining area and the above 20th executive officer of the mining area to the defendant for sale and purchase of the above 7th executive officer of the mining area, and that the above 2th executive officer would not be held responsible for the above 8th executive officer's relocation and sale of the mining area, and that the defendant would not be held responsible for the above 8th executive officer's relocation and sale of the mining area because the above 1st executive officer had been notified of the above 8th executive officer's relocation and sale of the mining area, and that the defendant would not be held responsible for the above 2th executive officer's sale and sale of the forest area.

2. Article 401 of the Commercial Act provides that directors shall be jointly and severally liable for damages to a third party if directors have neglected to perform their duties in bad faith or by gross negligence. Even if the directors breached their duties as a good manager upon delegation of the company, they do not naturally incur damages to the company. However, if the activities of a company in an important status in economy and society depend on the performance of duties of directors who are to protect the third party, they shall be held liable for damages to a third party due to bad faith or gross negligence. Thus, it is the purport of the above Act that the directors are liable for damages to the above third party, which have been caused by breach of the duty of care and good faith of the directors, even if they were unable to perform their duties in light of the terms of the management status of the company, and thus, they shall not be held liable for damages to the company if they were unable to perform their duties in accordance with the above contract with the third party, even if they were unable to perform their duties in advance due to the fact that they were unable to perform their duties in accordance with the contract with the third party.

Therefore, without further proceeding to decide on the remaining grounds of appeal, the judgment below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Jeong Jong-tae (Presiding Justice)