[1] The validity of a transaction where a director of a company, the total capital of which is less than one billion won, has not been approved by the general meeting of shareholders, where the general meeting of shareholders, prior to making a transaction with one or two directors on its own account or on a third party's account, by clarifying the important facts of the transaction (

[2] In a case where two directors of Gap corporation Eul were to enter into a share acquisition agreement with Eul corporation without a resolution of a general meeting of shareholders, the case affirming the judgment below holding that the share acquisition agreement is null and void on the ground that the above share acquisition agreement is insufficient to recognize that Gap corporation held 65% of the shares of Eul corporation Gap corporation at the time of entering into the share acquisition agreement, and Gap corporation was to receive the share acquisition price from Eul and lent it to Byung corporation, even though there is no resolution of a general meeting of shareholders

[1] Article 398 of the Commercial Act aims to prevent directors, etc. from promoting their own interest or a third party's interest by making a transaction with the company using their status and causing unexpected damages to the company and its shareholders. Thus, in order to strengthen control over the private interest trend of directors, controlling shareholders, etc., the scope of application to major shareholders, etc., other than directors, etc., and the requirements for approval of the board of directors were increased. However, in the case of a small-scale company with not more than two directors under Article 383 of the Commercial Act, approval of the board of directors was replaced by approval of the board of directors. The legislative intent of restricting the company's own transactions in the course

Generally, it cannot be deemed that the same applies to a resolution of a general meeting of shareholders solely on the ground that the shareholders who have shares meeting the quorum of a general meeting of shareholders consented or approved by the company. Therefore, if the total amount of capital is less than one billion won and less than one director or two directors of the company make transactions with the company on their own or a third party’s account, and if the company did not obtain the approval of the general meeting of shareholders, such transactions shall be deemed null and void, barring special circumstances.

[2] In a case where two directors of Gap corporation Eul, who were directors of Eul corporation, entered into a share acquisition agreement with Eul corporation without a resolution of a general meeting of shareholders, the case affirming the judgment below holding that the share acquisition agreement is null and void on the grounds that it is insufficient to recognize that Gap corporation, the representative director of Eul, was holding 65% of the shares of Eul corporation Eul at the time of entering into the share acquisition agreement, and Gap corporation, paid the share acquisition price by Eul and lent it to Byung corporation, without a resolution of a general meeting of shareholders

[1] Articles 383(1) and (4), and 398 subparag. 1 of the Commercial Act / [2] Articles 383(1) and (4), and 398 subparag. 1 of the Commercial Act

[1] Supreme Court Decision 2016Da241515, 241522 decided June 4, 2020 (Gong2020Ha, 1313)

Korea General Media Co., Ltd. (Law Firm Barun, Attorneys Park Jae-min et al., Counsel for defendant-appellant)

Syer Question Co., Ltd.

Intervenor joining the Defendant (Law Firm LLC, Attorneys Gu-moon et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2016Na2003179 decided December 6, 2018

The appeal is dismissed. The costs of appeal are assessed against the Defendant joining the Defendant.

The grounds of appeal are examined.

1. Self-transaction of directors and approval of a general meeting of stockholders in a small stock company;

Where a director makes a transaction with a company on his/her own account or a third party’s account, the board of directors shall, in advance, clarify important facts about the transaction and obtain approval from the board of directors (Article 398 subparag. 1 of the Commercial Act): Provided, That a company with the total capital of less than one billion won, one or two directors, in lieu of the board of directors’ general meeting, shall, in advance, specify the above facts and obtain approval from the general meeting of shareholders (Article 383(4)

Article 398 of the Commercial Act aims to prevent directors, etc. from promoting their own interest or a third party's interest by making transactions with the company using their status, and from causing unexpected damages to the company and its shareholders. In order to strengthen control over the private interest trend of directors, controlling shareholders, etc., the scope of the application is extended to major shareholders, etc. other than directors, and the requirements for approval of the board of directors are increased. However, in the case of a small-scale company with not more than two directors under Article 383 of the Commercial Act, approval of the board of directors is replaced by approval of the board of directors. In the process of interpreting and applying this provision, the legislative intent of restricting the company'

Generally, it cannot be deemed that the same applies to a resolution of a general meeting of shareholders solely on the ground that the shareholders who have shares meeting the quorum of a general meeting of shareholders consented or approved (see Supreme Court Decision 2016Da241515, 241522, Jun. 4, 2020). Therefore, if the total capital amount is less than one billion won and a director of a company who has less than one billion won makes a transaction with a company on his/her own or a third party’s account and did not obtain the approval of a general meeting of shareholders, such transaction shall be deemed null and void, barring any special circumstances.

2. The judgment of the court below

The lower court determined that the instant share acquisition agreement between the Plaintiff and the Intervenor was null and void for the following reasons.

A. The instant share acquisition agreement ought to undergo a prior resolution of the general meeting of shareholders by which one of the Plaintiff’s two directors was entered into by the Intervenor joining the Defendant at the time of the Plaintiff, and there is no evidence to acknowledge that the agreement had gone through the said resolution.

B. At the time of the conclusion of the instant stock acquisition agreement, the Defendant’s Intervenor, the representative director of the Defendant, owned 65% of the Plaintiff’s shares, and the Plaintiff received 600 million won payment from the Defendant’s Intervenor as the instant stock acquisition price, and lent it to the Korean New Daily Co., Ltd., Ltd.., the Plaintiff. However, this fact alone is insufficient to recognize that there was a special circumstance to deem the instant stock acquisition agreement as valid even if there was no resolution of the general

3. Supreme Court Decision

The lower judgment is justifiable in light of the foregoing legal doctrine. In so doing, the lower court did not err by misapprehending the legal doctrine on the special circumstances in which directors would recover the deficiencies of the resolution of the general meeting of shareholders, or by failing to exhaust all necessary deliberations, contrary

4. Conclusion

The appeal by the Intervenor joining the Defendant is dismissed as it is without merit, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Dong-won (Presiding Justice)