Whether shareholders of a parent company who is not shareholders of a subsidiary can file a so-called double derivative suit against directors of the subsidiary company (negative)

Even if a company owns all or most of the shares of another company and is in a parent-subsidiary relationship bilaterally, and a subsidiary suffers loss due to unlawful acts such as directors, etc., the parent-subsidiary and its subsidiary are separate legal entities under the Commercial Act, and are limited to shareholders of the pertinent company to which the director who should be held responsible for the derivative suit belongs. Thus, a shareholder of the parent-subsidiary who is not a shareholder of the subsidiary may not file a so-called double derivative suit to enforce liability against directors, etc. of the subsidiary under Articles 403 and 415 of the Commercial Act.

Articles 403 and 415 of the Commercial Act

Court Decision (Attorney Lee Jong-soo et al., Counsel for the plaintiff-appellant)

[Defendant-Appellee] Plaintiff 1 and 2 others (Law Firm Kim & Lee, Attorneys Song Jae-soo et al., Counsel for

Defendant 1 (Law Firm, Kim & Lee, Attorneys Song-soo et al., Counsel for the defendant-appellant)

Kim Young-young and two others (Law Firm Pacific, Attorneys Song Jae-soo et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2002Na13746 delivered on August 22, 2003

The part of the lower judgment against Defendant 1 is reversed, and that part of the lawsuit is dismissed. All of the Plaintiff’s appeals are dismissed. The costs of appeal against the dismissed part and the total costs of appeal against the dismissed part are assessed against the Plaintiff

1. Judgment on the Plaintiff’s grounds of appeal

A. As to the first and second points

According to the reasoning of the judgment below, the court below acknowledged that the non-party 1 company's claim for damages due to the sale of shares at low prices of the non-party 1 company to the non-party 3 company, the non-party 1 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 3 company's non-party 1 company's non-party 3 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 3 company's non-party 1 company's non-party 1 company's non-party 3 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 3 company's non-party 1 company's non-party 1 company's non-party 1 company's non-party 2 company's non-party 1 company's non-party 1 company's shares.

The facts acknowledged in the relevant criminal judgment can also be the only evidence in a civil trial unless there are any special circumstances. However, in a case where it is deemed difficult to adopt a factual judgment of the criminal judgment as it is in light of other evidence submitted in the civil trial, the court may dismiss it (see Supreme Court Decision 2004Da4386, Apr. 28, 2004, etc.).

In light of the above legal principles and records, we affirm the above fact-finding and judgment of the court below as just, and there is no error in the misapprehension of legal principles as to the directors and auditors' liability without exhaust all necessary deliberations as alleged in the grounds of appeal, or by misapprehending the rules of evidence.

B. On the third ground for appeal

According to the reasoning of the judgment below, the court below acknowledged the facts based on its adopted evidence, and found that the "transfer of the whole or essential part of the business" under Article 374 (1) of the Commercial Act, which requires a special resolution of the general meeting of shareholders, means the transfer of the whole or essential part of the property organized for a certain business purpose and functioned as an organic whole. Thus, the transfer of the whole or essential part of the business activity of the transferring company by the acquiring company should be accompanied by the succession of the whole or essential part, and mere transfer of the business property does not constitute the transfer of the transferring company's business property. Thus, even if the non-party 3 did not have any particular property except for the holding of the non-party 1's shares, the court below determined that the non-party 3's sale of the securities and shares sold to the non-party 2 cannot be deemed to constitute the "transfer of the important part of the property for business use to the extent subject to the regulation of the business transfer under the Commercial Act because it did not reach the degree of change in the governance of the non-party 1 company.

In light of the relevant legal principles and records, the above fact-finding and judgment of the court below are just, and there is no error of law by misunderstanding the legal principles as to the transfer of important business assets which require a special resolution of the general meeting of shareholders as alleged in the grounds of appeal. Meanwhile, according to the court below's finding on April 19, 1994, the part sold 2.80,00 shares among the shares of the non-party 1's company held by the non-party 3 to the defendant Jong-sung, the non-party 1, the non-party 1, the non-party 1, and the Kim Young-young was entirely returned to the non-party 3's ownership by the cancellation of the share transfer contract on May 6 of the same year. Thus, it is clear that the non-party 3 company did not cause damage to the plaintiff's assertion. Thus, even if the court below did not determine whether the special resolution of the general meeting of shareholders was necessary, the decision did not affect the conclusion of the judgment.

2. As to Defendant 1’s ground of appeal

A. The judgment of the court below

The court below found that, as a shareholder of the non-party 1 company, the non-party 3 company's shareholder, who is the representative director of the non-party 1 company, the non-party 1 company's company's company's occupational embezzlement, the non-party 1 company's liability for damages added at the court below's decision on behalf of the above defendant 1 company, where a certain company owns the whole or most of the shares of another company and is in a parent-subsidiary relationship bilaterally, where the shareholder of the parent company suffered damages due to illegal acts such as directors, etc., the so-called double derivative suit in which the shareholder of the parent company directly files a derivative suit against the directors of the subsidiary company for the purpose of the subsidiary is difficult to assess the indirect damages of the parent company due to the illegal acts of directors of the parent company or the director of the parent company. If the shares of the subsidiary are divided into several companies, it is difficult to recognize the effect of double derivative suit in which the shareholders of the non-party 1 company's subsidiary company's own shareholders could be reduced by 70 shareholders' expectation and other shareholders' damages.

B. Judgment of the Supreme Court

However, we cannot accept the above decision of the court below for the following reasons.

Article 403(1) and (3) of the Commercial Act provides that a shareholder who holds no less than 1/100 of the total number of issued and outstanding shares may file a lawsuit against the company to enforce the liability of directors. If a company fails to file a lawsuit within 30 days from the date it receives such request, the above shareholder may immediately file a lawsuit for the company. This provision applies mutatis mutandis to an auditor under Article 415 of the Commercial Act. One company owns all or part of the shares of the other company and is in a parent-subsidiary relationship bilaterally by holding them, and the subsidiary suffered damages due to illegal acts such as directors, etc., even though the parent company and its subsidiary are separate legal entities under the Commercial Act, and are limited to a shareholder of the company in which the director who should be held responsible for the representative lawsuit belongs. Thus, a shareholder of the parent company who is not a shareholder of the subsidiary may not file a so-called double representative lawsuit to enforce the liability of directors of the subsidiary company under Articles 403 and 415 of the Commercial Act. Thus, the lawsuit against the plaintiff's eligibility for the non-party 1.

Nevertheless, the court below recognized the plaintiff's qualification on the premise that double derivative suit is possible. Thus, the court below's decision on this part is erroneous in the misunderstanding of legal principles as to the plaintiff's qualification in a shareholder's derivative suit, which affected the conclusion of the judgment. Thus, it cannot be maintained without the need to determine the merits.

3. Conclusion

Therefore, all of the Plaintiff’s appeals are dismissed, and the costs of appeal are assessed against the Plaintiff. Of the judgment below, the part against Defendant 1 among the judgment below is reversed, and this part of the case is decided to be self-reader as it is sufficient for the court to directly render a judgment. For the same reason as seen earlier, this part of the lawsuit is dismissed as it is unlawful, and the total costs of the lawsuit against the dismissal of the lawsuit are borne by the Plaintiff.

Justices Lee Hong-hoon (Presiding Justice)