2019Da205398 Claim for Share Certificates

Korea General Media Co., Ltd.

Law Firm Barun (LLC)

Attorney Park Jae-in, Counsel for the plaintiff-appellant

Syer Question Co., Ltd.

Intervenor joining the Defendant

Law Firm LLC et al., Counsel for defendant-appellant

[Defendant, Appellant] Gu Head of Gu and one other

Seoul High Court Decision 2016Na2003179 Decided December 6, 2018

.7.9

The appeal shall be dismissed.

The costs of appeal shall be borne by the intervenor joining the defendant.

The grounds for appeal are determined.

1. In order for a director to engage in a transaction with his/her own trade and for his/her own account or for the account of a third party in a small-scale stock company, the board of directors shall, in advance, specify important facts about the transaction and obtain approval from the board of directors (Article 398 subparag. 1 of the Commercial Act): Provided, That the company, the total amount of capital of which is less than one billion won, one or two directors, shall, instead of the board of directors, specify the above facts in advance at a general meeting of shareholders and obtain approval from the general meeting of shareholders (Article 383(4)

Article 398 of the Commercial Act aims to prevent profit-making by making a transaction with a company by taking advantage of such position as a director, etc., and to prevent unexpected damage to the company and its shareholders. In order to strengthen control over the private interest trend of directors, including directors and controlling shareholders, the scope of applicable B to major shareholders 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 only two directors under Article 383 of the Commercial Act, approval of the board of directors was required to be substituted by approval of the general meeting of shareholders. In the process of interpreting and applying this provision, the legislative intent of restricting self-transaction such as directors should not be neglected.

Generally, solely on the circumstance that shareholders who have shares meeting the quorum of a general meeting of shareholders have consented or approved in a stock company, it cannot be deemed the same as a resolution of a general meeting of shareholders of such contents (see Supreme Court Decision 2016Da241515, Jun. 4, 2020).

Therefore, barring any special circumstance, the transaction should be deemed null and void, barring any special circumstance, where a director of a company, the total amount of capital of which is less than one billion won, whose director is less than one billion won, has clarified the important facts about the transaction at a general meeting of shareholders before making the transaction with the company on account of his or her own account or a third party.

2. The judgment of the court below

For the following reasons, the lower court determined that the share acquisition agreement between the Plaintiff and the Intervenor was null and void.

A. The acquisition agreement of the instant shares ought to be concluded by the general meeting of shareholders as one of the two directors of the Plaintiff at the time of the Plaintiff and the Intervenor joining the Defendant, one of which was the Plaintiff’s directors, and there is no evidence to acknowledge that the agreement had been passed by the general meeting of shareholders.

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

3. Supreme Court Decision

The judgment of the court below is justifiable in light of the aforementioned legal principles. In the judgment of the court below, contrary to what is alleged in the grounds of appeal, the court below did not err by misapprehending the legal principles on special circumstances where the company would recover the deficiency in the resolution of the general meeting of shareholders or by misapprehending the facts

4. Conclusion

The appeal by the Intervenor against 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 on the bench.

Justices Lee Dong-won

Justices Kim Jae-hyung

Justices Min You-sook

Justices Noh Tae-ok