[1] Standard for determining whether there exists “interest in confirmation” as a requirement for protection of rights in a lawsuit for confirmation

[2] Where a court permits a minority shareholder who seeks the convocation of a general meeting to convene a general meeting pursuant to Article 366(2) of the Commercial Act and did not specifically specify the convocation period, the time when the minority shareholder should convene the general meeting (i.e., within a reasonable period from the date of the decision to permit the convocation of the general meeting)

[3] Article 394(1) of the Commercial Act provides that an auditor in a lawsuit between a director and a company shall represent the company

[4] The case holding that Article 394 (1) of the Commercial Act does not apply to the lawsuit in this case because it is difficult to view that allowing the temporary representative director Eul to represent the company Gap, in case where Eul, a temporary representative director of Gap corporation, claimed the absence of a resolution of appointment of director against Byung who was appointed as a director at a general meeting of shareholders of Gap corporation on behalf of the minority shareholders of Gap corporation, and sought confirmation of the absence of director status, Byung asserted that Byung should represent the company pursuant to Article 394 (1) of the Commercial Act

[1] A lawsuit for confirmation requires the benefit of confirmation as a requirement for protection of rights, and the benefit of confirmation is recognized when a judgment for confirmation is rendered at the time of the most effective means to eliminate the Plaintiff’s rights or legal status in danger and danger.

[2] The court may permit a minority shareholder who seeks the convocation of a general meeting pursuant to Article 366(2) of the Commercial Act to convene the general meeting. Even if the court does not specifically specify the convocation period of the general meeting, the shareholder who obtained the permission to convene the general meeting must convene the general meeting within a reasonable period in light of the purpose of convening the general meeting. In cases where the power to convene the general meeting is granted to minority shareholders, the matters to be resolved at the general meeting are already determined and may be changed due to the circumstances which served as the basis for the decision to convene the general meeting after the lapse of a given period. Considering that minority shareholders can convene the general meeting without any time constraints, it permits minority shareholders, other than the board of directors, to attend the general meeting for a prolonged period of time, and the board of directors should lose balance compared with the requirement of convening the general meeting without delay where minority shareholders request the convocation procedure. Therefore, if the general meeting does not convene within a considerable period from the date of the decision to permit convening the general meeting, the convening authority pursuant to the convocation decision becomes extinct, barring special circumstances.

[3] Article 394(1) of the Commercial Act provides that an auditor shall represent a company with respect to a lawsuit between a director and a company. This is to prevent a conflict of interest and ensure fair performance of a lawsuit, as it is easy to resolve conflicts of interest between a director and a company.

[4] The case holding that Article 394 (1) of the Commercial Act does not apply to the lawsuit above, in case where Eul, a temporary representative director of Gap corporation, on behalf of Gap corporation, claimed non-existence of a resolution of appointment of director and sought confirmation of non-existence of director status against Byung who was appointed as a director at a general meeting of shareholders of Gap corporation on behalf of the minority shareholders of Gap corporation, and Byung asserted that Byung must represent the corporation under Article 394 (1) of the Commercial Act, since Eul filed an application for a temporary representative director and director appointment of Eul, on the ground that there was no person who legally represent Gap corporation, and even if Eul, a temporary representative director of Gap corporation, and a temporary representative director, were appointed, it cannot be deemed that it impedes fair performance of a lawsuit.

[1] Article 250 of the Civil Procedure Act / [2] Article 366 (2) of the Commercial Act / [3] Article 394 (1) of the Commercial Act / [4] Article 394 (1) of the Commercial Act

[1] Supreme Court Decision 2006Da68650, 68667 Decided February 9, 2007 (Gong2007Sang, 435) Supreme Court Decision 2014Da208255 Decided March 15, 2017 (Gong2017Sang, 739) / [3] Supreme Court Decision 2000Da9086 Decided March 15, 2002 (Gong2002Sang, 864)

Plaintiff 1 (Attorney Kim Jong-il, Counsel for the plaintiff-appellant)

Si Reconstruction Distribution Management Co., Ltd. (Attorney Kim Jong-il, Counsel for the plaintiff-appellant)

Defendant (Bae, Kim & Lee LLC, Attorneys Lee Dong-chul et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2016Na2034081 decided November 18, 2016

All appeals are dismissed. The costs of appeal between the plaintiff 1 and the defendant are assessed against the plaintiff 1, and the costs of appeal between the plaintiff 1 and the defendant are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to Plaintiff 1’s ground of appeal

A. A. A lawsuit seeking confirmation requires the benefit of confirmation as a requirement for the protection of rights, and the benefit of confirmation is recognized when a judgment for confirmation is rendered at the time of the most effective means to eliminate the Plaintiff’s rights or legal status in danger and danger (see, e.g., Supreme Court Decisions 2006Da68650, 6867, Feb. 9, 2007; 2014Da208255, Mar. 15, 2017).

B. According to the reasoning of the judgment below, the court below determined that the lawsuit by Plaintiff 1 cannot be deemed as a valid and appropriate means for fundamentally resolving the dispute between the parties surrounding the status of the Defendant’s director, and thus there is no interest in confirmation on the ground that the lawsuit by Plaintiff 1 cannot be deemed as a valid and appropriate means for fundamentally resolving the dispute between the parties surrounding the status of the Plaintiff’s director, on the following grounds: (a) the Defendant, as an internal director of the Plaintiff Company, participated in the management of the Plaintiff Company; and (b) the Plaintiff 1, as a shareholder, filed the lawsuit in this case for the purpose of eliminating anxiety and risk that the Plaintiff 1 would suffer disadvantages; and (c) the Plaintiff 1, as an internal director of the Plaintiff Company, shall be confirmed against the Plaintiff Company.

C. Examining the above legal principles and records, the above determination by the court below is justifiable. Contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the interest in confirmation.

2. As to the Defendant’s ground of appeal

A. As to the extinction of the power to call a general meeting of minority shareholders

1) A court may permit a minority shareholder who seeks the convocation of a general meeting pursuant to Article 366(2) of the Commercial Act to convene the general meeting. Even if the court does not specifically specify the convocation period of the general meeting, the shareholder who has obtained the permission to convene the general meeting must convene the general meeting within a reasonable time in light of the purpose of convening the general meeting. In cases where the power to convene the general meeting is granted to minority shareholders, the matters to be resolved at the general meeting are already determined and may be changed due to the circumstances which served as the basis for the decision to permit convening the general meeting after the lapse of a given period. Considering that minority shareholders can convene the general meeting without any time constraints, it permits minority shareholders, other than the board of directors, to attend the general meeting for a prolonged period of time, and that the board of directors would lose balance compared to without delay taking the convocation procedure where minority shareholders request the convocation of the general meeting. Therefore, if the general meeting does not convene within a considerable period from the date of the decision to permit convening the general meeting, whether considerable period has elapsed from the convocation decision becomes extinct, barring special circumstances.

2) On the grounds indicated in its reasoning, the lower court determined that the convening authority was extinguished at the time of convening the instant final general meeting of shareholders after a considerable period of time after the instant convocation permission decision.

3) Examining the foregoing legal doctrine in light of the foregoing, the lower court did not err by misapprehending the legal doctrine on the extinction of the power to convene a general meeting, as otherwise alleged in the grounds of appeal.

B. As to the assertion of defects in the legal representation right

1) As the instant lawsuit, the Plaintiff asserted the absence of a resolution of appointment of director and sought confirmation of the absence of the status of the Defendant’s director against the Defendant appointed at the instant final general meeting of shareholders. The allegation in the grounds of appeal is that, where the Plaintiff filed a lawsuit against the director, the auditor represents the company pursuant to Article 394(1) of the Commercial Act, and if there is no representative, the special representative should have been appointed pursuant to Article 62 of the Civil Procedure Act.

2) Article 394(1) of the Commercial Act provides that an auditor shall represent a company with respect to a lawsuit between a director and a company. This is to prevent such conflict of interest and ensure fair performance of a lawsuit (see Supreme Court Decision 2000Da9086, Mar. 15, 2002). However, according to the facts acknowledged by the court below, prior to the institution of the lawsuit in this case, Plaintiff 1 files an application with the court for temporary appointment of the representative director and director of the Plaintiff company (Seoul Southern District Court Decision 2015Da10022, Seoul Southern District Court Decision 2015Da10022), and Nonparty 1 was appointed as a temporary representative director and director of the Plaintiff company. Thus, even if the lawsuit in this case had the temporary representative director of the Plaintiff company represent the Plaintiff company, it cannot be deemed that this would undermine fair performance of a lawsuit, and therefore, Article 394(1) of the Commercial Act of this case is not applicable.

3) Therefore, the lower court did not err by misapprehending the legal doctrine on the application of Article 394(1) of the Commercial Act, contrary to what is alleged in the grounds of appeal, on the premise that Article 394(1) of the Commercial Act cannot be applied to the instant lawsuit.

C. As to the remaining grounds of appeal

1) The defendant asserts that the court below had examined whether the above minority shareholders exercised the authority to convene a general meeting in accordance with the above convocation permission decision of this case at the time of the final convocation of the general meeting of this case, the court below did not properly examine whether the provisional general meeting permitted by the court in this case and the provisional general meeting held on December 6, 2007 are the same as the temporary general meeting held on the convocation permission decision of this case, and that there was an error of failing to exercise the authority to convene a general meeting.

2) According to the reasoning of the judgment below, the court below did not determine that the convening authority was extinguished because the purpose of the convening authority was achieved by holding a temporary general meeting in accordance with the decision on permission to convene the convocation of this case, but determined that the convening authority was extinguished at the time of convening the final general meeting of this case after a considerable period of time after the decision on permission to convene the convocation of this case. Accordingly, the above ground of appeal on the premise different from the judgment of the court

3. Conclusion

Therefore, all appeals by Plaintiff 1 and by Defendant against Plaintiff Company are dismissed. The costs of appeal between Plaintiff 1 and Defendant are assessed against Plaintiff 1, and the costs of appeal between Plaintiff 1 and Defendant are assessed against Defendant. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa (Presiding Justice)