Whether only shareholders on the register of shareholders can exercise shareholders' rights such as voting rights (affirmative in principle), and in this case, whether a company may deny the exercise of shareholders' rights by shareholders on the register of shareholders or recognize the exercise of shareholders' rights by those who did not complete entry on the register of shareholders (negative in principle)

Articles 337(1), 352(1), and 353(1) of the Commercial Act

Supreme Court en banc Decision 2015Da248342 Decided March 23, 2017 (Gong2017Sang, 847)

Plaintiff (Law Firm, Kim & Lee LLC, Attorneys Kim Jong-soo et al., Counsel for the plaintiff-appellant)

Pung Electronic Industry Co., Ltd. (Law Firm LLC, Attorneys Cho Il-bong et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2015Na2059748 decided October 28, 2016

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

The grounds of appeal are examined.

1. Of the grounds of appeal No. 2, determination as to the allegation that the progress of the general meeting of shareholders is unlawful or unfair

The court below determined that the progress of the general meeting of shareholders of this case cannot be deemed unlawful after the resolution of appointment of non-Confidence and non-party 1 as Speaker pro tempore, according to the circumstances acknowledged by the evidence of the judgment.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court’s aforementioned determination is acceptable. In so determining, it did not err by misapprehending the legal doctrine on defects in the resolution of the general meeting of shareholders.

2. Of the grounds of appeal No. 2, determination as to the allegation that there is a defect in the resolution of the general meeting of shareholders

A. The reason for the establishment of the shareholder registry system under the Commercial Act is to ensure the efficiency and legal stability of business affairs related to the issuance and transfer of stocks so that a company can process the legal relations related to a large number of shareholders in accordance with the form and uniform criteria, which can be easily identified externally, due to the nature of organizational legal relations where the composition of a shareholder continues to change following the issuance and transfer of stocks. This is to uniformly determine persons entitled to exercise shareholder rights according to the entry in the shareholder registry without a separate examination of the substantive legal relations with the stockholders. Therefore, the exercise of shareholder rights can be considered to have a significant impact on the legal relations between the company and the large number of interested parties surrounding the company, and the convenience of the company with respect to the handling of

Therefore, barring special circumstances, a person who is lawfully entered in the register of shareholders may exercise a shareholder’s right, such as voting rights, in relation to the company, and the company may not deny the exercise of a shareholder’s right by a shareholder on the register of shareholders, regardless of the existence of another person who actually owns shares, other than the shareholder on the register of shareholders, regardless of the existence of another person who actually owns the shares. (See Supreme Court en banc Decision 2015Da248342 Decided March 23, 2017).

B. According to the reasoning of the judgment below, the court below determined that the non-party 4 did not err in exercising voting rights on the shares of this case by delegation from the majority of inheritance right holders at the general meeting of shareholders of this case, on the ground that the shares of this case entered in the name of the defendant non-party 2 in the name of the defendant in the name of the non-party 2 title trust to the non-party 2.

C. However, in light of the above legal principles, the above determination by the court below is not reasonable. In other words, inasmuch as Nonparty 2 legally enters the shares of this case as the Defendant’s shareholders’ list is recorded as the Defendant’s shareholders, his exercise of rights, such as voting rights, in relation to the shares against the Defendant, and the Defendant cannot deny Nonparty 2’s exercise of rights, regardless of whether he was aware of the existence of another person who actually owns the shares, or whether he was unaware of the existence of another person who actually owns the shares, and the deceased’s heir

Nevertheless, the court below did not examine whether Nonparty 2, who is entitled to exercise shareholder rights in relation to the company, attended the general meeting of shareholders in this case, if he delegated his proxy voting rights, whether the delegation was valid, and accordingly whether the requirements for resolution of the general meeting of shareholders in this case were met. The court below held that Nonparty 4, who was delegated by the deceased, did not err in exercising shareholder rights in this case on the premise that the deceased’s heir is able to exercise the voting rights in this case. The court below erred by misapprehending the legal principles on the exercise of shareholder rights by those who are listed as shareholders in the

3. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)