[1] Where the reorganization plan of the reorganization company which is a primary debtor provides for conversion of investment in lieu of satisfaction of the reorganization claim, the extent of extinction of the guaranteed obligation of the guarantor of the reorganization company

[2] The method of calculating the market price of equity swap stocks under the net asset value law, etc. in a case where the reorganization company implements large-scale reduction of capital for the old stocks, conversion of investment into equity for reorganization creditors, etc., and large-scale issuance of new stocks to the underwriter who prepaid the purchase price of new stocks at a short time under the former Company Reorganization Act

[1] Articles 22(1) and 240(2) (see current Article 206(1) of the former Company Reorganization Act (repealed by Article 2 of the Addenda of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428, Mar. 31, 2005); Articles 22(1) and 240(2) of the former Company Reorganization Act (see current Article 250(2) of the Debtor Rehabilitation and Bankruptcy Act); Articles 428 and 466 of the Civil Act / [2] Articles 22(1) of the former Company Reorganization Act (repealed by Article 2 of the Addenda of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428, Mar. 31, 2005; see current Article 206(1)); Article 240(2) (see current Article 250(2) of the Debtor Rehabilitation and Bankruptcy Act); Articles 428 and 466 of the Civil Act

[1] Supreme Court Decision 2002Da12703, 12710 decided Jan. 10, 2003 (Gong2003Sang, 612) Supreme Court Decision 2009Da47739 decided Nov. 12, 2009 (Gong2009Ha, 2084)

E.O.N.D. (LLC, Kim & Lee LLC, Attorneys Park Dong-chul et al., Counsel for the defendant-appellant)

Defendant 1 and one other (Law Firm Ulil, Attorney Shin-il, Counsel for the defendant-appellant)

Seoul High Court Decision 2008Na80816 decided May 14, 2009

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

The grounds of appeal are examined.

1. Article 240 (2) of the former Company Reorganization Act (repealed by Article 2 of the Addenda of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005, hereinafter the same applies) provides that the reorganization plan does not affect any rights of reorganization creditors or security holders against guarantors or other persons who bear obligations together with the company, and any security provided by other persons than the company for reorganization creditors or security holders. However, where the reorganization plan of the reorganization company, which is the principal debtor, provides that a conversion of investment shall be made in lieu of satisfaction of the reorganization claim, the guarantor's guarantee obligation of the reorganization company shall be deemed to have been repaid within the scope of the amount of the reorganization claim calculated by evaluating the market price of new stocks acquired by the reorganization creditor as of the date of entry into force of the issuance of new stocks through a conversion of investment and in lieu of satisfaction of the reorganization claim through a conversion of investment (see, e.g., Supreme Court Decisions 2002Da12703, Nov. 10, 2003>

In a case where the reorganization company has submitted and approved the reorganization program to implement a large scale reduction of capital for the old stocks, a debt-to-equity swap to reorganization creditors, etc., and a large-scale new stocks for an underwriter who prepaid the acquisition price of new stocks at a short time under the former Company Reorganization Act, and its contents are publicly announced, the financial structure of the reorganization company under the reorganization plan and the number of issued stocks are certain information available to the market. Thus, even if the new stocks issued through a debt-to-equity swap (hereinafter “investment conversion stocks”) are not yet implemented under the reorganization plan as at the effective date of the stocks issued through a debt-to-equity swap (hereinafter “investment conversion stocks”), it is reasonable to view that the market price of the debt-to-equity swap stocks is formed by reflecting the circumstance that the large-scale capital increase is to be implemented under the reorganization plan, unless there are special circumstances. Therefore, where the market price of the debt-to-equity swap stocks is calculated under the Net Asset Value Act because it is difficult to prove the normal practices of trading stocks on the debt-to-equity swap stocks at the time of the stock.

(2) According to the reasoning of the judgment of the court of first instance as cited by the court below, New Co., Ltd. (hereinafter referred to as "New Co., Ltd.") shall enter into an investment contract with 6,24.7 billion won between the underwriter and 200,000,000 won of New Co., Ltd. on December 5, 2003, with the purpose of corporate acquisition procedures for business normalization under the former Company Reorganization Act; (3) the period for submission of new Co., Ltd. (hereinafter referred to as "Co. 2"); (4) the period for submission of new Co., Ltd. under the above 206,000,000,000 won and 4.0,000 won of new Co., Ltd. (hereinafter referred to as "New Co., Ltd."); (3) the period for delivery of new Co. 4, 200,000 won of new Co., Ltd. (hereinafter referred to as "this case's new Co. 1, 2003).

We examine the above facts in light of the legal principles as seen earlier. In this case, the extent of extinguishment of the guaranteed debt of the Defendants, the guarantor, depending on the amount actually satisfied through the debt-to-equity swap according to the above alteration plan, which was a reorganization creditor at the time of the above debt-to-equity swap, differs from the extent of the above alteration plan. The net asset value of the reorganization company, the plaintiff was 1,709,510,731,966 won, which was the effective date of the above debt-to-equity swap, and the total number of shares issued by the reorganization company at that time was 726,540 shares (113,89 shares after the old debt-to-equity swap + 612,651 shares after the above debt-to-equity swap), it is reasonable to calculate the net asset value per share by simply dividing the above net asset value into the number of shares. Furthermore, the method of calculating the net asset value of the company's stock-to-equity swap through the above alteration plan should be considered.

Nevertheless, the lower court determined that: (a) the calculation of net asset value per share of the instant equity swap as of the effective date of the instant equity swap as of the date of the entry into force of the said equity swap was based on logical inconsistency, and that KRW 2,352,948, which was calculated by dividing the net asset value of KRW 1,709,510,731,96 by the number of issued shares of the said reorganization company as of February 4, 2004; and (b) the net asset value per share of the instant equity swap. In so doing, the lower court erred by misapprehending the legal doctrine on the valuation of the equity swap shares of the liquidation company and the scope of the extinguishment of guaranteed liabilities due to the said equity swap of the liquidation company, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal assigning

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ahn Dai-hee (Presiding Justice)