In cases where rehabilitation procedures have commenced against the company pursuant to the Debtor Rehabilitation and Bankruptcy Act, whether the application of Article 466(1) of the Commercial Act that provides for the right to claim perusal and copy of the accounting books, etc. of minority shareholders is excluded (negative)

Article 466(1) of the Commercial Act recognizes a shareholder’s right to claim perusal and copy of the accounting books, etc., which hold no less than 3/100 of the total number of issued and outstanding shares of a company. In order for a shareholder to exercise various powers, such as a right to claim removal of directors (Article 385 of the Commercial Act), a right to claim removal of directors (Article 402 of the Commercial Act), a right to maintain an illegal act (Article 402 of the Commercial Act), and a right to representative litigation (Article 403 of the Commercial Act), the shareholder must have accurate knowledge and appropriate information about the company’s business or financial status. Since it is difficult to obtain sufficient information solely on the inspection of the financial statements kept by the company pursuant to Article 448 of the Commercial Act, the right to peruse and copy the accounting books and accounting documents which form the basis for the financial statements as above is recognized.

The right to claim inspection and copying of such minority shareholders’ account books, etc. shall be deemed not to be excluded from the company even after the commencement of rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”). Detailed reasons are as follows.

① The Debtor Rehabilitation Act excludes the application of the provisions of the Commercial Act concerning the reduction of the debtor’s capital, merger, etc. (Articles 264(2) and 271(3) of the Debtor Rehabilitation Act). However, when rehabilitation procedures commence for the debtor, the act of restructuring, such as reduction of capital, issuance of new shares, and merger, may not be performed without resorting to rehabilitation procedures (Article 55(1) of the Debtor Rehabilitation Act). However, Article 466(1) of the Commercial Act does not provide for the exclusion of the application of Article 466(1) of the same Act upon commencement of rehabilitation procedures for the company, and there is no provision that the shareholder may not exercise his/her right to peruse or copy the accounting books, etc. provided for in Article 466(1) of the Commercial Act, unless the rehabilitation procedures commence. Documents for which the shareholder may request perusal or copying pursuant to Article 466(1) of the Commercial Act include the accounting books and accounting documents, and the scope thereof is wider than those available to interested parties under the Debtor Rehabilitation Act.

② Even if rehabilitation procedures commence with respect to the company, if rehabilitation procedures are discontinued before the authorization of the rehabilitation plan is granted, the debtor’s right to carry out business and the right to manage and dispose of the company without the effect of exemption from rehabilitation claims, etc. (Article 251 of the Debtor Rehabilitation Act) or alteration of rights (Article 252 of the Debtor Rehabilitation Act), etc. Accordingly, even if rehabilitation procedures commence, the need for the shareholder to exercise his/her rights under Article 466(1) of the Commercial Act is not denied

(3) Where a shareholder’s request for inspection or reproduction of accounting books and documents is made pursuant to Article 466(1) of the Commercial Act, the company may refuse such request by proving that it is unreasonable. Whether the shareholder’s right to request inspection or reproduction is unjust should be determined by comprehensively taking into account various circumstances, such as the background leading to the exercise of the right, the purpose of the exercise, and the existence of bad faith. For the purpose of efficient rehabilitation of the obligor, rehabilitation procedures under the Debtor Rehabilitation Act have commenced against the company for the purpose of efficient rehabilitation, and where the shareholder exercises such right to request inspection or reproduction for the purpose of hindering the company’

Article 466 of the Commercial Act, Articles 55(1), 264(2) and 271(3) of the Debtor Rehabilitation and Bankruptcy Act

Supreme Court Decision 2017Da270916 Decided February 28, 2018 (Gong2018Sang, 635)

Applicant (Appointed Party) (Attorney Sun-ho et al., Counsel for defendant-appellant)

The respondent of the Korea Rehabilitation Foundation, the debtor, the debtor corporation, the debtor corporation, the debtor corporation, the debtor corporation, the vice versa.

Seoul High Court Order 2019Ra21185 dated May 12, 2020

The order of the court below is reversed, and the case is remanded to Seoul High Court.

The grounds of reappeal are examined.

1. Article 466(1) of the Commercial Act recognizes a shareholder’s right to claim inspection and copying of the accounting books, etc., which hold no less than 3/100 of the total number of issued and outstanding shares of a company. In order for a shareholder to exercise various powers, such as a shareholder’s right to claim removal of directors (Article 385 of the Commercial Act), right to claim removal of directors (Article 402 of the Commercial Act), right to maintain illegal act (Article 402 of the Commercial Act), and right to representative litigation (Article 403 of the Commercial Act), the shareholder must have accurate knowledge and appropriate information about the company’s business or financial status. Since it is difficult to obtain sufficient information solely on the financial statements kept by the company pursuant to Article 448 of the Commercial Act, the right to peruse and copy the accounting books and accounting documents, which form the basis for the financial statements, is recognized. However, the Commercial

The right to claim inspection and copying of such minority shareholders’ account books, etc. shall be deemed not to be excluded from the company even if rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”) commence. Detailed reasons are as follows.

A. The Debtor Rehabilitation Act excludes the application of the provisions of the Commercial Act to cases where specific matters, such as the reduction of the debtor’s capital and merger, are prescribed in the rehabilitation plan (Articles 264(2) and 271(3) of the Debtor Rehabilitation Act), and prohibits a debtor from undergoing rehabilitation procedures, such as capital reduction, issuance of new shares, a merger, etc. upon commencement of rehabilitation procedures (Article 55(1) of the Debtor Rehabilitation Act). However, Article 466(1) of the Commercial Act does not provide for the exclusion of the application of Article 466(1) of the same Act upon commencement of rehabilitation procedures with respect to the company, and there is no provision that a shareholder may not exercise his/her right to peruse or copy the accounting books, etc. provided for in Article 466(1) of the Commercial Act without undergoing rehabilitation procedures. Documents for which a shareholder may request perusal or copying pursuant to Article 466(1) of the Commercial Act are included in the accounting books and accounting documents, and the scope thereof is wider than those available to interested parties under the Debtor Rehabilitation Act.

B. If rehabilitation procedures are discontinued prior to the commencement of rehabilitation procedures, even if the rehabilitation procedures were to be approved prior to the commencement of the rehabilitation plan, the debtor’s right to conduct business and the right to manage and dispose of assets are recovered without the effect of exemption from rehabilitation claims, etc. due to authorization of the rehabilitation plan (Article 251 of the Debtor Rehabilitation Act) or alteration of rights (Article 252 of the Debtor Rehabilitation Act). Therefore, even if the rehabilitation procedures commenced, the need for the shareholder to exercise his/her right under Article 46

C. In the event of a shareholder’s request for inspection or reproduction of accounting books and documents as stipulated under Article 466(1) of the Commercial Act, the company may refuse such request by proving that it is unreasonable. Whether the exercise of shareholder’s right to request inspection or reproduction is unjust should be determined by comprehensively taking into account various circumstances, such as the background leading to the exercise of the right, the purpose of the exercise, and the existence of bad faith (see Supreme Court Decision 2017Da270916, Feb. 28, 2018). For the purpose of efficient rehabilitation of the debtor, rehabilitation procedures have commenced against the company for the sake of efficient rehabilitation of the debtor. If the shareholder exercises such right to request inspection or reproduction for the purpose of hindering the company’s rehabilitation, the company may refuse such request

2. The reasoning of the lower judgment and the record reveal the following facts.

A. The applicant (Appointed Party) and the designated parties (hereinafter “applicants”) filed an application for inspection and copying of the articles of incorporation, minutes of the general meeting of shareholders, documents of financial statements, etc. against Han shareholder Pung Pung Pung Pung, a corporation consisting of 11 shareholders (hereinafter “ Han shareholder Pung Pung”) pursuant to Article 396 (Articles of Incorporation, etc., Duty of Publication), Article 448 (Keeping and Publication of Financial Statements, etc.), Article 466 (Stockholder’s Right to Inspect) of the Commercial Act against Han shareholder Pung Pung, a corporation holding not less than 3/100 of the shares of 349,800 shares of Han shareholder Pung Pung, a corporation consisting of not less than 11 shareholders.

B. The court of the first instance accepted only an application for inspection and copying of the articles of incorporation, minutes of the general meeting of shareholders, statement of financial position, income statement, etc. (each of the documents listed in the quoted list of the first instance decision; hereinafter “documents quoted in the court of first instance”) of a set set forth in Articles 396 and 448 of the Commercial Act, and dismissed the application for inspection and copying of account books under Article 466(1) of the Commercial Act on the ground that there is insufficient vindication as to the right to be preserved and the necessity for preservation. Upon filing a complaint by the applicant, the applicant added an application for inspection and copying of the documents listed in Article 16 of the attached Table 2 of the order of the court below.

C. During the lower judgment, the Respondent, a representative director of Han Pung-gu, took over the Han Pung Pung Pung-si, as a custodian, under the Debtor Rehabilitation Act, relating to Han Pung-si Pung-si, etc.

D. In the above rehabilitation case, a report of investigation was prepared and submitted on the one shareholder opposition, and its contents include the fact that the sales amount for several years has been excessively appropriated and the expenses have been reduced by the window dressing accounting, such as appropriating the sales amount for the reasons that led to the commencement of rehabilitation procedures, etc.

3. For the following reasons, the lower court dismissed the application for inspection and copying of the remainder of the documents except the documents cited in the first instance trial and the documents additionally filed in the appellate trial (hereinafter “subject documents”).

A. From 2014 to 2014, the applicants sought perusal and copying of the accounting books and accounting documents kept by one shareholder. However, there is a lack of vindication of the specific grounds for the application, or there is no evidence to prove the substantial relationship between the reasons for the application and the documents concerned, and the period and scope thereof are too broad. Furthermore, there is no need to explain the need to require the respondent to send them by electronic mail and facsimile.

B. It is insufficient to vindicate that the materials submitted by the applicants alone have been cited in the first instance trial. Moreover, insofar as the report of investigation was prepared and submitted in the rehabilitation procedure for the Han-Salet, it is likely that the applicants can peruse the report of investigation to achieve a substantial part of the purpose of the application.

C. Of the relevant documents, the monthly minutes, etc. are difficult to be deemed as “accounting books and documents” under Article 466(1) of the Commercial Act, and there is no sufficient explanation as to the grounds for applying for perusal and copying of the instant documents and what substantial relationship exists.

4. However, in light of the above legal principles, the order of the court below cannot be accepted for the following reasons.

The applicants are not allowed to peruse the accounting books and accounting documents of one shareholder, even though they are seven shareholders exceeding a majority among the shareholders of one shareholder book composed of 11 shareholders. However, the respondent has a cumulative loss of KRW 00,000 as a result of the windowping accounting that has been performed as a sole representative director for several years, and the rehabilitation procedure began for this reason. Accordingly, the applicants have the right to request the respondent to peruse and copy the accounting books and accounting documents so that they can grasp the management status and request correction if necessary in the future.

Most of the documents subject to the application by the applicants for inspection and copying are difficult to be considered as documents that can be perused and copied in the rehabilitation procedure of one shareholder opposition.Although the rehabilitation procedure was commenced for one shareholder opposition, or the investigation report was submitted for the property status of one shareholder opposition and the process of entering the rehabilitation procedure, etc. in the rehabilitation procedure, it is not denied the need for the applicants, who are minority shareholders, to exercise their rights under Article 466(1) of the Commercial Act.

Nevertheless, the lower court rejected the applicant’s application for inspection and copying under Article 466(1) of the Commercial Act. The lower court erred by misapprehending the legal doctrine on the rights under Article 466(1) of the Commercial Act. The allegation in the grounds of reappeal assigning this error is with merit.

However, the lower court needs to examine the scope of documents subject to inspection and copying after remanding. The accounting books and documents that are subject to inspection and copying based on Article 466(1) of the Commercial Act should be limited to the reasons for the applicant to request inspection and copying, and their evidentiary materials (see Supreme Court Decision 9Da58051, Oct. 26, 2001). This is because it is improper for the applicant to exercise the above rights in the position of a monetary creditor who is not a shareholder (see Supreme Court Decision 2017Da270916, Feb. 28, 2018).

5. Therefore, without further proceeding to decide on the remainder of the grounds of reappeal, the order 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

[Separate] List of Appointors: Omitted

Justices Lee Dong-won (Presiding Justice)