[1] Status and authority of directors of social welfare foundation and dismissal procedure

[2] In a case where a director dismissal agenda not specified at the time of the notice of convening the board of directors of a social welfare foundation was presented to the board of directors, whether the violation of the convening procedure is cured solely on the ground that all the directors including the pertinent director were present at the board of directors (negative in principle), and the burden of proving the consent to remedy the defect (=the

[1] Directors of a social welfare foundation are not simple enforcement agencies, and have the status and authority corresponding to independent agencies for the public interest, and have high-level public interest duties that should exercise their authority properly through mutual checks and balance. In light of this, new appointment of directors and dismissal of existing directors by the board of directors of a social welfare foundation shall cause direct changes to the members of the board of directors, which are the core agencies of the social welfare foundation, thereby adversely affecting the public interest activities of the social welfare foundation, and there are no laws and regulations that enable the dismissed directors to claim the cancellation of dismissal due to the substantive reasons for the dismissal. Therefore, the procedure for dismissal of the existing directors by the board of directors is strictly applied to the procedure stipulated in the above laws and the articles of incorporation of the social welfare foundation so that it can conform to the purpose of the Act on the Establishment and Operation of Social Welfare Services and Public Interest Corporations, and thus, the opportunity to prepare for the director to exercise the right of deliberation on the directors representing the

[2] In a case where a director dismissal agenda which was not notified in advance was presented to the board of directors of a social welfare foundation, unless the director gives consent that the dismissal agenda was added to the purpose of the meeting and that the violation of the convocation procedure of the board of directors was cured, the mere fact that all the directors present at the board of directors, and the purpose of the meeting is not to remedy any defect in the convocation procedure of the board of directors which was not notified to each director seven days before the meeting, and the same applies even if the director is a representative with the authority to convene the board of directors (in particular, if the four directors of a social welfare foundation dismiss only one director and make it impossible to temporarily satisfy the number of five or more directors who are strong under the Social Welfare Services Act, such interpretation should be more necessary). The fact that such consent was obtained shall be proved by a person who asserts that the resolution of the board of directors is valid.

[1] Articles 18(1) and (5), 22, and 32 of the Social Welfare Services Act, Articles 5(5), 6(2), and 7(1) of the Act on the Establishment and Operation of Public Interest Corporations / [2] Article 32 of the Social Welfare Services Act, Article 8(3) and (4) of the Act on the Establishment and Operation of Public Interest Corporations

Plaintiff (Attorney Yoon Jae-in, Counsel for the plaintiff-appellant)

Defendant

An intervenor;

Seoul High Court Decision 2006Na72705 decided Oct. 19, 2007

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

We examine the grounds of appeal.

A social welfare foundation shall have at least five directors including the representative director, and when appointing and dismissing its officers, the Minister for Health, Welfare and Family Affairs shall report without delay to the Minister for Health, Welfare and Family Affairs. The Minister for Health, Welfare and Family Affairs may order a juristic person to dismiss its executives (Articles 18(1) and (5) and 22 of the Social Welfare Services Act). Furthermore, the board of directors of a social welfare foundation shall be composed of directors, and the number of persons having special relations prescribed by Presidential Decree in organizing it shall not exceed 1/5 of the current number of directors. In light of the foregoing, the social welfare foundation’s budget, settlement of accounts, loans, and assets shall not exceed 1/5 of the current number of directors, matters concerning the amendment of the articles of incorporation, matters concerning the dissolution of a social welfare foundation, matters concerning the appointment and dismissal of officers, profit-making business, etc. (Article 32 of the Social Welfare Services Act, Articles 5(5), 6(2) and 7(1) of the Act on the Establishment and Operation of Public Interest Corporations, and the directors of public nature seems to have a high level of position and authority.

In light of the status and authority of the directors of a social welfare foundation, the appointment of a new director by the board of directors of a social welfare foundation and the dismissal of an existing director by the board of directors shall cause direct changes to the members of the board of directors, which are the core institutions of the social welfare foundation, and thereby have a decisive influence on the public interest activities of the social welfare foundation, and there are no laws and regulations that allow the dismissed directors to claim the revocation of the dismissal due to the substantive reasons for the dismissal. Therefore, the procedure of dismissal of the existing director by the board of directors is strictly applied to the procedure stipulated in the above Acts and the articles of incorporation of the relevant social welfare foundation so that it can conform to the purpose of the Act on the Establishment and Operation of Social Welfare

However, when a social welfare foundation convenes a board of directors, it shall notify each director of the purpose of the meeting at least seven days prior to the meeting of the board of directors: Provided, That this shall not apply where all the directors attend the board of directors and request the convocation of the board of directors, and where it is impossible to convene the board of directors for at least seven days due to a vacancy in the authority to convene the board of directors or a challenge, it may convene the board of directors with the approval of the supervisory authority at the same time as the majority of the directors registered at the board of directors. In such a case, the articles of incorporation stipulate that the directors shall preside over the board of directors (Article 32 of the Social Welfare Services Act, Article 8(3) and (4) of the Act on the Establishment and Operation of Public Interest Corporations). In light of the above legal principles, unless a prior notice is presented to the board of directors, unless all the directors present at the board of directors for the purpose of the meeting, and therefore, they can prove that there is any defect in the procedures for convening the board of directors at least seven days prior to the meeting.

Nevertheless, the court below held that the resolution on the removal of the non-party from office of the 61st board of directors of this case is valid even if the non-party was not specified at the time of the notice of convening the board of directors, on the premise that the non-party was dismissed by the above resolution of the 61st board of directors, and that the resolution on the removal of the non-party from office of the non-party is valid unless there are any special circumstances. The court below erred in the misapprehension of legal principles as to the removal procedure of the director from office of the 61st board of directors of this case, which is a social welfare foundation established under Article 3 (1) of the Social Welfare Services Act, in order to carry out life-saving, emergency patient delivery, and safety prevention projects due to various disasters, or the non-party's non-party's non-party's non-party's non-party's non-party's non-party's non-party's non-party's non-party's non-party's non-party's dismissal.

Therefore, without further proceeding to decide on the remaining grounds of appeal by the Plaintiff, 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 Park Ill-sook (Presiding Justice)