Cho Jae-2015-west-2389 (2015.08)

Although treasury stock transactions are null and void under the Commercial Act, they will be subject to the avoidance of wrongful calculation if transactions are valid under tax law.

Although the Plaintiff’s purchase of treasury shares is null and void, the Plaintiff appears to have no de facto obstacle to exercising and transferring ownership of the shares, and the Plaintiff’s transfer of shares to the representative director and the representative director actually controlled and managed the shares. Therefore, the Plaintiff’s treasury shares transaction is subject to the avoidance of wrongful calculation.

Article 52 of the Corporate Tax Act: Wrongful Calculation Board

2015Guhap79000 Revocation of Disposition of Imposing corporate tax, etc.

○○ Incorporated Company

○○ Head of Tax Office, Seoul Director of Tax Office

June 17, 2016

July 15, 2016

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The imposition of 00 million won of corporate tax belonging to the business year 2012 against the plaintiff on March 5, 2015, the imposition of 00 million won of corporate tax belonging to the business year 2013, and the imposition of 00 million won by the head of the Seoul Regional Tax Office on March 5, 2015 against the plaintiff on March 5, 2015.

1. Details of the disposition;

A. The Plaintiff is a company established on May 14, 2007, which is divided from ○○○ Company for the purpose of selling telecommunications equipment, and ○○○ is serving as a representative director.

B. On February 23, 2012, the Plaintiff purchased 20,400 shares of the Plaintiff corporation from ○○○ Company in KRW 10,00 per share. On the 24th of the same month, the Plaintiff sold the said shares in KRW 10,00 per share to ○○○○○ on the 24th of the same month (hereinafter referred to as “the Plaintiff’s sale transaction, hereinafter referred to as “one transaction, and hereinafter referred to as “one transaction”). After ○○○ on March 20, 2012, the Plaintiff, an employee of the Plaintiff, sold 6,60 shares of the said shares in KRW 10,00 per share to AA, BB, CCC, DD, EE, FF.

In addition, on December 21, 2012, the Plaintiff purchased 4,200 shares of Plaintiff corporation from GGG for KRW 10,00 per share (hereinafter referred to as “second transaction”), and transacted shares (hereinafter referred to as “second transaction”).

C. From October 20, 2014 to December 17, 2014, the director of the Seoul Regional Tax Office conducted a tax investigation on stock change with the Plaintiff, thereby deeming the first transaction as low-price transfer, the second transaction as low-price purchase, and on March 5, 2015, notified the head of the Seoul Regional Tax Office ○○○○○○ of the said fact.

D. Accordingly, on March 5, 2015, the head of Defendant ○○○○○ Tax Office imposed corporate tax of 00 million won on the Plaintiff for the business year 2012. The head of Seoul Regional Tax Office, on the same day, notified the Plaintiff of the change in the amount of income (the kind of income, the bonus for the year to which it belongs, the income amount of 00 million won, the income amount of 00 million won, and the income earner ○○○ Tax Office imposed corporate tax of 00 million won on the Plaintiff for the business year 2013 in relation to the second transaction (hereinafter “instant disposition”).

E. On May 7, 2015, the Plaintiff filed an appeal with the Tax Tribunal on May 7, 2015, but was dismissed on September 9, 2015.

[Ground of recognition] Facts without any dispute, Gap evidence 1 to 9, Eul evidence 1 and 2 (including numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff’s acquisition of shares Nos. 1 and 2 from ○○○○ Co., Ltd. or GGG constitutes an act of acquiring treasury shares that fall under the invalidation of the Commercial Act, and the Plaintiff’s transfer of shares No. 1 to ○○○○ is also null and void, and the instant disposition that is based on the premise that the Plaintiff’s transfer of shares No. 1 and 2 is valid is unlawful. Moreover, since the Plaintiff did not issue the share certificates, ○○ may not bona fide acquire shares pursuant to the first transaction

2) Although the Defendant calculated the market price of shares Nos. 1 and 2 as a supplementary assessment method of inheritance tax and gift tax, the Defendant’s method of appraisal of shares constitutes the market price where the Plaintiff, ○○, GG and Plaintiff traded shares of Plaintiff Corporation in KRW 10,00 per share.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Determination on the first argument

A) The Plaintiff’s effect of acquiring and selling shares 1 and 2

Article 341 of the former Commercial Act (amended by Act No. 10600, Apr. 14, 2011; hereinafter referred to as the “former Commercial Act”) stipulates that, in principle, the acquisition of a company’s own shares on its own account may cause various harm, such as undermining the interests of the company, shareholders, and creditors, impairing the principle of shareholder equality, and causing unfair corporate control by its representative director, etc., as an exception to cases where the acquisition of a company’s own shares is allowed, it is specifically classified as cases where the acquisition of a company’s own shares is allowed, and Article 341 of the Commercial Act (amended by Act No. 10600, Apr. 14, 201; hereinafter referred to as “former Commercial Act”) permits the acquisition of a company’s own shares under certain requirements.

Therefore, in addition to explicitly allowing the acquisition of treasury stocks under Article 341 of the former Commercial Act, in cases where the company gratuitously acquires treasury stocks or where it is not possible to endanger the company’s capital foundation or harm the interests of shareholders, etc. on another person’s account, such as where it acquires treasury stocks, the acquisition of treasury stocks shall be exceptionally allowed, and in other cases, even in cases where there are unavoidable circumstances in order to avoid serious damage that may occur to the company, shareholders, or creditors, etc., even if it is inevitable, the acquisition of treasury stocks is not allowed. Furthermore, it is naturally null and void for the company to acquire treasury stocks in violation of the prohibition provision as seen above (see Supreme Court Decision 2001Da44109, May 16, 20

As seen earlier, the acquisition of shares by the Plaintiff from ○○ Co., Ltd. on February 23, 2012 constitutes the acquisition of shares under the former Commercial Act, and there is no other evidence to acknowledge that the acquisition of shares constitutes an exception to the permission under the former Commercial Act or other statutes. There is no evidence to deem that the second shares acquired through the Plaintiff’s second transaction meet the requirements required under Article 341 of the Commercial Act (such as a resolution of the general meeting of shareholders, resolution of the board of directors, and acquisition within the scope of distributable profits). Therefore, the Plaintiff’s acquisition of shares from ○○ Co., Ltd. and the acquisition of shares of 2 pursuant to the second transaction are invalid as it violates each of the provisions of Article 341 of the former Commercial Act, Article 341 of the Commercial Act, and

B) Whether the Plaintiff can be notified of tax assessment and change in the amount of income

Whether a person becomes an income subject to imposition shall be deemed to have the ability to control and manage the profit in reality from the economic perspective, and it is sufficient to determine that there is the ability to pay the tax, and the legal assessment of the causal relationship in which the person has gained such income is not necessarily a lawful and effective assessment (see, e.g., Supreme Court Decision 95Nu758, Nov. 10, 1995).

Comprehensively taking account of all the following circumstances acknowledged as seen earlier, although the Plaintiff’s purchase of the Plaintiff’s corporate shares from ○○○ Co., Ltd. and GGG were invalid, the Plaintiff appears to have no de facto obstacle to exercising and transferring the ownership of the said shares, and the Plaintiff’s transfer of the first shares to ○○○○○○○○, thereby practically controlling and managing the said shares. Therefore, the Plaintiff’s transfer of the first shares to ○○○○○○, and the Plaintiff’s transfer of the second shares from GG to ○○○○○○ is deemed to be subject to the avoidance of wrongful calculation. As such, the instant disposition is lawful, and the Plaintiff’s assertion on the other premise

① The Plaintiff’s special relation corporation that sold shares 1 to the Plaintiff is the Plaintiff’s specially related corporation. GGG was the Plaintiff’s employee, and there was no particular dispute between the Plaintiff with respect to the ownership of the Plaintiff’s corporate shares. ○○○○ Co., Ltd and GGG did not assert the invalidity of the sale of shares to ○○○, after the Plaintiff acquired shares, until ○○ sells shares again to AA et al., or did not dispute over the refund of the purchase price.

② The Plaintiff and ○○○ appears to have exercised rights relating to shares 1 and 2 without any limitation.

③ Meanwhile, ○○○ Co., Ltd. filed a lawsuit seeking the return of 1 shares on February 11, 2016, which was after the filing date of the lawsuit in this case. The time is about four years from the date of stock transaction, and ○○ Co., Ltd., which has special relations with the Plaintiff, appears to have filed the lawsuit seeking the return of the said shares, which would be favorable to the Plaintiff in this case after the filing of the lawsuit in this case.

C) As seen earlier, even if all transactions Nos. 1 and 2 are null and void, as long as the instant disposition is deemed lawful, no further determination is made as to whether ○○○’s bona fide acquisition is made.

2) Determination on the second argument

According to Article 89(1) of the Enforcement Decree of the Corporate Tax Act, in a situation similar to the pertinent transaction, if there is a price generally traded between many and unspecified persons other than a specially related person and a third party who is not a specially related person, the price shall be determined. In this case, since all of the stock transactions constitute a transaction between the executives and employees of the Plaintiff corporation or between the specially related persons such as ○○○ Company, which is a pre-divisiond company, etc., the market price of the stocks cannot be calculated according to the above statutes, and ultimately, it cannot be assessed by a supplementary assessment method

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so ordered as per Disposition.

shall be ruled.

3. Conclusion

The plaintiff's claim is reasonable, and it is so decided as per Disposition.

director of the former Commercial Act (amended by Act No. 10600 of April 14, 201)

Article 341 (Acquisition of Company's Own Shares)

A company shall not acquire its own shares for its own account except in the following cases:

1. In case of the retirement of shares;

2. In case of a merger of the company or an acquisition of the whole business of another company;

3. Where it is necessary to achieve its objectives in executing the rights of the company.

4. Where it is necessary to deal with the principle of simplification.

5. When shareholders exercise their appraisal rights;

(1) The Commercial Act (amended by Act No. 10600, Apr. 14, 2011; and enforced April 15, 2012)

§ 341. Acquisition of treasury shares

(1) A company may acquire its own shares under its name and on its account in the following manners: Provided, That it shall not apply:

The total amount of acquisition value shall be the net assets value on the balance sheet for the immediately preceding settlement term, under each subparagraph of Article 462 (1).

shall not exceed the amount less than the amount obtained by subtracting the amount.

1. In cases of stocks having market prices in the exchange, the method of acquisition at the exchange;

2. The number of shares held by each shareholder, except in cases of different classes of shares concerning the redemption of shares under Article 345 (1);

Method prescribed by Presidential Decree, to be acquired under equal terms

(2) A company which intends to acquire its own stocks pursuant to paragraph (1) shall conduct the following matters by a resolution of a general meeting of

a ruling: Provided, That the articles of incorporation provide that a dividend may be paid by a resolution of the board of directors;

a resolution of a general meeting of shareholders may be substituted by a resolution of the board of directors.

1. The class and number of the stocks that can be acquired;

2. Limit on the total acquisition amount;

3. The period of not exceeding one year for acquisition of its own stocks.

(3) A company shall maintain net assets on the balance sheet for the settlement of the relevant business year at the end of each subparagraph.

In cases where it is apprehended to be short of the total amount of stocks, he/she shall not acquire stocks under paragraph (1).

v. n.

(4) The total amount of net assets on the balance sheet for the settlement of the relevant business year shall be the sum of the amounts under subparagraphs of Article 462

In the event that a company acquires shares pursuant to paragraph (1) even though it does not reach such amount, directors shall

The director shall be jointly and severally liable for any deficiency: Provided, That the concern of paragraph (3) by the director

If it is proved that he/she has not been negligent in giving due attention when he/she considers that there is no provision;

of this chapter.

【Enforcement Decree of the Corporate Tax Act

Article 89 (Scope of Market Price, etc.)

(1) In applying Article 52 (2) of the Act, a corporation other than a specially related person in a situation similar to the relevant transaction

Generally, a third party who is not a price continuously traded with many and unspecified persons or a specially related person;

such price, if any, (or the shares issued by a stock-listed corporation on the Korea Exchange);

The market price of the relevant stocks shall be the final market price on the transaction date.