Seoul High Court 2012Nu9125 (2012.09.07)

The method of public offering of securities includes the method of deemed public offering stipulated in Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act.

Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act provides that it shall be determined whether it constitutes a deemed public offering on the basis of ‘the number of persons who have been solicited to subscribe' rather than ‘the number of persons who have been solicited to subscribe', and even if there was no invitation to subscribe, if it satisfies the standards for possibility of resale under Article 12(1)1 of the Securities and Exchange

Supreme Court Decision 2012Du2225 Decided revocation of Disposition imposing gift tax

AA

Head of Yongsan Tax Office

Seoul High Court Decision 2012Nu9125 Decided September 7, 2012

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 39(1)1 (c) of the former Inheritance Tax and Gift Tax Act (amended by Act No. 8828 of Dec. 31, 2007; hereinafter "the Inheritance Tax and Gift Tax Act") stipulates that "in case where a person, other than a shareholder of the relevant corporation, obtains profits by directly obtaining new stocks from the relevant corporation as a result of issuing new stocks at a price lower than the market price, the amount equivalent to such profits shall be deemed as the value of donated property." The general provision of item (a) (hereinafter the "general provision of this case") of the same subparagraph of the same Article provides that a stock-listed corporation or an Association-registered corporation under the Securities and Exchange Act (amended by Act No. 7114 of Jan. 29, 2004; hereinafter "corporation whose name has been changed to the KOSDAQ-listed corporation"; hereinafter "corporation combined with the stock-listed corporation") shall not be subject to the imposition of gift tax if it directly allocates new stocks to the securities offering method under Article 2(3) of the same Act.

Meanwhile, Article 2 (3) of the former Securities and Exchange Act (amended by Act No. 8635, Aug. 3, 2007; hereinafter referred to as the "former Securities and Exchange Act") provides that "public offering of new securities shall be made under the conditions as prescribed by the Presidential Decree," and Article 2-4 (1) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 2051, Jan. 18, 2008; hereinafter referred to as the "former Enforcement Decree of the Securities and Exchange Act") provides that "the number of persons who are solicited to acquire new securities shall be 50 or more persons who are subscribed to acquire new securities," and Article 2-4 (3) of the former Enforcement Decree of the Securities and Exchange Act provides that "public offering of new securities shall be made within 40 years from the date of public offering of new securities or 50 years from the date of public offering of new securities" (amended by Presidential Decree No. 2034, Apr. 7, 2008).

2. citing the reasoning of the judgment of the court of first instance, the court below rejected the Plaintiff’s assertion that 49,000 won (the 49,017,945,000 won (the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the '' of the first court' cited in the 'the 'the '4,262,430 shares') was participating in the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the ' the ' the ' the ' the ' the ' the ' the ' the '''') was allotted to the '○○○' corporation (the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the 'the '')' and the 'the ' would not be applied to the '.

3. However, we cannot agree with the above determination by the court below for the following reasons.

The purport of the instant overall provision is to determine that, in cases where a listed corporation issues new stocks in accordance with the method of public offering of new stocks under the former Securities and Exchange Act, it shall not only disclose the matters regarding such issuance, but also follow strict regulations prescribed by the relevant Acts and subordinate statutes, such as determining the issue price at a price close to the stock price formed at the securities market, etc. (Articles 53 and 57 of the former Securities and Exchange Act). Furthermore, in light of the fact that it is inevitable for a listed corporation to raise funds through public offering of new stocks on the securities market, etc., it shall be deemed that the issuance price of new stocks is lower than the market price by determining the issue price of new stocks in accordance with the method of public offering of new stocks under the former Securities and Exchange Act, even if an underwriter gains profits, it shall be deemed that there is no difference between the general public offering under Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act and Article 2-4 of the former Enforcement Decree of the Securities and Exchange Act and Article 2-4 of the former Securities and Exchange Act.

In addition, in light of the language and text of Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act and the legislative intent of preventing acts of avoiding various regulations under the Act on the Issuance of Securities and Exchange, it is interpreted that Article 2-4 (4) of the former Enforcement Decree of the Securities and Exchange Act provides that "the number of persons who have been solicited to subscribe shall not be the number of persons who have been solicited to subscribe, but shall be deemed to fall under the deemed public offering." Thus, even if there was no solicitation for subscription, it is reasonable to view that it constitutes the deemed public offering under Article 2-4 (4) of the former Enforcement Decree of the Securities

4. Nevertheless, the lower court rejected the Plaintiff’s assertion as to the instant provision without further examining whether the Plaintiff was allocated new stocks through deemed public offering, on the ground that the “public offering method of securities” as referred to in the instant general provision does not include the method of deemed public offering, and that, even if there is no solicitation of subscription, it does not constitute deemed public offering. In so determining, the lower court erred by misapprehending the overall provision of this case and the legal principles on the interpretation and application of Article 2-4(4) of the Enforcement Decree of the former Securities and Exchange Act, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

5. 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.