In a case where Gap corporation filed an immediate appeal against Gap corporation, upon filing an application for commencing rehabilitation procedures without a special resolution of the general meeting of shareholders, and the rehabilitation court's decision to commence rehabilitation procedures was defective, and as a shareholder of Gap corporation, the representative director of Gap filed a retirement allowance claim lawsuit against Eul corporation, the case holding that Gap corporation's above application for commencing rehabilitation procedures revoked the decision to commence rehabilitation procedures on the ground that it is unlawful by exercising the defective representative authority

Although the articles of incorporation provides that Gap corporation shall file an application for commencement of rehabilitation procedures as a special resolution of the general meeting of shareholders without a special resolution of the general meeting of shareholders, the rehabilitation court's decision to commence rehabilitation procedures is defective, and the representative director of Gap corporation is the case where Eul corporation filed a retirement allowance claim lawsuit against Gap corporation and filed

Since an application for commencing rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”) has the power to make a decision at a general meeting of shareholders under the articles of incorporation of the company A, the application for commencing rehabilitation procedures for the company A, which did not undergo a special resolution of a general meeting of shareholders, is unlawful by exercising a defective power of representation, and is therefore unlawful. Meanwhile, the case revoking the decision for commencing rehabilitation procedures and remanding the case to the court below on the ground that it is difficult to readily conclude that the right to request commencing rehabilitation procedures is an exercise of a defective power of representation on the ground that it is not permissible in light of the purpose of rehabilitation procedures or the economy of litigation, etc., solely on the ground that a representative director of the company A holds at least 1/10 of the capital, and the relevant procedures were initiated following the decision for commencing rehabilitation procedures based on the improper request for the decision for commencing rehabilitation procedures for which

Articles 34, 53(1) and (5) of the Debtor Rehabilitation and Bankruptcy Act, Articles 361 and 363(4) of the Commercial Act

G. G. L.S. L.S. (Law Firm Sejong-ro, Attorneys Yoon Jae-ju et al., Counsel for the plaintiff-appellant)

Appellant (Attorney Yoonn-ck, Counsel for defendant-appellant)

Seoul Congress Order 2019 Ma100197 dated November 25, 2019

1. Revocation of a decision of the first instance;

2. The instant case is remanded to Seoul Rehabilitation Court.

1. Purport of request;

The rehabilitation procedures shall commence for the debtor.

2. Purport of appeal;

The order is as stated in the Disposition (the immediate appeal is stated as "a cancellation of the decision on commencing the rehabilitation procedure and seek a new proper trial again," but it is so decided in accordance with Article 53 (5) of the Debtor Rehabilitation and Bankruptcy Act).

1. The decision of the first instance and the reasons why the immediate appeal is filed;

According to the purport of the records and the whole examination, the following facts are substantiated:

A. On July 3, 2006, the debtor filed an application for commencing rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”) on November 6, 2019, on the ground that the financial failure occurred due to the failure of business, the progress of a new lawsuit related to the sale of trademark rights, the decrease of sales, etc. after around 2014, while running the manufacturing and distribution business of safe mooring, etc., which was established on July 3, 2006.

B. On November 25, 2019, the rehabilitation court rendered a decision on the commencement of rehabilitation procedures for the debtor on November 25, 2019 (the first instance decision).

C. The appellant is a shareholder holding 35% of the total number of shares generated by the debtor. From July 3, 2006 to November 30, 2018, at the time of the establishment of the debtor, the appellant served as the representative director of the debtor. After retirement, the appellant filed a lawsuit against the debtor on the retirement allowance claim under Incheon District Court 2019Gahap537, and received a partial winning judgment (principal principal KRW 636,230,000 and damages for delay from January 9, 2019) on October 24, 2019, and the appellant filed the immediate appeal of this case on December 6, 2019.

2. Summary of grounds for appeal;

For the following reasons, even though the application for commencing the rehabilitation procedure of this case should be dismissed or dismissed, the first instance decision that commenced the rehabilitation procedure against the debtor is unfair.

A. The debtor’s articles of incorporation provides that an application for commencing rehabilitation procedures shall be subject to a special resolution of the general meeting of shareholders, and the application for commencing rehabilitation procedures of this case shall have been filed by the exercise of the defective representative authority

B. In light of the following circumstances, the application for the commencement of rehabilitation procedures of this case constitutes a ground of dismissal stipulated under Article 42 of the Debtor Rehabilitation Act, where the application for the commencement of rehabilitation procedures is not bona fide (Article 42 (2)), or where the application for the commencement of rehabilitation procedures is deemed inappropriate for the general interest of creditors (Article 3

1) The debtor entered into a guarantee agreement with the Korea Credit Guarantee Fund under the personal guarantee of the representative director (appellants and non-applicants) before the appellant's retirement, and had the renewal of guarantee agreement, and had the current representative director alone guarantee the personal, and when the appellant was placed in a situation where compulsory execution based on the judgment of the court of first instance in the lawsuit for retirement allowance claim by the appellant, the debtor temporarily exempted the appellant from it and applied for commencement of rehabilitation procedures using the time.

2) An in-house director, who is the debtor’s representative, stated the retirement allowance claims of the executives having special relation with the debtor as public-interest claims, while the appellant’s retirement allowance claims were stated as undetermined specially related rehabilitation claims. As such, an application for commencing the instant rehabilitation procedures is intended to have other creditors preferentially repaid only the claims of the present representative and the officers concerned, while causing losses to the other creditors.

3) The debtor transferred the business necessary for rehabilitation to a third party, such as selling the business prior to an application for commencing rehabilitation procedures to another competitor without a special resolution of the general meeting of shareholders in accordance with the Commercial Act and the articles of incorporation, among the brands with "( brand name 1 omitted)" and "( brand name 2 omitted)." In light of this, the application for commencing rehabilitation procedures in this case cannot be deemed to aim at promoting the efficient rehabilitation of the debtor and its business.

3. Determination

(a) Defects in violation of decision-making procedures prescribed by the articles of association;

1) According to the overall purport of the records and examination, the debtor’s articles of incorporation provides that “the corporate reorganization under the Company Reorganization Act” shall adopt a resolution in the number of 2/3 or more of the shareholders present at the general meeting of shareholders and 1/3 or more of the total number of issued and outstanding shares (Article 32(3)3). The debtor, as a company whose total amount of capital is less than one billion won, is less than one billion won and whose director at the time of the application for the commencement of the rehabilitation procedure of this case did not require a resolution of the board of directors on the application for the commencement of the rehabilitation procedure pursuant to Article 383(5) and (6) of the Commercial Act due to the absence of only one shareholder other than the representative director at the time of the application for the commencement of the rehabilitation procedure of this case. However, the debtor is proved to have filed the application for the commencement of the rehabilitation procedure of this case without the special resolution of the general meeting of shareholders pursuant to Article 363(4)

2) In light of the fact that the former Company Reorganization Act was enacted as of March 31, 2005 and enforced as of April 1, 2006 under Article 2 of the Addenda of the Debtor Rehabilitation Act, and the rehabilitation procedures under Part II of the Debtor Rehabilitation Act provide for partial improvement and supplementation of the previous system while maintaining the company reorganization procedures under the former Company Reorganization Act, and the debtor’s establishment and enforcement date of its articles of incorporation ( July 3, 2006) is the time when three months elapsed since the date of repeal of the former Company Reorganization Act and the Debtor Rehabilitation Act, it is reasonable to deem that the “company reorganization under the Company Reorganization Act” under the articles of incorporation of the debtor refers not to the procedure under the repealed Act but to the rehabilitation procedure under the Debtor Rehabilitation Act, which is in force at the time of the debtor’s incorporation. On the same premise, the debtor also submitted a preparatory document prior to the submission of a resolution on March 20, 2006, on the ground that there is a defect in the articles of incorporation, which is an internal provision of the debtor’s filing of the rehabilitation procedure, and the remaining shareholders’ interests.

Therefore, inasmuch as an application for commencing rehabilitation procedures under the Debtor Rehabilitation Act has the right to make a decision at a general meeting of shareholders in accordance with the debtor’s articles of incorporation, the application for commencing rehabilitation procedures by the debtor without going through a special resolution of the general meeting

In addition, the following facts and circumstances revealed by the purport of the recording and examination, namely, ① the appellant asserts that the decision on commencement of rehabilitation procedures is unlawful on December 6, 2019, which did not go through lawful procedures pursuant to the articles of incorporation as the grounds for appeal by the head of the immediate appeal. ② The debtor is deemed to have consented to the rehabilitation procedures of the debtor on December 19, 201, including the total number of outstanding shares, and the debtor’s internal directors, and all of the three shareholders (excluding the appellant) except for this court on December 23, 2019. However, it is difficult to view the debtor’s right to request rehabilitation procedures as legitimate grounds for the commencement of rehabilitation procedures under the provisions of the Commercial Act and the articles of incorporation to have a separate consent of all shareholders in lieu of the special resolution of the general meeting of shareholders (the grounds for appeal cannot be deemed to have been met by more than 2/3 of the shareholders present as the special resolution of the general meeting of shareholders). ③ The rehabilitation procedures for the debtor cannot be deemed to have been based on the debtor’s right to request for rehabilitation procedures for the rehabilitation plan.

B. Grounds for dismissing an application for commencing rehabilitation procedures under Article 42 of the Debtor Rehabilitation Act

According to the purport of the record and examination, the fact that the debtor's retirement claims, including the appellant, were reported as rehabilitation claims and were not recognized as public-interest claims in the rehabilitation procedures, and the debtor's inspection report submitted to the rehabilitation court on January 20, 2020 by the inspection commissioner appointed by the rehabilitation court, stating that the debtor's continuous business value exceeds 500 million won and is not found to be subject to the exercise of avoidance power under the Debtor Rehabilitation Act. In light of such circumstances, it is difficult to conclude that the data submitted by the appellant alone was transferred by the debtor to a third party in violation of the procedures stipulated in the Commercial Act and the articles of incorporation before the commencement of rehabilitation procedures, as alleged by the appellant. It is difficult to conclude that the debtor, as incidental effect following the rehabilitation procedures, failed to perform compulsory execution against a specific creditor and was deferred as a representative's guarantee obligation and did not meet the general interest of the creditor in the rehabilitation procedures.

Therefore, it is difficult to deem that there exist grounds for dismissal under Article 42 subparag. 2 and subparag. 3 of the Debtor Rehabilitation Act for filing an application for commencement of the debtor’s rehabilitation procedure.

4. Conclusion

Although the debtor's application for commencing rehabilitation is inappropriate, the first instance court's decision accepting it is improper. Accordingly, the appeal by the appellant is accepted, and the first instance court's decision is revoked, and the case is remanded to the Seoul Rehabilitation Court pursuant to Article 53 (5) of the Debtor Rehabilitation Act.

Judges Kang Young-chul (Presiding Judge)