Plaintiff 1 and nine others (Attorney Lee Jae-hoon et al., Counsel for the plaintiff-appellant)

Ba Automobile Co., Ltd. (Law Firm U.S., Attorneys Dog-ju et al., Counsel for the plaintiff-appellant)

December 6, 2012

Seoul Central District Court Decision 201Ga363555 Decided August 8, 2012

1. All appeals filed by the plaintiffs are dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the first instance shall be revoked. The defendant shall deliver 357 common shares to the plaintiffs, ① deliver them, ② pay KRW 24,068,940 to each of them as preliminary.

1. Quotation of judgment of the first instance;

The reasoning for the court’s explanation on this case is as stated in the reasoning of the judgment of the first instance except for the addition of the following contents between the first and second parts of the judgment of the first instance. Thus, it is acceptable to accept this as it is in accordance with the main text of Article 420 of the Civil Procedure Act.

Article 429 of the Commercial Act concerning the lawsuit to nullify the issuance of new shares is applied mutatis mutandis to the lawsuit to nullify the issuance of new shares in the lawsuit to nullify the issuance of new shares, and the above provision may apply mutatis mutandis to the issuance of new bonds with the same bonds in terms of the issuance of converted bonds and the issuance of new shares. Thus, the plaintiff asserts that since the substance of the issuance of

It is difficult to view that all provisions concerning the issuance of new shares should apply mutatis mutandis to the issuance of convertible bonds or bonds with warrants, solely on the ground that the provisions of the Commercial Act concerning the lawsuit seeking to nullify the issuance of new shares are applied mutatis mutandis to the lawsuit seeking to nullify the issuance of new shares. Therefore, in the issuance of new shares, it is difficult to view that a provision recognizing the right to preferential allotment to members of the employee stock ownership association is applied mutatis

In addition, the plaintiffs asserts that in the case of bonds with warrants, inasmuch as the company can avoid the duty of preferential allotment to the members of the employee stock ownership association by issuing convertible bonds or bonds with warrants instead of issuing new stocks, the right of preferential allotment to the members of the employee stock ownership association should be recognized even in the case of bonds with warrants.

In light of the above, the following: (a) The instant bonds with warrants were issued by public offering; (b) the members of the employee stock ownership association, including the plaintiffs, were not excluded from the acquisition of the bonds with warrants; (c) the total amount of the issue price of the stocks issued by exercising the preemptive rights to new bonds does not exceed the amount of each bonds with warrants (Article 516-2(3) of the Commercial Act); (c) the company has a preventive measure to prevent management of the issuance of the bonds with warrants by giving substantially large amounts of preemptive rights to the small amount of bonds; (d) where the articles of incorporation stipulate matters concerning total amount of the bonds with warrants, details of the preemptive rights to new bonds, period of exercise, etc., or where the articles of incorporation do not stipulate such matters as the articles of incorporation, the board of directors shall determine each general meeting of shareholders if the articles of incorporation provides that the company shall determine the amount of the bonds with warrants (Article 516-2(1) of the Commercial Act), i.e., persons other than the members of the employee stock ownership association, if they issue the bonds with warrant, are subject to preferential bonds with warrants.

2. Conclusion

Therefore, the plaintiffs' claims are dismissed in its entirety due to the lack of grounds, and the judgment of the court of first instance is just, and the plaintiffs' appeal is dismissed in its entirety due to the lack of grounds. It is so decided as per Disposition.

Judge Lee Jae-chul (Presiding Judge)

1) Convertible bonds are bonds granted a right to convert into a stolen stock by exercising the convertible right. Such issuance of convertible bonds is similar in fact to the issuance of new stocks in that it affects the physical foundation of a stock company and the interests of the existing shareholders. As such, Article 429 of the Commercial Act regarding the action for nullification of issuance of new stocks is applied mutatis mutandis to the issuance of convertible bonds (Supreme Court Decision 2000Da37326 Decided June 25, 2004).