Whether “an act of pretending to perform payment or contribution in kind,” which is subject to punishment under Article 628(1) of the Commercial Act, constitutes “an act of fraudulent act or grave fact in violation of Acts and subordinate statutes,” which is prescribed as the grounds for dismissal of directors under Article 385(2) of the same Act (affirmative)

In full view of the legislative purport of Article 385(2) of the Commercial Act to protect minority shareholders, etc. by rectifying unreasonable acts related to duties, or violations of Acts and subordinate statutes or the articles of incorporation, and the legislative purport of Article 628(1) of the Commercial Act to regulate acts detrimental to the purpose of the Commercial Act to protect minority shareholders, etc., the act of pretending performance of payment or investment in kind subject to punishment pursuant to Article 628(1) of the Commercial Act, barring any special circumstance, should be deemed to constitute “an act of misconduct in connection with its duties or a serious fact contrary to the Acts and subordinate statutes” pursuant to Article 385(2) of the Commercial Act, barring special circumstances.

Articles 385(2) and 628(1) of the Commercial Act

Plaintiff (Attorney Dong-sung et al., Counsel for plaintiff-appellant)

CSK Co., Ltd. and one other (Attorneys Park Jong-jin et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2009Na66541 decided April 2, 2010

All appeals are dismissed. The costs of appeal are assessed against the Defendants.

The grounds of appeal are also examined.

1. Article 385(2) of the Commercial Act on the dismissal of directors provides that "If a director refuses to dismiss him/her at a general meeting of shareholders even though he/she has committed an unlawful act in connection with his/her duties, or grave violation of Acts and subordinate statutes or the articles of incorporation, a shareholder who holds no less than 3/100 of the total issued and outstanding shares may request the court to dismiss the director within one month from the date when the general meeting passes a resolution," and Article 628(1) of the Commercial Act on the crime of soliciting payment, etc. provides that "a person prescribed in Article 622(1) commits an act of pretending to make payment or investment in kind, he/she shall be punished by imprisonment for not more than five years or by a fine not exceeding

In full view of the legislative purport of Article 385(2) of the Commercial Act to protect minority shareholders, etc. by correcting unreasonable acts related to duties, or violations of Acts and subordinate statutes or the articles of incorporation, and the legislative intent of regulating acts that undermine the purpose of the Commercial Act to maintain the equity capital of the company, the act of pretending payment or investment in kind subject to punishment under Article 628(1) of the Commercial Act, barring special circumstances, should be deemed to constitute “an act of misconduct or grave fact in violation of the Acts and subordinate statutes relating to the relevant duties” under Article 385(2) of the Commercial Act, barring special circumstances.

2. According to the reasoning of the lower judgment, the lower court acknowledged the facts as indicated in its reasoning, and determined that the Plaintiff’s claim for removal of Defendant 2 against Defendant 2 was well-grounded, on October 30, 2008, on the ground that: (a) Defendant 2, the representative director of the Defendant Company, proposed payment without realizing the payment of the share capital at the time of issuance of new shares; (b) there is no dispute between the parties; (c) such act of payment provisional payment constitutes “an act of misconduct in connection with his duties or a serious fact in violation of the laws and regulations” as stipulated in Article 385(2) of the Commercial Act; (d) however, (e) it rejected

In light of the above legal principles and records, such determination by the court below is justifiable. In so doing, it did not err by misapprehending the legal principles as to Article 385(2) of the Commercial Act or incomplete hearing.

3. Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min Il-young (Presiding Justice)