[1] Purport of the proviso of Article 335(1) of the Commercial Act, and whether the provision of the articles of incorporation can entirely prohibit transfer of shares (negative)

[2] The case holding that, where a company and its shareholders agree that all or part of the shares shall not be sold or transferred to another party or to a third party for five years from the date of incorporation of the company, such agreement does not restrict transfer of shares, such as allowing the approval of the board of directors, but it was stipulated in the articles of incorporation to prohibit transfer of all shares for five years after its incorporation, even if it was stipulated in the articles of incorporation to prohibit transfer of shares for five years after its incorporation, since it completely denies the possibility of recovery of shares invested by shareholders, and it is null and void even if it was agreed between the company and its shareholders, or

[1] The proviso of Article 335(1) of the Commercial Act provides that the transfer of shares shall be premised on the transfer of shares, but it does not provide that the approval of the board of directors may be prohibited by the method of restricting the transfer of shares, and that the transfer of shares may be prohibited by the provisions of the articles of incorporation. Thus, even where the transfer of shares is restricted by the articles of incorporation, a provision prohibiting transfer of shares entirely

[2] The case holding that, where a company and its shareholders agree that all or part of the shares shall not be sold or transferred to another party or to a third party for five years from the date of incorporation of the company, such agreement does not restrict transfer of shares, such as allowing the approval of the board of directors, but it was stipulated in the articles of incorporation to prohibit transfer of all shares for five years after its incorporation, even if it was stipulated in the articles of incorporation to prohibit transfer of shares for five years after its incorporation, since it completely denies the possibility of recovery of shares invested by shareholders, and it is null and void even if it was agreed between the company and its shareholders or between shareholders

[1] Article 335 (1) of the Commercial Act / [2] Article 335 (1) of the Commercial Act

Red Capital Co., Ltd. (Law Firm Yang Dong-dong Office, Attorneys Lee Chang-sik et al., Counsel for the defendant-appellant)

New century Communications Co., Ltd. (Law Firm Han-dong Law Office, Attorneys Yu-hee et al., Counsel for the defendant-appellant)

Seoul High Court Decision 98Na65917 delivered on July 13, 1998

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal (the supplemental appellate brief submitted after the deadline for submission)

The case shall be examined to the extent of supplement).

1. As to the validity of the instant transfer restriction agreement

Article 335(1) of the Commercial Act provides that a share may be transferred to another person, but the transfer of shares may be subject to the approval of the board of directors under the conditions as prescribed by the articles of incorporation. However, the proviso of Article 335(1) of the Commercial Act provides that the transfer of shares may be subject to the approval of the board of directors by means of restricting the transfer of shares, or that the transfer of shares may be prohibited by the articles of incorporation. Thus, even where the transfer of shares is restricted by the articles of incorporation, a provision prohibiting the transfer of shares entirely shall not be established.

According to the facts duly established by the court below after accepting the judgment of the court of first instance, the defendant company and the shareholders shall not sell or transfer all or part of the shares of the joint venture company to the other party or to a third party for five years from the date of the establishment of the joint venture company unless the joint venture company (hereinafter referred to as the "defendant company") is disclosed in advance at the time of the joint venture agreement of this case and at the time of the investment agreement of Sep. 4, 1994, the non-party joint venture company and the non-party joint venture company representing the shareholders, and at the time of the investment agreement of Sep. 4, 1994, the non-party joint venture company and the non-party joint venture company shall not sell or transfer all or part of the shares of the joint venture company to the other party or a third party: Provided, That the above exception or five years after the establishment date of the joint venture agreement shall not be applicable to the transfer of shares of the joint venture company's shares by the parties or all of the parties agreed to transfer the shares at the price of the joint venture company.

However, the agreement of this case does not restrict the transfer of shares by requiring the approval of the board of directors even according to its content itself, but does not restrict the transfer of shares for five years after its establishment, and such contents, even if stipulated in the articles of incorporation as seen above, shall be null and void as it completely denies the possibility of the recovery of shares by shareholders. Therefore, even if it is stipulated in the articles of incorporation, it shall also be null and void as it is deemed null and void.

In addition, among the agreement of this case, the transfer can be made with the consent of all shareholders, but this also goes against the purport of the provisions of the Commercial Act as it increases the requirements for restriction on transfer under the proviso of Article 335(1) of the Commercial Act, and it does not go against the purport of the provisions of the Commercial Act, as it makes it impossible or considerably difficult to transfer, and it does not change from the actual

Therefore, the transfer restriction agreement of this case is null and void, and the defendant cannot refuse the transfer restriction claim of this case based on the invalid transfer restriction agreement.

Although the judgment of the court below is somewhat unclear in its reasoning, it is justified in the conclusion that the validity of the transfer restriction agreement of this case is justified. The ground of appeal pointing this out cannot be accepted.

2. As to the assertion of abuse of rights

In light of the records, the court below's rejection of the defendant's anti-social order and abuse of rights on the grounds as stated in the judgment of the court of first instance is just, and there is no error as otherwise alleged in the ground of appeal. This ground of appeal is rejected

3. As to the assertion that the benefit of lawsuit is extinguished

Even based on the record, there is a lack of evidence to acknowledge that the Plaintiff transferred the shares of this case to another person as alleged by the Defendant, and issued them. Therefore, the grounds of appeal on this premise cannot be accepted.

4. Conclusion

Therefore, the appeal is 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 Park Jae-sik (Presiding Justice)