Requirements for liability under Article 395 of the Commercial Act to the company for an act of a person appointed as a representative by a resolution of the general meeting of shareholders who prepared the minutes only without holding a general meeting of shareholders

Pursuant to Article 395 of the Commercial Act, the company is liable for the act of a representative of expressions only when it explicitly or implicitly approves the use of the name of the representative of expressions so that the company is liable for the realization of the appearance of the representative's qualification. If the company intends to take the responsibility for the act of a representative of a representative without convening a general meeting of shareholders or holding the minutes, it should be recognized that the minutes are responsible for the act of the representative of the company.

Article 395 of the Commercial Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Lee Do-young and 1 other, Counsel for plaintiff-appellant)

Appellee and 14 Plaintiff (Counterclaim Defendant)

Defendant corporation

Seoul High Court Decision 92Na49821, 92Na49838 delivered on December 3, 1993

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate brief).

1. According to the reasoning of the judgment of the court below, the defendant company took office as the representative director of the non-party 1 and the non-party 3, who was the non-party 1's son at the time of establishment of the company, respectively. However, the non-party 1 invested the total amount of the capital, and made trust in the name of her relative without issuing the share certificates, and it is one company which actually exercised the management rights of the defendant's own shares. The defendant company was unable to meet the obligation to pay the construction price upon the completion of the above non-party 1's settlement of the company's shareholders meeting. The court below decided that the non-party 1 was the non-party 1's temporary sale of the company's shares and the non-party 1's non-party 4's temporary sale of the company's 9's shareholders meeting, which was the non-party 1's representative director and the non-party 1's representative director's non-party 1's non-party 1's non-party 1's non-party company's non-party 1's non-party 9's shares.

2. However, under Article 395 of the Commercial Act, the company is liable for the act of a representative of expression by explicitly or implicitly approving the use of the name of a representative of expression. In the case of this case, if the company intends to take the responsibility for the act of a representative of the meeting who is appointed by a resolution of the general meeting of shareholders that prepared the minutes only without convening a general meeting of shareholders, it should be recognized that the company is responsible for the act of a representative of expression (see, e.g., Supreme Court Decision 91Da14369, Aug. 18, 192; 91Da5365, Sept. 22, 1992).

However, as determined by the lower court, barring special circumstances, such as: (a) Nonparty 1 was not a representative director or director of the Defendant Company at the time of forging the minutes of the general meeting of shareholders and registering himself as a representative director; and (b) Nonparty 1’s act does not go against the intent of Kim Jong-young, a representative director, if all of the Defendant’s shares and assets are transferred to the Nonparty Company and is not a shareholder’s status; (c) it is difficult to view that Nonparty 1

Ultimately, the court below should first examine the defendant company's causes attributable to the non-party 1's appearance, and accordingly, should have caused the defendant company to be liable for the representative director. However, the defendant company's exercise of management right by the non-party 1's representative director was neglected and the non-party 3 et al. conspired with the non-party 1's act, the majority of the number of directors of the defendant company was allowed to represent the non-party 1. The defendant company determined that the non-party 1 cannot be exempted from liability for the plaintiffs who traded the non-party 1's belief as a legitimate representative director, and that the defendant company failed to exhaust all necessary deliberations by misunderstanding the legal principles as to the requirements for the company's liability under Article 395 of the Commercial Act and failing to exhaust all all necessary deliberations. The arguments raised this point are with merit.

3. Therefore, without examining the remaining grounds of appeal, we reverse the judgment below and remand the case to the court below. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Jae-soo (Presiding Justice)