[1] The meaning of the principle of trust and good faith and the requirements for denying the exercise of rights on the grounds that it violates the principle of trust and good faith, and whether a person who violates the mandatory law asserts the invalidity of an agreement on his/her own (negative in principle)

[2] Whether it is against the principle of trust and good faith to assert the invalidity of an agreement on the ground that a corporation did not have a special resolution of the general meeting of shareholders after transferring all or part of its business (negative in principle)

[1] The principle of trust and good faith under the Civil Act is an abstract norm that a party to a legal relationship should consider the other party’s interest and should not exercise his/her right or perform his/her duty in a way that is contrary to the principle of trust and good faith. In order to deny the exercise of right on the ground that it violates the principle of trust and good faith, a party to a legal relationship should have provided good faith to the other party, or the other party should have been objectively regarded as being in a legitimate state, and the exercise of right against the other party’s trust should have to reach an irrecoverable level in light of the concept of justice. In addition, if a person who violated the mandatory law rejects his/her assertion on the ground that he/she is an exercise of the right against the principle of trust and good faith, claiming the invalidity of the agreement, it would result in realizing the outcome to be excluded by the mandatory law, and thus, entirely excluding special circumstances, it cannot be said that such assertion

[2] Article 374(1)1 of the Commercial Act provides that a stock company shall adopt a resolution by at least two-thirds of the voting rights of the shareholders present pursuant to Article 434 and at least one-third of the total number of issued and outstanding shares when it engages in the transfer of all or some of its business. This is a mandatory provision to protect the interests of shareholders by requiring a special resolution of the general meeting of shareholders to obtain a special resolution of the general meeting of shareholders and reflect the shareholders' intent in the decision. Thus, barring special circumstances such as where a stock company claims the invalidity of the agreement on the ground that there was no special resolution of the general meeting of shareholders after the transfer of all or part of its business, even if it claims the invalidity of the agreement by itself on the ground that there was no special resolution of the general meeting of shareholders after the transfer of all

[1] Article 2 of the Civil Act / [2] Articles 374(1)1 and 434 of the Commercial Act, Articles 2 and 105 of the Civil Act

[1] Supreme Court Decision 2003Da2390, 2406 Decided April 22, 2003 (Gong2003Sang, 1192), Supreme Court Decision 2005Da64552 Decided November 29, 2007 (Gong2007Ha, 2001), Supreme Court Decision 2014Da6404 Decided September 4, 2014

Plaintiff (Law Firm LLC, Attorneys Cho Jong-ok et al., Counsel for the plaintiff-appellant)

Ministry of Information and Communication

Seoul High Court Decision 2017Na2009518 decided November 17, 2017

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

The grounds of appeal are examined.

1. The court below rejected the Defendant’s assertion that the Defendant’s act of selling the instant limited company to the Plaintiff without a special resolution of the general meeting of shareholders under Article 374(1)1 of the Commercial Act in order to sell the instant limited company, which is its subsidiary, is null and void. As to the Defendant’s assertion that the Defendant’s act of selling the instant limited company to the Plaintiff is null and void, it can be deemed that a shareholder who holds 84% shares above the requirements for the special resolution of the general meeting of shareholders under Article 434 of the Commercial Act consents to the conclusion of the instant transfer contract. Thus, the Defendant’s assertion that the said

2. However, the lower court’s determination is difficult to accept for the following reasons.

A. The principle of trust and good faith under the Civil Act is an abstract norm that a party to a legal relationship should consider the other party’s interest and should not exercise his/her right or perform his/her duty in a way that is contrary to the principle of trust and good faith. In order to deny the exercise of the right on the ground that it violates the principle of trust and good faith, there must be a good faith provided to the other party, or the other party should have been objectively regarded as having good faith, and the exercise of the right against the other party’s trust should be in an irrecoverable state in light of the concept of justice. In addition, if a person who violates the mandatory law rejects his/her assertion on the ground that he/she is an exercise of the right contrary to the principle of trust and good faith, claiming the invalidity of the agreement, it would result in realizing the outcome to be excluded by the mandatory law, and entirely excluding the legislative intent, barring any special circumstance, it cannot be said that the above assertion constitutes an abuse of rights or is contrary to the principle of trust and good faith (see, e.g., Supreme Court Decision 2014Da.

Article 374(1)1 of the Commercial Act provides that a stock company shall adopt a resolution by at least 2/3 of the voting rights of stockholders present pursuant to Article 434 and at least 1/3 of the total number of issued and outstanding stocks when it transfers all or some of its business. This is a mandatory law to protect the interests of stockholders by requiring a special resolution of the general meeting of stockholders to obtain a special resolution of the general meeting of stockholders when a stock company enters into a contract which has a significant effect on the interests of stockholders. Thus, barring special circumstances such as where a stock company claims the invalidity of the agreement on the ground that there was no special resolution of the general meeting of stockholders after the transfer of all or some of its business, even if it claims the invalidity of the agreement by itself on the ground that there was no special resolution of the general meeting of stockholders after the transfer

B. According to the reasoning of the lower judgment and the evidence duly admitted and examined by the lower court, the following facts and circumstances are revealed.

1) The Defendant, a stock company mainly engaged in the manufacture, sale, etc. of clothing and established the instant limited construction company by investing 100% of shares in China around 2004 in order to expand its business overseas.

2) On April 29, 2014, the Plaintiff, while holding the Defendant’s representative director, owned 85% of the Defendant’s shares as well as her wife Nonparty 1, and actually manages the Defendant. On April 29, 2014, the Plaintiff entered into a contract with Nonparty 2, etc. to transfer the Defendant’s management rights and all shares held by the Plaintiff and Nonparty 1, and entered into a contract with the Defendant to acquire the entire shares of

3) After that, on September 18, 2014, the Plaintiff entered into a share acquisition agreement (hereinafter “instant transfer agreement”) with the terms and conditions that the instant limited liability company will take over the instant limited liability company without compensation, under which the Plaintiff entered into a share acquisition agreement (hereinafter “instant transfer agreement”).

4) At the time of entering into the transfer contract of this case, the limited company of this case accounts for about 1/4 of the defendant's assets from among the defendant's assets, and the defendant has de facto insolvency due to the aggravation of management, and thus, there was only the share of the limited company of this case that has substantial property value among the defendant's assets. In light of the fact that the defendant, who mainly engages in the manufacture and sale of clothing, could have caused enormous disruptions in the defendant's operation if there is no clothing manufacturing factory in China, selling all shares of the limited company of this case constitutes the transfer of all or part of the defendant's business, and the defendant did not

5) At the time of entering into the instant transfer contract, the Defendant’s shareholder was Nonparty 3 (42,00 shares, 21%), Nonparty 4, Nonparty 2, Nonparty 5, Nonparty 6 (each of 32,00 shares, 16%) and Nonparty 7 (30,00 shares, and 15%) but the remaining shareholders except Nonparty 6 (84%) directly entered into the instant transfer contract or prepared a written confirmation to actively cooperate in the completion of the implementation thereof.

C. Examining these facts in light of the legal principles as seen earlier, the Defendant’s act of selling all shares in the instant limited company to the Plaintiff constitutes an act of disposal of property for business subject to a special resolution of the general meeting of shareholders pursuant to Article 374(1)1 of the Commercial Act, and thus, the transfer contract of this case concluded without such special resolution is null and void. Barring any special circumstance, barring any special circumstance, the invalidation assertion cannot be deemed as contrary to the principle of trust and good faith, barring any special circumstance. It cannot be deemed that there is no special circumstance to reject the Defendant’s assertion of invalidation solely on the ground that the shareholders holding 84% shares among the Defendant’s shareholders have consented to the transfer contract of this case. Supreme Court Decision 2001Da14085 Decided March 28, 2003, which is based on the judgment of the court below, is a case where all the shareholders agreed to the transfer contract of this case. Thus, it is inappropriate to invoke

D. Nevertheless, the lower court deemed that the Defendant’s assertion that the transfer contract of this case is null and void on the ground of a defect in the special resolution of the general meeting of shareholders is not permissible against the principle of good faith. In so doing, the lower court erred by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by misapprehending the legal doctrine on the special resolution

3. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench

Justices Kwon Soon-il (Presiding Justice)