바카라쿠폰

1. Case summary

Company A sold its shares in the 2^{바카라쿠폰} largest local shoes multi-shop (the “Company”) to 바카라쿠폰. B who acted as a professional manager in the footwear distribution field.

바카라쿠폰. B did not pay the purchase price for the shares to Company A even though he had management rights to the Company through the share purchase agreement and he managed the Company as representative director.

As Company A filed a lawsuit for the payment of KRW35 billion against 바카라쿠폰. B, 바카라쿠폰. B argued that he had no obligation to pay the purchase agreement, cancelling the share purchase agreement for the reason of fraud and a mistake of a material part of the agreement. 바카라쿠폰. B asserted that Company A had not informed him of the overestimation of stock value caused by Company A’s window dressing practices.


2. Decision

The Seoul Central District rejected 바카라쿠폰. B’s assertions and rendered a decision to the effect that it granted all the claims for the purchase price on the following grounds (2019Gahap544722):

①A financial institution participating in investment with 바카라쿠폰. B conducted due diligence through an accounting firm before the share purchase agreement was executed and 바카라쿠폰. B could know of the inventory status of the Company and how the Company recognized revenue in terms of accounting;

②Since 바카라쿠폰. B had been appointed to be representative director of the Company, had operated the Company, and had received reports from the employees of the Company even before the execution of the share purchase agreement, 바카라쿠폰. B would be deemed that he was aware of accounting practices of the Company;

③Considering the circumstances, in which CFO who was a person on the side of 바카라쿠폰. B raised accounting issues one month before executing the share purchase agreement and requested to reduce net assets of the Company, 바카라쿠폰. B who is a professional manager, would also be aware of the accounting issues around the time; and

④Given a “management right premium” created by the transfer of management rights held by Company A through the share purchase agreement, the court could not conclude that the purchase price was unreasonably high.


3. Our role and implication

We represented Company A, and actively refuted 바카라쿠폰. B’s allegation of window dressing.

We pointed out that accounting appraisal requested by 바카라쿠폰. B had limitation in appraising the essential value of the shares because it was conducted in the state where back data was not secured. We also substantiated that the purchase price under the share purchase agreement was set in reasonable level because 46% to 63% of average management right premium was applied to the case where the largest shareholder was changed.

This case is meaningful in that the court confirms that denying the effect of a share purchase agreement is not allowed even after the parties have identified the inventory status and accounting principles through due diligence.


ㅁ Attorneys in charge: Ryu Seong-keun, Jung Yang-hun and Kim Dong-hyun