1. Case summary
The client company engages in real estate development. The current management and certain shareholders hostile to the current management hold 50% of the shares in the company, respectively. The company newly issued 20,000 shares to raise money by allocating the shares among its shareholders in order to deal with urgent need in operating funds through resolution of the board of directors (the “1st BOD resolution”). Certain shareholders hostile to the current management put the account to which the payments for the shares were supposed to be deposited by the current management under provisional attachment. As a result, the current management gave up paying for the shares, and eventually, 10,000 shares were forfeited. The company issued 10,000 shares again through resolution of the board of directors, and allocated the shares among third parties friendly to the current management (the “Issuance of New Shares”)
The shareholders hostile to the current management filed a suit to invalidate the Issuance of New Shares, and to suspend effect and to prevent the exercise of voting rights, arguing that the Issuance of New Shares should be invalidated because new shares were issued in the manner of allocating them to third parties, which failed to meet certain requirements prescribed in the Commercial Code and the Articles of Incorporation of the company.
2. Progress of the lawsuitThe hostile shareholders argued: (i) the shares newly issued in this case constituted shares newly issued by allocating them to a third party pursuant to Article 418(2) of the Commercial Code, but the shares failed to meet requirements applying to the allocation of shares to a third party as prescribed in the Commercial Code and the AOI of the company; (ii) the board of directors of the company had not had any discussion nor made resolution in relation to the Issuance of New Shares, which resulted in the nonexistence or invalidation of resolution allegedly made by the board of directors of the company, and the spouse of one of the directors participating in the resolution of the board of directors was the representative director of the company to which new shares were allocated, so the director was a special stakeholder in the Issuance of New Shares and was not included in the number of directors present required for the constitution of the resolution of the board of directors, which resulted in the rejection of the Issuance of New Shares at the meeting; and (iii) the issuance was not compatible with the method to be used to deal with forfeited shares that was determined by the first resolution made by the board of directors of the company.
Shares may be newly issued by way of allocating them to a third party only when shares needs to be newly issued to achieve the business objectives of a company such as the adoption of a new technology and the improvement of financial structure of a company pursuant to Article 418(2) of the Commercial Code, and the issuance of new shares is required to be notified to shareholders at least two weeks before the payment date (pursuant to Article 418(4) of the Commercial Code). If the client company newly issued the shares to achieve its business objectives, it was highly likely that the company would be found that it issued the shares in violation of the procedural requirements because it failed to meet the requirement of notifying its shareholders of the issuance.
(i) In this situation, our attorneys noted the legal principle that issuing shares that are forgone or are not purchased by shareholders to a third party constitutes the issuance of new shares by way of allocating them to a third party. After examining circumstances surrounding the first resolution made by the board of directors of the company, the issuance and the forfeiture of shares newly issued, the notice of convening the board of directors’ meeting and the minutes of the board of the directors’ meeting, we argued that the new shares did not constitute the issuance of new shares by way of allocating them to third party, but constituted the treatment of forfeited shares by allocating them to a third party. In this process, the shares were inevitably registered as those issued by way of allocating them to a third party because the company had to use another account to receive payments for the shares other than that to which provisional attachment was attached by the hostile shareholders. (ii) In addition, with regard to the allegation of the nonexistence and invalidation of the resolution made by the board of directors of the company, we pointed out that we could not say that the spouse was a special interest related person simply on the basis of the fact that the spouse of a director was the representative director of the company to which the forfeited shares were issued. (iii) We also argued that the 2nd resolution prevailed over the 1st resolution. Since the issuance of new shares is equivalent to the execution of a business affair of a corporation limited by stock, as long as the representative director of the company newly issued the shares upon his/her authority, the shares newly issued were 안전한 바카라 사이트. We also aggressively argued that even if there was a defect in the resolution made by the board of directors of the company, as the resolution was an internal decision of the company, the alleged defect did not have any impact on the effect of the shares newly issued by the company.
The court dismissed all the claims for the suspension of effect, interim injunction to prevent the exercise of voting rights and the invalidation of shares newly issued, accepting our arguments.
□ Attorneys in charge: Lee Sung-hun and Shin Eun-ryung.
