법무법인(유한) 율촌 | Yulchon LLC

The Korean Supreme Court has dismissed the appeal of rulings in favor of Shinsegae's directors, including vice president Yong Jin Jung, in a shareholders' derivative suit filed by Solidarity of Economic Reform. Yulchon successfully defended Shinsegae's directors at the trial court, intermediate appeals court and the Supreme Court.
 

GwangjuShinsegae, which was 100% owned by Shinsegae, decided to increase its capital during the Asian Financial Crisis. Shinsegae was also in the process of improving its financial condition and was unable to participate in GwangjuShinsegae's capitalization plan. Although Shinsegae's directors decided that the parent company was unable to participate in the affiliate's capital increase, vice president Yong Jin Jung acquired new shares of GwangjuShinsegae through the contribution of private property as a major shareholder.
 

The Plaintiff Solidarity of Economic Reform, however, asserted that the management decision of the directors of Shinsegae, coupled with the contribution of private property by a major shareholder amounted to a usurpation of corporate opportunity by the major shareholders and filed a suit against the major shareholders of Shinsegae at the time, including Tiger Fund, a foreign hedge fund, along with vice president Yong Jin Jung and vice president Hak Seo Gu, seeking KRW 120 billion in damages.
 

In the criminal case instigated by Solidarity of Economic Reform, the prosecution placed a higher value on the shares of GwangjuShinsegae than the shares' issuance price (face value) at the time of the capital increase. However, in representing the directors of Shinsegae, Yulchon persuaded the court of first instance and intermediate appellate court that Mr. Jung's acquion of the forfeited shares of GwangjuShinsegae was indeed lawful. The Supreme Court dismissed Plaintiff's appeal.
 

This case establishes important precedents regarding directors' self-dealing, usurpation of corporate opportunity, the threshold for share- holding in order to bring a shareholders' derivative suit, and court orders for securing litigation costs, among others.
 

Yulchon was able to successfully carry out this case with its litigation group in the lead, with close cooperation with the tax group regarding issues on the valuation of the unlisted stock, and with advice from the Corporate & Finance group regarding issues on disputes arising under corporate law, including the usurpation of corporate opportunity.