SOUTH KOREA Law and Practice Contributed by: Hyeon-Deog Cho, Yeong-Ik Jeon, Ji-won Lim and Hakbum Ahn, Kim & Chang
• to demand, on behalf of the company, that a director not take certain actions or ceases to take certain actions that are in violation of the law or the AOI of the company, if such actions would result in irreparable harm to the company; and • to bring an action in court and/or to demand that the company bring an action in court against: (a) promoters; (b) directors; (c) statutory auditors; (d) those who have colluded with the company to subscribe to shares at a considerably unfair price; (e) shareholders who have received profits from the company; or (f) liquidators. Shareholders of a listed company may also exercise the right to demand that a director not take certain actions or ceases to take certain actions that are in violation of the law or the AOI of the company if they satisfy the following shareholding thresholds: • 0.05% of the total issued and outstanding shares continuously held for at least six consecutive months; or • 0.025% if the paid-in capital of the immediately preceding financial year is KRW100 billion or more. Shareholders of a listed company may also exercise the right to bring an action in court and/or to demand that the company bring an action in court against the entities listed above if such shareholders hold 0.01% of the total issued and outstanding shares for at least six consecutive months. 10.2 Remedies Against the Directors Holders of at least 1% of the total issued and out- standing shares have the right to demand, on behalf of the company, that a director refrain from taking certain actions or cease to take certain actions that are in violation of the law or the AOI of the company, if such actions would result in irreparable harm to the company. Shareholders of a listed company may exer- cise the same right if they hold at least 0.05% of the total issued and outstanding shares for at least six consecutive months, or 0.025% if the paid-in capital of the company in the immediately preceding financial
year is KRW100 billion or more. Such demand right may be exercised by way of communications to the director or bringing an action in court. A shareholder may file a claim against a director or the company for any damages incurred by such share- holder as a result of such director’s neglect of their duties to the company if such neglect results from “wilful misconduct or gross negligence”, even where such negligence does not constitute a tort against the shareholder under the Civil Code. This liability is joint and several for all directors involved; in the event of any action taken pursuant to a resolution of the board of directors, the directors who voted for such resolu- tion will be jointly and severally liable. 10.3 Derivative Actions If a director has intentionally or negligently acted in violation of laws and regulations or the AOI, or has neglected their duties, all directors shall be held lia- ble, jointly and severally, for damages incurred by the company as a result of their actions. Holders of at least 1% of the total issued and out- standing shares have the right to bring an action in court on behalf of the company against directors (ie, a derivative suit). In the case of a listed company, contin- uous holders of at least 0.01% of the total issued and outstanding shares for at least six consecutive months have the same right in addition to the holders of at least 1% of the shares. Prior to exercising the right to institute such derivative suit, the relevant sharehold- ers must first deliver to the company a written notice demanding the filing of an action against directors. If the company does not file an action against directors within 30 days of receiving such notice, the sharehold- ers may bring an action on behalf of the company. However, if the company may suffer irreparable harm due to the lapse of the 30-day period, the relevant shareholders may file the lawsuit immediately. So long as the shareholders have satisfied the requisite shareholding threshold at the time of filing the lawsuit, they may cease to maintain the shareholding thresh- old after filing the lawsuit. The company may join the derivative suit filed by the shareholders.
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