SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
tor for compensating losses resulting from such actions. Under the KCC, a shareholder’s liability is limited to the acquisition or subscription price of their shares; however, the Supreme Court of Korea has held that there may be exceptions for situa - tions where companies are essentially sole pro - prietorships or deemed to have no substance, but incorporated merely for the purpose of shielding legal implications that would otherwise apply against the individual proprietor, leading to a ruling that, in such cases, the corporate veil may be pierced – thereby imposing personal liability on the individual proprietor. In addition, under Korean tax law, a shareholder who owns more than 50 per cent of the total outstanding shares of a company may, in certain cases, be liable for the company’s secondary tax liability in proportion to their ownership interest. 5.2 Role of Shareholders in Company Management In short, other than by voting on the matters reserved for shareholders, the shareholders are not permitted to direct the management of a company. However, they are able to influence the management of a company through appoint - ment and/or dismissal of directors or by exercis - ing their statutory rights to influence the man - agement of a company. Key statutory shareholder rights include the right to demand a shareholders’ meeting, the right to demand the dismissal of directors/auditors, the right to inspect accounting books, and the right to maintain legal action against unlawful acts of directors/auditors. In particular, the right to demand the dismissal of directors/auditors or to maintain legal action
against unlawful acts allows shareholders to influence the management of the company. Shareholders exercise these minority sharehold - er rights and may seek a court injunction to sus - pend the directors’ performance of their duties. 5.3 Shareholder Meetings Under the KCC, a company is required to convene an Ordinary General Meeting of the Shareholders annually. While the KCC does not specifically stipulate the timing for holding the Ordinary General Meeting of the Shareholders, in practice, the majority of companies hold the meeting within three months of the end of the preceding fiscal year. In addition to the Ordinary General Meeting of the Shareholders, the Extraordinary General Meeting of the Shareholders may be held from the time to time as necessary. Please refer to 3.2 Decisions Made by Particu- lar Bodies and 3.3 Decision-Making Processes for the procedures and resolutions related to the general meeting of the shareholders. For claims against directors discussed in 4.8 Consequences and Enforcement of Breach of Directors’ Duties , shareholders of a company are also considered third parties that can claim compensation for damages from directors due to negligence in their duty to act. However, court decisions have only allowed for compensa - tion claims for damages where the sharehold - er directly incurs damages from the director’s negligence, and not in situations in which the company is the one to incur damages, which then affects the shareholder negatively (indirect damages). 5.4 Shareholder Claims Claims Against Directors
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