Hello, I am Attorney Kim Kwang-sik from Cheongchul Law Firm.
As the season for regular shareholder meetings approaches, questions often arise regarding whether the accounting treatment of specific transactions, large-scale investments, or related party transactions was appropriate. However, it is a reality that confirming the substance of actual transactions and the responsibility for them is difficult with only disclosure documents or financial statements.
In this context, the key right that serves as a pivotal practical measure is the right to inspect and copy accounting books and documents under Article 466 of the Commercial Act. Today, I will summarize the requirements and scope for exercising this right, as well as how it differs from other rights of inspection.
[Question]
Can the right to inspect and copy accounting books and documents under Article 466 of the Commercial Act be exercised by shareholders of listed companies? How are the requirements, scope, and the company's potential for rejection determined?
[Answer]
1. Requirements for Exercise
In the case of unlisted companies, only shareholders who hold at least 3% of the total number of issued shares can exercise this right.
For listed companies, the requirements are relaxed.
A shareholder who has held shares for more than 6 months
must hold at least 0.1% of the total number of issued shares,
If the capital is over 100 billion KRW, they can exercise this right if they hold 0.05% or more.
Therefore, in listed companies, whether they meet the ‘6-month continuous holding’ requirement becomes the key issue rather than just the percentage of ownership. In cases of stock lending, trust in name, or joint ownership structures, whether continuous holding is recognized may become a problem, so it is essential to organize and proceed with related matters.
2. Method of Request and Scope of Subject: ‘Reason’ and ‘Specificity’ Determine Success or Failure
Article 466 requires shareholders to make their requests in writing with “reasons attached.” This is a procedural mechanism to allow the company to determine whether it is obligated to provide access and the scope of such access.
The Supreme Court views that the ‘reason’ stated in the request must be specific enough regarding the circumstances and purpose for the company to assess, and it is sufficient not to attach supporting evidence. However, it is not permitted if the reason itself is false or the purpose is clearly unjustified.
The subjects for inspection and copying are also not unlimited.
Typically recognized documents include journals, general ledgers, subsidiary ledgers, vouchers, contracts, tax invoices, receipts, deposit slips, and expenditure approval documents, which are direct evidences of transactions.
On the other hand, internal memos, meeting materials, and documents regarding decision-making processes tend not to fall within the scope of ‘accounting books and documents’ by principle.
Ultimately, the key is whether the request is specified in a manner directly related to the purpose of the request. Requests like “all company accounting materials” are likely to be seen as exploratory requests and thus restricted.
3. Company's Possibility of Rejection and Burden of Proof
Article 466, Paragraph 2 of the Commercial Act stipulates that a company cannot refuse a shareholder's request unless it proves that the request is unjustified.
Typical elements raising concerns for refusal include fears of competitive use, objectives that infringe on the joint interests of the company or shareholders, and the selection of significantly disadvantageous timing for the company. However, these are matters that the company must assert and prove. Rejection is an exception, and approval is the principle in this structure.
If a company refuses or effectively delays, a lawsuit seeking to allow inspection and copying can be filed, and in urgent cases, provisional measures can be considered. However, provisional measures tend to require stricter proof of necessity.
4. Distinction from Other Rights of Inspection: Confusing Procedures is Risky
The right to inspect accounting books must be clearly distinguished from rights of inspection regarding company materials, such as the following.
Board meeting minutes can be inspected and copied under Article 391-3 of the Commercial Act, and if the company refuses, it proceeds through court authorization (non-contentious procedure).
Shareholder meeting minutes are based on Article 396, Paragraph 2 of the Commercial Act.
Financial statements and business reports are guaranteed for inspection and copying under Article 448, Paragraph 2 of the Commercial Act.
As such, each document has different bases and procedures, and they are not handled in the same manner as the right to inspect accounting books under Article 466.
Therefore, if accounting materials, minutes, and financial statements are bundled together and requested through the same procedure, some may encounter legal issues, thus requiring a strategy to separate the request structure by relevant provisions.
The right to inspect and copy accounting books and documents under Article 466 of the Commercial Act is a powerful tool designed for shareholders to verify the appropriateness of the company's accounting practices and, if necessary, prepare subsequent legal actions such as derivative lawsuits.
Especially for listed companies, it is crucial to meet the special requirements of “6 months of continuous holding + 0.1% (or 0.05%) ownership,” so checking the requirements before exercise is of utmost importance. Additionally, specifying the purpose and scope accurately from the request stage is the most effective way to prevent disputes.
If you are considering exercising relevant rights ahead of the regular shareholder meeting, I encourage you to approach it from the perspective of “how to design it” beyond simply asking “can I see it.”
Cheongchul Law Firm provides consistent legal advice from drafting appropriate requests for each case to responding to refusals and developing strategies for follow-up accountability.
