[Company, Shareholders' Meeting] Whether the defects in the resolution of the shareholders' meeting are cured by the ratifying resolution

Hello, I am Attorney Eom Sang-yoon from Cheongchul Law Firm.

[Defects in the Shareholders' Meeting Resolution]

A corporation is required to convene a shareholders' meeting once a year, and may convene additional meetings as necessary (Article 365 of the Commercial Act). However, if there are defects in the procedures of convening the shareholders' meeting or in the method of resolution, shareholders may file a lawsuit for cancellation of the resolution, or may seek a declaration of nullity or non-existence if the defects are substantial.

In cases where the shareholders' meeting is convened by someone without the authority to do so, the procedure of convening is violated, or resolutions are passed due to the participation of someone without voting rights, it can be seen that there are grounds for defects in the shareholders' meeting resolution, and shareholders, directors, or auditors may file a lawsuit for cancellation of the shareholders' meeting resolution against the company.

For example, if a non-representative director convenes a shareholders' meeting based on a resolution of the board of directors, if someone without voting rights exercises their voting rights, or if the quorum is not met, these are grounds for cancellation of the shareholders' meeting.

[Curing Defects by Ratifying Resolution]

Meanwhile, the Supreme Court has stated, “If the company ratifies a previously defective resolution or makes another resolution on the same agenda at a shareholders' meeting that was convened and resolved in accordance with legal procedures, unless there are special circumstances that recognize that the new resolution of the shareholders' meeting is non-existent or invalid due to other procedural or substantive defects, even if there were defects in the previous resolution, there is no interest in filing a lawsuit for non-existence or nullity of the previous defective resolution” (Supreme Court ruling 2017Da260902).

In other words, even if a shareholders' meeting resolution has defects, if the company subsequently ratifies the defective resolution at a shareholders' meeting held in accordance with proper procedures, the plaintiff has no interest in seeking a confirmation of nullity or cancellation regarding the previous resolution, leading to the dismissal of the case.

[Recent Supreme Court Ruling Case]

It is not necessarily required for such a ratifying resolution to occur before a lawsuit is filed.

Recently, in a case where the 'motion to grant the representative director a special bonus and to raise the salary' was approved with the consent of the representative director at the regular shareholders' meeting of the corporation, the court found that even though someone with a special interest in the resolution could not exercise voting rights (Article 368, Paragraph 3 of the Commercial Act), the representative director, who fell under the category of special interest, exercising voting rights constituted grounds for cancellation of the resolution (Gwangju District Court Suncheon Branch 2022GaHap10881, Gwangju High Court 2023Na23769 ruling).

However, after the second-instance ruling was made, a resolution was made at the company's extraordinary shareholders' meeting asserting cancellation of the remuneration resolution, which ratified the prior defective resolution, and based on this, the Supreme Court determined that the plaintiff had no interest in seeking cancellation of the problematic remuneration resolution since the preceding defective resolution was ratified by the subsequent resolution.

Thus, even if there are defective resolutions in a shareholders' meeting, if those resolutions are ratified by a subsequent resolution, it results in a curing of the defect.

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