Law Firm Cheongchul (Responsible Attorney: Attorney Kim Kwang-sik) has filed a lawsuit for inspection of accounting records regarding the corporate card usage of executives on behalf of minority shareholders of an unlisted company. The plaintiffs, being long-time shareholders of the company, sought to understand the causes of the company's increasingly poor performance over the years by requesting an inspection of the accounting records, but the company argued that such requests did not meet the requirements under the Commercial Act.
Legal Issues Summary and Response: Despite being shareholders who have held the company’s stock for a long time and have provided advice for its development, the company has continuously rejected the plaintiffs' reasonable requests and suggestions, repeatedly operating independently and recording results that are close to operational losses. Therefore, our law firm conducted comprehensive consultations and litigation regarding the requirements and effects of the right to inspect accounting records as stipulated under the Commercial Act, including the procedures for exercising those rights and related lawsuits.
Victory: The opposing company appointed a large law firm and actively contended that the plaintiffs' claims did not meet the requirements under the Commercial Act. However, our law firm presented specific legal principles from previous cases and pointed out the illogical nature of the opposing party's arguments, resulting in a judgment from the court that ordered the company to allow the plaintiffs to inspect the accounting records.
This case arose after the opposing company became a subsidiary of a listed company, where a former executive of the listed company was continuously appointed as CEO, and while the operating results were persistently declining, expenditures for employee welfare were continually increasing. Consequently, the long-time shareholders, the plaintiffs, requested an inspection of the accounting records based on Article 466(1) of the Commercial Act, but the company refused, leading to the lawsuit.
In this case, the plaintiffs made a lawful request for inspection of accounting records as ① shareholders holding more than 3% of the total issued shares, and ② by submitting written reasons for their request, but the company contested the legitimacy of the plaintiffs' claims for the following reasons.
The plaintiffs' request for inspection and copying is based on false facts, and there is no substantive correlation between the 'reasons' for the request and the accounting records to be inspected.
The plaintiffs' request seeks to exert undue pressure on the CEO and others based on corporate card usage, with the improper purpose of collecting exploratory evidence to expel them.
The court confirmed the legal principles regarding the right to inspect accounting records that our law firm presented as follows: "The 'reasons' attached to the inspection and copying request submitted by a shareholder should be sufficiently detailed to determine the existence of the company’s obligation to respond to the request or to clarify the scope of the accounting records and documents to be provided, and it is not necessary to provide evidence that explicitly supports the reasons or to attach materials substantiating the reasons." It ruled that "the plaintiffs adequately clarified their reasons through the notice of this incident and the filing of this lawsuit to the extent that the defendant could ascertain the existence or scope of the obligation to provide access to the corporate card usage records, and substantial relevance between the subject of the request and the reasons for the request for inspection and copying was recognized," thereby fully granting the plaintiffs' claims.
This case is an important instance clarifying the requirements for exercising the right to inspect accounting records as a minority shareholder, and reaffirms the standards for determining the extent of the 'reason' that constitutes the requirements for such requests and the criteria for substantive relevance.
Law Firm Cheongchul has carried out a successful lawsuit for inspection and copying of accounting records against the company for refusing to respond to legitimate exercises of minority shareholder rights, providing concrete legal advice from the initial stages of such actions.
Law Firm Cheongchul has extensive legal consultation and litigation experience related to the exercise of minority shareholder rights and shareholder activism, providing tailored legal services suited to specific situations for effective and appropriate exercises of minority shareholder rights. In addition to the accounting record inspection and copying cases like the successful instance mentioned above, there are various litigation experiences related to injunctions to suspend the validity of shareholder meeting resolutions, lawsuits to confirm the invalidity of shareholder meeting resolutions, and injunctions to present items for resolutions at shareholder meetings. If you need related legal advice or litigation representation, please contact Law Firm Cheongchul.
