Supreme Court: "Special Performance Bonuses Paid Without Shareholders' Meeting Are Unjust Enrichment and Must Be Returned to the Company"

[Asia Economy Reporter Kim Hyung-min] The Supreme Court has ruled that special performance bonuses paid to inside directors without a shareholders' meeting, even in situations where resolutions are expected according to the intentions of the largest shareholder, constitute unjust enrichment.

The Supreme Court's First Division (Presiding Justice Kwon Soon-il) announced on the 28th that it upheld the appellate court's partial ruling in favor of the plaintiff in the final appeal of an unjust enrichment refund lawsuit filed by electronic component manufacturer Company A against inside director Mr. B and others, demanding the return of approximately 4.5 billion KRW.

The court stated, "There is no legal error or illegality in the lower court's judgment regarding the director's remuneration as stipulated in the Commercial Act and the resolutions of the shareholders' meeting."

Mr. B, who served as the CEO of Company A, received special performance bonuses totaling 4,584,990,000 KRW over four occasions between 2013 and 2014, according to the wishes of the largest shareholder, Mr. C.

After Mr. B stepped down from his CEO position, Company A filed a lawsuit demanding the return of the special performance bonuses plus delayed damages, arguing that the bonuses were paid without a resolution from the shareholders' meeting.

During the trial, Mr. B claimed, "Since there was approval from the largest shareholder, even if the shareholders' meeting had actually been held, the special performance bonuses would have been resolved."

The first trial court ruled in favor of Company A, declaring the special performance bonuses paid to Mr. B invalid.

The appellate court also upheld the first trial's decision, stating, "At Company A's regular shareholders' meeting, only the limit on directors' remuneration was set; there was no resolution regarding the amount, payment method, or timing of the special performance bonuses," and "The decision to pay the special performance bonuses was invalid as it did not go through a shareholders' meeting resolution."

However, the court ordered Mr. B to return 2,851,000,000 KRW, the amount he actually received excluding taxes, along with statutory interest to Company A.

The court pointed out, "Special performance bonuses are not income subject to withholding tax," and "Nevertheless, Company A withheld and paid income tax from Mr. B's special performance bonuses, which should be reclaimed from the state."

This content was produced with the assistance of AI translation services.