Supreme Court: "Even with management involvement, without dominant influence, not a major shareholder requiring regulatory approval"

Supreme Court. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Daehyun] Even if a company secures a 9.6% stake and partially participates in management, if it has not secured 'dominant management rights,' it is not subject to major shareholder change approval from the Financial Services Commission, according to a Supreme Court ruling.

On the 11th, the Supreme Court's 3rd Division (Presiding Justice No Taeak) announced that it overturned the lower court's ruling that sentenced Choi, who was indicted for violating the Capital Markets and Financial Investment Business Act, to a fine of 5 million won, and remanded the case to the Suwon District Court. The ruling stated that even if a new investor secures a substantial amount of shares, if the existing major shareholder continues to hold and exercise dominant influence while checking the investor's acquisition of control, the investor does not fall under the category of a 'major shareholder subject to FSC approval.'

Choi secured a 9.6% stake in Asset Management Company A in 2013, and after obtaining the right to nominate one of the three directors and one auditor, he appointed outside directors and auditors and changed important provisions of the company's articles of incorporation, but was prosecuted for failing to obtain major shareholder change approval from the FSC. The prosecution judged that although a financial investment business operator must obtain prior approval from the FSC to acquire shares and become a major shareholder, Choi directed such business execution without approval.

The first trial court acquitted Choi, stating that "it is insufficient to recognize that he exercised 'dominant influence' in decision-making or business execution." It was a judgment that it was difficult to consider Choi as a major shareholder subject to FSC approval.

On the other hand, the second trial court found Choi guilty and sentenced him to a fine of 5 million won. At that time, the court stated, "Choi acquired shares issued by the company with the intention of becoming a major shareholder," and "Considering that he appointed directors and auditors according to his will and received reports on management matters from company executives, it can be sufficiently recognized that he exercised dominant influence over major decision-making and business execution."

However, the Supreme Court ruled to re-examine and judge the case. The court pointed out, "On the contrary, it appears that the existing CEO was opposing Choi and checking the basis for control through Choi's additional investments." It added, "There is no circumstance to believe that Choi had the basis to make binding decisions or instructions regarding major decision-making or business execution and continuously exercised dominant influence accordingly," and remanded the case.

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