Supreme Court: "Lawsuit to Nullify General Meeting Resolution is an 'Essential Joint Litigation' with Same Trial Results for Parties"

Supreme Court, Seocho-dong, Seoul. Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Daehyun] The Supreme Court has ruled that lawsuits seeking to nullify resolutions made at shareholders' meetings must be conducted as "necessary joinder lawsuits" since all parties involved are affected. A necessary joinder lawsuit refers to a case where multiple plaintiffs (or defendants) must receive the same trial outcome.

On the afternoon of the 22nd, the Supreme Court en banc (Presiding Justice Lee Gitaek) upheld the lower court's ruling dismissing the appeal in a case where two shareholders of a real estate development company, including Mr. A, filed a lawsuit against the company to confirm the nullity of a resolution made at an extraordinary shareholders' meeting.

Previously, shareholder Mr. B obtained court permission in 2012 to convene an extraordinary shareholders' meeting to elect inside directors and auditors, and proceeded with the resolutions for directors and auditors. In response, Mr. A and others filed a lawsuit claiming that the shares held by Mr. B actually belonged to another owner, rendering the extraordinary shareholders' meeting convened by Mr. B invalid.

The first trial ruled against the plaintiffs, stating, "The alleged defects regarding the convening authority or quorum claimed by the plaintiffs cannot be recognized," and dismissed the claims of Mr. A and others. The second trial also upheld this decision and dismissed the plaintiffs' appeal.

The Supreme Court en banc also dismissed the appeal, stating, "The lower court did not err in its understanding of the legal principles related to the authority to convene shareholders' meetings, and there was no mistake affecting the judgment." However, the key issue was whether the nature of such company-related lawsuits should be considered necessary joinder lawsuits or ordinary joinder lawsuits.

Among the 13 justices, a majority of nine held that lawsuits to confirm the nullity of shareholders' meeting resolutions should be conducted as necessary joinder lawsuits. The majority opinion stated, "In company-related lawsuits where the effect of a favorable judgment for one person extends to all co-litigants, the case must proceed as a necessary joinder lawsuit rather than an ordinary joinder lawsuit."

In necessary joinder lawsuits, multiple co-litigants must receive the same conclusion. If even one party appeals, the finalization of the judgment is blocked even if the other litigants waive their appeals, and the entire lawsuit is subject to appellate review.

In contrast, ordinary joinder lawsuits apply independent statuses to each co-litigant, allowing for different trial outcomes such as wins or losses. Additionally, separate pleadings can be conducted.

Meanwhile, four of the 13 justices expressed a dissenting opinion that the lawsuit should be considered an ordinary joinder lawsuit. They reasoned that forcing all parties involved in company-related lawsuits to have consistent trial outcomes could restrict the parties' rights to dispose of their claims or procedural rights.

A Supreme Court official stated, "Through this ruling, it has become an opportunity to examine and discuss various aspects regarding the forms of joinder lawsuits involving multiple parties, specifically the meanings and procedural differences between ordinary joinder and necessary joinder lawsuits, and their impact on the parties involved."

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