Background
Our client founded an agricultural machinery manufacturer in 2002 and serves as its CEO. The company issued 20,000 shares at incorporation without share certificates. Some shares were subscribed in the name of Mr. B, then an employee, who left in 2006 but remained on the shareholder register as the holder of 6,600 shares. Our client asserted that the shares were held in Mr. B's name only nominally, terminated that arrangement through the complaint, and sought a declaration that he owned the shares. Mr. B claimed he had received the shares as a founding promoter.
What Was at Stake
Mr. B argued that the suit was unnecessary, and on the merits the question was who actually paid for the shares and acted as their owner.
How Changchun Helped
Law Firm Changchun represented the founder, and the court accepted its position. Under Supreme Court of Korea precedent, ownership of shares issued without certificates reverts to the true owner upon termination of a nominee arrangement, and a declaratory suit is available when the registered holder disputes it. The evidence showed that our client paid the full subscription price, that Mr. B never attended shareholder meetings or voted, that minutes were prepared with Mr. B's seal held by our client, that Mr. B collected no dividends in 2019 or 2020, and that he raised no objection when 400 shares in his name were gifted to our client's child in 2018.
Outcome
In April 2025 the first-instance court declared that our client holds the shareholder rights to the 6,600 shares and ordered Mr. B to bear the costs, finding no sign that Mr. B had acted as a shareholder for about 22 years.
Nominee shareholdings tend to generate disputes over time. Keeping records of subscription payments, dividends, and voting is the best evidence of true ownership. (Outcomes depend on the facts of each case.)