Background
Questions were raised that, in the course of moving large sums of money in the past, a major group's holding company had used those funds to support a company connected to the group chairman's children. Minority shareholders viewed this as usurpation of a corporate opportunity and a conflict of interest, and retained Changchun.
The Issue — Can Directors Be Held Liable on the Company's Behalf?
Where a company finds it difficult to pursue management liability for loss caused to it, a shareholder derivative suit (Commercial Act art. 403) allows shareholders to pursue directors on the company's behalf. The issue was whether the movement of those funds amounted to a breach of the prohibition on usurping corporate opportunities (Commercial Act art. 397-2) or a conflict of interest in breach of the duty of loyalty, such that the directors must compensate the company.
How Changchun Helped
Acting for the minority shareholders, Changchun (attorneys Donghwan Shin and Jonghwa Kim) brought a derivative suit, ① identifying in concrete terms the circumstances and the flow of funds in the transactions at issue; ② showing that they usurped a corporate opportunity or were carried out in a situation of conflict of interest; and ③ setting out the damages liability owed by the current and former directors.
The case is drawing attention as an instance of shareholder oversight of internal dealings at a major group. Changchun is engaging actively for shareholders' interests and corporate transparency. (Related coverage: Lawtimes article) (Outcomes depend on the facts of each case and may differ.)