The Supreme Court of Korea has noted that the corporate veil may be pierced and a shareholder may be sued:
"Where a company maintains the external appearance of a juristic person while it merely takes the form of a juristic person and, in substance, it is equivalent to other person's private enterprise behind the corporate veil or used without justifiable reason in order to circumvent the application of laws against the person behind the corporate veil, the denial of any responsibility of the person behind the corporate veil with respect to an action of the company, based on the ground that such person is a separate entity and the legal effect of such action is attributed only to the company, cannot be permitted. It cannot be allowed in light of justice and equity for the individual to abuse the corporate entity in violation of the principle of trust and good faith. Therefore, the company as well as the person behind the corporate veil must be responsible for the actions of the company."The "test" imposed by the Korean Supreme Court has lead to Korea courts to look to, inter alia, whether:
- Funds were commingled between a shareholder and the company;
- Corporate formalities were observed;
- All the assets were transferred to another company controlled by a dominate shareholder;
- Company failed to maintain an arm’s length relationship with a related entity or individuals;
- Siphoning of corporate funds by a dominant shareholder occurred;
- Two or more companies acted as a single economic unit;
- Company falsified corporate records; and/or
- Company is otherwise being utilized as a facade to shield a shareholder from liability.
Sean Hayes may be contacted at: SeanHayes@ipglegal.com.
Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.