It is getting easier for shareholders to obtain judgments against directors for breaching their fiduciary duties to Korean companies. We recommend all directors obtain director liability insurance and that all shareholders consider suing directors when disputes arise because of the lack of oversight or malfeasance by directors. For a more comprehensive article on this issue please see: Fiduciary Duties of Korean Directors, Representative Directors, and Controlling Shareholders of Korean companies.
|Director’s Fiduciary Duties to Korean Companies|
Article 382-3 of the Korean Commercial Act and, also, 681 of the Korean Civil Act impose fiduciary duties on directors of Korean companies. These clauses impose a duty to affirmatively act “faithfully,” with reasonable prudence and to comply with the law. Article 399 of the Korean Commercial Act allows courts in Korea to award damages to shareholders for breaches of these duties.
Korea courts have been very lenient in imposing liability on directors, but recent cases may be an indication that Korean courts are becoming more willing to protect minority shareholders’ rights in Korea.
I will be writing more on this issue next week.
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.
- Suing Korean Directors for Company Loses Based on Breach of Korean Fiduciary Duties
- Fiduciary Duties of Korean Directors/Representative & Controlling Shareholders of Korean Companies
- Guide to Winding-Up/Closing a Korea-based Company: Korean Company Liquidation Procedure
- Liability of Persons who have Lent their Names for Korean Business Transactions
- Director Liability Insurance in Korea: Follow the Oxy Reckitt Beckiser
- Involuntary Dissolution of a Company in Korea: Shareholder Disputes in Korean Companies
- Increased Protection for Minority Shareholder Rights in Korea under Revised Korean Commercial Code
- Statutory Severance Obligations in Korea after Acquisition of Company in Korea
- Korean Derivative Suit Law
- Korean Jurisdictional and Choice of Law Issues in Commercial Agency & Distributor Agreements with Korean-based Agents & Distributors