Suing Korean Directors for Company Loses Based on Breach of Korean Fiduciary Duties

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.
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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.

Sean’s profile may be found at: Sean C. Hayes. Please Schedule a Free Consultation with Sean Hayes at: Schedule a Call with a Lawyer.