Complete Guide to Shareholder Meeting Injunctions – Legal Requirements & Practical Strategies

1. Legal Foundation and Practical Significance of Shareholder Meeting Injunctions

Shareholder meeting injunctions are temporary relief procedures that provisionally establish legal relationships when legal disputes arise concerning the convening, resolutions, or effectiveness of shareholder meetings. These fall under the category of “injunctions to establish temporary status” prescribed in Article 300, Paragraph 2 of the Civil Execution Act.

The reason why such injunction systems have special importance in the field of shareholder meetings lies in the phenomenon of “substantialization of injunctions.” Shareholder meetings have urgency as they must be held at designated times, so injunction decisions alone often lead to substantial dispute resolution. In practice, disputes are frequently concluded without proceeding to main litigation after injunction decisions.

Under corporate law, shareholder meetings are key decision-making bodies that determine fundamental directions of companies, such as appointment and dismissal of directors, corporate combinations, and business transfers. Therefore, if disputes over defects in such resolutions become prolonged, they can have fatal effects on stable company operations. For this reason, injunction systems are actively utilized for rapid and effective dispute resolution.

2. Injunctions to Prohibit Shareholder Meetings and Resolutions

Concept and Purpose

An injunction to prohibit shareholder meetings blocks the holding of entire shareholder meetings, while an injunction to prohibit resolutions restricts only resolutions on specific agenda items. When convening procedures or resolution matters of shareholder meetings violate laws or articles of incorporation, these are preventive relief measures to prevent the formation of complex legal relationships through illegal shareholder meetings being held before main judgments.

Types of Rights to be Preserved

The rights to be preserved in injunctions to prohibit shareholder meetings and resolutions are structured variously according to dispute situations:

1. Situations of Non-existence of Convening Authority: Right to exclude interference with authority of legitimate convening authority
2. Situations of Agreement Violations Between Parties: Right to claim performance of contractual non-performance obligations (case related to Hana Bank-Korea Exchange Bank merger)
3. Situations of Legal Violations in Convening Procedures or Resolution Content: Litigation rights to dispute defects in shareholder meeting resolutions or rights to cease illegal acts against executives

In practice, the view that “litigation rights to dispute defects in shareholder meeting resolutions” serves as the right to be preserved is generally accepted.

Standards for Recognizing Necessity of Preservation

Injunctions to prohibit shareholder meetings or resolutions are often filed immediately before shareholder meeting dates, so once granted, opposing parties have almost no time to seek cancellation of injunctions. Therefore, it is appropriate that they be granted exceptionally only in the following cases:

• When there is significant concern that additional legal disputes will arise from holding illegal shareholder meetings
• When the illegality of holding shareholder meetings is reasonably clear
• When there is high possibility of damages that cannot be recovered through post-hoc rights relief

Practical Considerations

Review of injunctions to prohibit shareholder meetings is very strict, so courts may recommend changing application purposes to injunctions to suspend effectiveness of shareholder meeting resolutions, or issue injunctions to suspend effectiveness of future resolutions even without changing application purposes.

3. Injunctions to Suspend Effectiveness of Shareholder Meeting Resolutions

Concept

These are injunctions to temporarily suspend the effectiveness of resolutions when shareholder meetings have already been held and resolutions completed, but there are defects in their procedures, content, or convening processes.

Rights to be Preserved

Since these dispute the effectiveness of already completed resolutions, rights to claim cancellation of resolutions or rights to confirm nullity/non-existence of resolutions under commercial law based on defects in shareholder meeting resolutions become the rights to be preserved.

Special Considerations

Injunctions to suspend effectiveness of executive appointment resolutions tend to be dismissed by lower courts as lacking necessity of preservation. The reasons are as follows:

• Has the same effect as seeking suspension of executives’ job performance
• Creates gaps in company operations due to absence of acting representative provisions
• Harms safety of third-party transactions due to lack of methods for corporate registration disclosure

Importance of Complying with Filing Periods

Lawsuits to cancel shareholder meeting resolutions must be filed within 2 months from the resolution date, so if 2 months have passed based on the injunction application date, nullity or non-existence grounds must be asserted. Filing injunction applications alone is not recognized as compliance with the 2-month filing period.

4. Injunctions for Agenda Inclusion in Shareholder Meetings

Legal Basis

These are injunctions to demand inclusion of agenda items when shareholder proposal rights under Commercial Act Article 363-2 are improperly rejected or ignored.

Rights to be Preserved and Requirements

When companies reject legitimate exercises of shareholder proposal rights, rights to claim agenda inclusion based on shareholder proposal rights become the rights to be preserved. However, all of the following requirements must be met:

• Holding 1% or more shares or shares worth 3 million won or more
• Continuous holding for 6 months or more
• Written proposal 6 weeks before shareholder meeting date
• Proposal content must not violate laws or articles of incorporation

Necessity of Preservation

Even when shareholder meeting dates are imminent, agenda inclusion is possible within the scope maintaining identity with agenda items listed in convening notices, so necessity of preservation should not be denied solely based on imminent convening notice periods. Considering required costs and time, necessity of preservation cannot be denied solely based on possibilities of calling extraordinary shareholder meetings unless there are special circumstances.

5. Legal Consequences of Violating Injunctions

When shareholder meetings are held and resolutions made in violation of injunction decisions, the provisional nullity theory is appropriate regarding the effectiveness of such resolutions.

Theoretical Basis of Provisional Nullity Theory

1. Injunctions have formative power and temporarily suspend opposing parties’ authority to hold shareholder meetings/make resolutions
2. Injunctions have provisionality and dependency regarding main lawsuits
3. When main lawsuit defeats are confirmed, injunction effects are deemed never to have existed from the beginning, allowing opposing parties to assert effectiveness of injunction violation acts

Supreme Court Decision 2009Da3920 also ruled that when it is confirmed in main lawsuits that there are no rights to be preserved, injunction violation acts are valid.

6. Key Practical Considerations

Major Practical Points

1. Party Standing Confirmation: Shareholder meeting injunctions must have companies as opposing parties, and representative directors cannot be respondents (except for rights to cease illegal acts)
2. Expedited Processing Procedures: Since filed when shareholder meeting dates are imminent, expedited procedures such as special service and urgent hearing date scheduling are necessary
3. Strict Compliance with Filing Periods: For resolution cancellation grounds, 2-month filing periods must be strictly observed
4. Specific Specification of Injunctions: Time, place, resolution matters, etc. must be clearly specified

7. Comprehensive Review and Outlook

Shareholder meeting injunctions are effective means for rapidly resolving disputes regarding companies’ key decision-making. However, since they often become final dispute resolution means as satisfactory injunctions, careful hearings and strict requirement reviews are necessary. It is important to strategically utilize injunction applications by fully considering practical considerations such as clear proof of rights to be preserved and necessity of preservation, expedited procedure progression, and compliance with filing periods.

8. Analysis of Related Supreme Court and Lower Court Precedents

Major Supreme Court Precedents

Supreme Court Decision May 10, 2007, 2005Da4284 – Adoption of Expansion Theory on Scope of Shareholder Meeting Authority

The court ruled that even matters specified as board of directors’ authority under commercial law, if stipulated as shareholder meeting authority matters in articles of incorporation, are not matters for board decision unless there are special circumstances such as unanimous consent of all shareholders.

Supreme Court Decision March 29, 2012, 2009Da92883 – Methods of Rights Relief for Non-performance Agreement Violations

The court ruled that when parties make non-performance agreements to refrain from certain acts and debtors violate them, creditors can seek performance of non-performance obligations and stop violation states through alternative execution or indirect compulsion decisions.

Supreme Court Decision January 28, 2010, 2009Da3920 – Effectiveness of Injunction Violation Acts

The court ruled that since it was revealed that injunctions were substantially invalid through confirmation in main lawsuits that there were no rights to be preserved for injunctions, exercises of voting rights violating injunction decisions ultimately do not infringe on rights to be preserved for injunctions and are therefore valid.

Supreme Court Decision January 25, 2007, 2005Da11626 – Standards for Judging Necessity of Preservation for Injunctions

The court ruled that whether necessity of preservation exists should be determined purposefully according to court discretion, considering interest-loss relationships of both parties according to whether relevant injunction applications are granted, expected wins/losses in main lawsuits, and various other circumstances.

Major Lower Court Precedents

Seoul Central District Court Decision February 4, 2015, 2015Kahap80051 – Injunction to Prohibit Shareholder Meetings to Prevent Mergers

This is a case where the court granted an injunction when Korea Exchange Bank and labor unions agreed not to pursue mergers for 5 years, but merger procedures were initiated before the period expired, and labor unions filed injunctions to prohibit shareholder meetings with rights to claim performance of non-performance obligations based on agreements as rights to be preserved.

Seoul Central District Court Decision January 23, 2019, 2018Kahap21610 – Related to Resolution Cancellation Filing Periods

The court ruled that merely filing injunction applications cannot be seen as compliance with 2-month filing periods, so if 2 months have passed from resolution dates, rights to claim resolution cancellation are extinguished by statute of limitations, and injunctions cannot be granted unless nullity or non-existence grounds for resolutions are asserted.

Ulsan District Court Decision March 23, 2021, 2021Kahap10105 – Necessity of Preservation for Shareholder Proposal Agenda Inclusion Injunctions

The court ruled that when agenda inclusion injunctions are filed with less than 2 weeks remaining until scheduled shareholder meeting dates, if specific agenda items proposed by shareholders are within the scope maintaining identity with agenda items listed in convening notices, agenda inclusion is possible in shareholder meetings even if proposed agenda items are not listed in convening notices, so necessity of preservation should not be denied solely based on imminent convening notice periods.

K&P Law Firm has experience successfully handling shareholder meeting injunction cases related to recent management disputes, and has achieved positive results particularly in complex matters related to listed companies’ shareholder proposal rights exercises.

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