Standards for Determining Obstruction of Business, Embezzlement, and Improper Support — Constituent Elements in Three Supreme Court Judgments

Question

To what extent does an auditor's power to attend a board meeting and state an opinion fall within the scope of business protected by Article 314(1) of the Criminal Act? The Supreme Court defined the business protected by the offence of obstruction of business as affairs or undertakings in which a person is continuously engaged by virtue of an occupation or a position in social life, and held that incidental business closely and inseparably connected with the principal business is also protected. The issue is whether an auditor's attendance at a particular board meeting and the statement of an opinion there constitute such incidental business.

How do share certificates that are deposited and transferred by book entry between accounts differ, for the purpose of determining the object of embezzlement, from shares that are treated as deposited without share certificates having been issued? Because the offence of embezzlement under Article 355(1) of the Criminal Act is constituted where a person who keeps another's property embezzles it or refuses to return it, whether the offence is established turns on whether the object of the transaction is property or a right.

What role does the transaction price that would have been formed between independent parties having no special relationship, the so-called normal price, play in determining whether there has been improper support? What remains is how to weigh and combine the various circumstances, including the difference between the performance and the counter-performance, in an overall assessment, and how to apply the transitional measures before and after an amendment of the law.

Material to check

The company's corporate governance documents must first be collected. The objects include the articles of incorporation, the rules governing the operation of the board of shareholders' resolution on the appointment of the auditor, internal regulations specifying the scope of the auditor's duties, notices of convocation of board meetings and attendance confirmation records, and minutes. How far the auditor's authority is expressly defined becomes the starting point for the subsequent determination of the scope of work.

Materials are needed concerning what explanations and statements were actually exchanged at the board meeting in issue. These include transcripts of the meeting, presentation materials, written statements of the participants, documents recording whether the materials requested by the auditor were provided, and written inquiries and replies before and after the meeting. The content of the false explanations and the channels through which they were conveyed must be revealed, together with whose judgment those explanations influenced and how.

Confirm the materials supporting whether share certificates were issued. These include board or shareholders' resolutions on the issuance of share certificates, the register of shareholders, the share certificate issuance register, the substitution entry details and inter-account movement records of the depository and clearing institution, and the terms and conditions or practice guidelines under which unissued shares are treated as having been deposited. Proof of issuance becomes the gateway to the establishment of the offense of embezzlement.

In unfair support cases, the actual transaction materials must be collected. These include transaction agreements and tax invoices, financial statements and audit reports, shareholding status and concurrent officer positions showing whether a special relationship exists, records of the period, number of times, and timing of the support, materials showing the financial circumstances and management situation of the supported party, and price data from comparable third-party transactions.

Possible readings

One interpretation views the auditor's attendance at board meetings and expression of opinions as an essential part of the auditor's duties. In order to substantively perform audits of accounting and of duties, one must be able to attend the board meeting where the state of management is discussed and present one's views; and if this authority is infringed, the entirety of the audit work is shaken, so the reasoning is that false explanations may be regarded as obstruction of business against the auditor. Furthermore, if those explanations also disrupted the directors' deliberation and voting, obstruction of the board's work is separately recognized.

The opposing interpretation construes the scope of work narrowly. The auditor's original work lies in accounting audits and duty audits, and attendance at a particular meeting and the expression of opinions there are no more than one mode or occasion of exercising that authority. The concern is that if interference on such an occasion is immediately connected to interference with audit work, the scope of punishment expands without end, and the constituent elements of Article 314 paragraph (1) of the Criminal Act become virtually infinitely flexible.

The points of contention between the two interpretations lie in the expansion or contraction of the scope of protected work, where to draw the line between negotiable instruments and rights in determining the quality of property, and whether market prices should take precedence in calculating normal prices or whether the realities of transactions should be broadly reflected. The Supreme Court, while setting out the requirements expressly, adopts the stance of examining the concrete facts of each case individually.

What the decisions held

Supreme Court Judgment 2023Do9332 defined the business protected by the offence of obstruction of business as affairs or undertakings in which a person is continuously engaged by virtue of an occupation or a position in social life, and proceeded on the premise that incidental business closely and inseparably connected with the principal business is also included. It held, however, that the act of an auditor, who is not a member of the board of directors, attending a particular board meeting and stating an opinion is difficult to regard as incidental business closely and inseparably connected with the auditor's proper business. Accordingly, while the defendants' false explanations could be regarded as obstructing the directors' business of deliberation and resolution, they could not be regarded as obstructing the auditor's business, and the judgment below, which convicted the defendants of obstructing the auditor's business, was reversed for misapprehending the legal principles on 'business' in the offence of obstruction of business in a manner that affected the judgment.

Supreme Court Judgment 2020Do2884 drew a strict distinction between share certificates and shares. It held that share certificates, as securities, constitute property and can therefore be the object of embezzlement, whereas shares, which signify a unit of capital or shareholder rights, are not property and cannot be the object of embezzlement. Consequently, it held that share certificates deposited and transferred by book entry between accounts can be the object of embezzlement under Article 355(1) of the Criminal Act, but shares treated as deposited without share certificates having been issued and transferred by book entry are not property and cannot be the object of embezzlement. The court below should have examined whether share certificates had been issued and determined whether the defendant was a person keeping another's property.

Supreme Court Judgment 2019Do19067 held that whether conduct amounts to improper support or to improperly adding a stage to a transaction must be determined concretely and individually, taking into account as a whole the difference between the performance and the counter-performance, the scale of the supporting transactions, the economic benefit from the support, the period, frequency and timing of the support, and the economic situation of the recipient of the support at the time. It defined the normal price as the transaction price or the like that would have been formed between independent parties having no special relationship, and held that a single comprehensive offence spanning the period before and after an amendment of the law must be punished under the new law in force at the time the criminal conduct ended, notwithstanding the period of application set out in the addenda.

Practical checklist

First, can the work infringed by the act in question be identified? After first setting out the principal work that is the object of protection under Article 314 paragraph (1) of the Criminal Act, it must be separately argued whether the work in question is incidental work in a close and inseparable relationship with that work. Even where it is said to fall within the auditor's authority, check whether it can be explained in writing that attendance at a particular board meeting and the expression of opinions there stand in such a relationship.

Second, has it been confirmed from the records whether the legal character of the subject of the transaction is property or a right? By comparing the resolution on the issuance of share certificates, the issuance register, and the depository substitution entry details, one must ascertain whether share certificates that were actually issued changed hands, or whether only the status of unissued shares moved between accounts. Depending on that result, determine which of the offense of embezzlement and the offense of breach of trust is to be taken as the principal ground.

Third, are the comparison materials for calculating normal price sufficient? Prepare market materials from which the transaction prices between independent parties having no special relationship can be obtained, the contract terms of transactions of the same kind, and grounds for adjusting differences in the time and scale of the transactions. Do not reach a conclusion on the basis of the difference between performance and counter-performance alone, but also organize together the period of support, the number of times of support, the timing of support, and the economic circumstances of the supported party.

Fourth, have the point in time of the applicable statutes and the transitional measures been confirmed? Depending on when the transaction began and how long it continued, whether the former Act or the current Act applies differs. Examine together the period of application provided in the Supplementary Provisions and the principle under Article 1 of the Criminal Act, and it is safer to organize in a separate table the portions where the periods overlap.

Glossary

Business, for the offence of obstruction of business, means affairs or undertakings in which a person is continuously engaged by virtue of an occupation or a position in social life. Because incidental business closely and inseparably connected with the principal business is also protected, whether something constitutes incidental business is the core of the determination in practice.

The distinction between property and securities is decisive in determining embezzlement. Share certificates, being tangible objects, are securities and are therefore treated as property that can be the object of embezzlement. Shares, by contrast, are no more than a right signifying a unit of capital or shareholder rights; they are not property and therefore are not, in themselves, the object of embezzlement. Even where shares are deposited and transferred by book entry, whether share certificates were actually issued is the dividing line.

The normal price means the transaction price that would have been formed between independent parties having no special relationship. Improper support is determined concretely and individually, centring on the difference between the performance and the counter-performance while taking into account as a whole the scale of the supporting transactions, the economic benefit, the period, frequency and timing of the support, and the economic situation of the recipient of the support. Improperly adding a stage to a transaction is examined under the same approach.

Sources and limitations

This white paper was prepared solely on the basis of the judgments of the Supreme Court in 2023Do9332, 2020Do2884, and 2019Do19067 and the provisions cited in those judgments. The texts of the judgments and of the provisions were checked against the National Law Information Center as of 2026-10-15, and no case other than the three judgments set out in this white paper is cited.

This material is merely a summary for general research purposes and is not legal advice. Determinations on individual matters may vary depending on the facts, the evidence, and the point in time of the applicable statutes, and practical decisions must therefore undergo review by the responsible attorney.

Points left open

Supreme Court Judgment 2023Do9332 held that the substance of the defendants' false explanations could be assessed and subsumed as conduct obstructing the directors' normal business of deliberation and resolution. Because obstruction directed at an auditor and obstruction directed at members of the board of directors have different objects, the same explanation may lead to different conclusions depending on how the protected business is identified. The question of distinguishing whether obstruction by a fraudulent scheme, as one of the methods under Article 313 of the Criminal Act, concerns the auditor's business or the directors' business of deliberation and resolution needs to be clarified.

Supreme Court Judgment 2020Do2884 remanded the case to the Seoul High Court to examine whether share certificates had been issued and to determine whether the defendant was a person keeping another's property. Supreme Court Judgment 2019Do19067 held that, for a single comprehensive offence spanning the period before and after an amendment of the law, the fact that the addenda provide for the former provisions to apply to ongoing transactions does not warrant a different view, and that the offence must therefore be punished under the new law in force at the time the criminal conduct ended. Both judgments remanded the cases to the courts below for further hearing and determination.

When to reconsider

This white paper must be reviewed anew if subsequent case law on the scope of work of the offense of obstruction of business emerges, or if the auditor's authority and the manner of participation in board meetings change through amendments to corporate statutes and regulations. If changes occur in depository and clearing practice or in share certificate issuance procedures such that the manner of treating unissued shares changes, the portion on the determination of the quality of property must also be revised.

If the provisions of the Monopoly Regulation and Fair Trade Act and its Enforcement Decree are amended and the criteria for calculating normal price or the provision on adding transaction stages changes, the relevant portion is to be updated. In addition, if the trial decisions on the facts in the three judgments become final, or if the full texts of the judgments are newly released and further detailed facts come to light, the white paper must be republished.

Statutes referred to

• 형법 제1조, 제30조, 제313조, 제314조 제1항, 제355조 제1항
• 형사소송법 제325조
• 독점규제 및 공정거래에 관한 법률 구 법 제23조 제1항 제5호, 제7호, 제2항, 제3항, 부칙 제1조, 제2조, 현행 제45조 제1항 제7호, 제8호, 제9호, 제3항
• 독점규제 및 공정거래에 관한 법률 시행령 구 영 제36조 제1항 [별표 1의2] 제8호 (라)목, 제10호 (나)목, (라)목, 현행 제52조 [별표 2] 제8호 (라)목, 제9호 (나)목, (라)목

Decisions referred to

• 대법원 2023. 9. 27. 선고 2023도9332 판결 · Decision ledger
• 대법원 2023. 6. 1. 선고 2020도2884 판결 · Decision ledger
• 대법원 2022. 9. 16. 선고 2019도19067 판결 · Decision ledger

Verification status

The texts of the relevant provisions and the judgments of the Supreme Court in 2023Do9332, 2020Do2884, and 2019Do19067 were checked against the National Law Information Center as of 2026-10-15. This white paper cites only the three judgments set out in the judgments it addresses.