Open Decision Ledger · Corporate law & governance
Third-party share allotment for control defence and the validity of the issue
Supreme Court, Apr. 3, 2019, 2018Da289542 (judgment)
No holding summary · checked against points at issue. The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Case name: 전환사채및신주발행무효확인
Official text on the National Law Information Center
Question
Where a company issues new shares to third parties without any of the reasons set out in Article 418(2) of the Commercial Act, in a live control dispute and to defend the incumbent management's control, does it infringe the shareholders' pre-emption rights, and is the issue void in principle where it breaches a statute or the articles of association and seriously affects the existing shareholders' interests and control?
Holding
It does. Where a company allots new shares to third parties without any of the reasons in Article 418(2) of the Commercial Act, in a live control dispute and to achieve the purpose of defending the incumbent management's control, that allotment breaches Article 418(2) and infringes the shareholders' pre-emption rights. A share issue that is unlawful by reason of a breach of a statute or the articles of association is in principle void where it is contrary to the essential nature of a company or the basic principles of company law, or has a serious effect on the existing shareholders' interests and on the company's control or governance. The Supreme Court held that the court below had rightly found no urgent financing need, had treated the subscribers' funding as strongly suspect, and had seen the issue as a device to secure control, and dismissed the defendant company's appeal in full.
Points at issue, verbatim
신주발행에 법령이나 정관을 위반한 위법이 있고 그것이 주식회사의 본질 또는 회사법의 기본원칙에 반하거나 기존 주주들의 이익과 회사의 경영권 내지 지배권에 중대한 영향을 미치는 경우, 신주발행의 효력(원칙적 무효)
Unofficial English translation
Where the issuance of new shares involves an illegality in violation of statutes or the articles of incorporation and it contravenes the essence of a stock company or the basic principles of company law, or has a serious impact on the interests of existing shareholders and the management or control of the company, the effect of the new share issuance (null and void in principle)
Disposition
Dismissed Stated in the decision
상고를 모두 기각한다.
Unofficial English translation
All appeals are dismissed.
Form of the test
Elements stated Stated in the decision
신주발행에 법령이나 정관을 위반한 위법이 있고 그것이 주식회사의 본질 또는 회사법의 기본원칙에 반하거나 기존 주주들의 이익과 회사의 경영권 내지 지배권에 중대한 영향을 미치는 경우, 신주발행의 효력(원칙적 무효)
Unofficial English translation
Where the issuance of new shares involves an illegality in violation of statutes or the articles of incorporation and it contravenes the essence of a stock company or the basic principles of company law, or has a serious impact on the interests of existing shareholders and the management or control of the company, the effect of the new share issuance (null and void in principle)
Factors
- 회사가 상법 제418조 제2항에서 정한 사유가 없는데도
- 경영권 분쟁이 현실화된 상황에서 경영진의 경영권이나 지배권 방어라는 목적을 달성하기 위하여
- 주식회사의 본질 또는 회사법의 기본원칙에 반하거나
- 기존 주주들의 이익과 회사의 경영권 내지 지배권에 중대한 영향을 미치는 경우
Unofficial English translation
• where a company, despite having no grounds provided in Article 418 (2) of the Commercial Act,
• in order to achieve the purpose of defending the management or control of the management in a situation where a management dispute has materialized
• contravenes the essence of a stock company or the basic principles of company law, or
• has a serious impact on the interests of existing shareholders and the management or control of the company
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2009. 1. 30. 선고 2008다50776 판결(공2009상, 247)
Unofficial English translation
Supreme Court Decision 2008Da50776 decided January 30, 2009 (Gong 2009 Sang, 247)
Decisions referred to
[1][2] 대법원 2009. 1. 30. 선고 2008다50776 판결(공2009상, 247), 대법원 2015. 12. 10. 선고 2015다202919 판결(공2016상, 120)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
How serious must the effect on the existing shareholders' interests and on the company's control be before a defective share issue becomes void in principle?
A later decision that fixes a threshold for the serious effect on control, or an amendment to Article 418 of the Commercial Act on the reasons for a third-party allotment, would call for this entry to be read again. So would a new judgment on whether a subscriber's funding raised from the issuer's own credit is enough to found an inference of control defence.
Cross-family AI independent reading & axis check
6 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-25
A reader from another model family (GPT-6 Astra), given the official text but not the primary reading, agreed on 6 of the 8 axes; the readings differed on axis 4 (form of the test), axis 8 (open question and revisit condition).
Axis 4 (Form of the test): Primary “Elements stated” vs Independent “Existing test applied”
The primary reading presents the general test as a requirement set (요건 제시), while the independent reading frames the decision as applying the test to the facts of this case (사안 적용). The holding contains both the abstract rule and the court's factual findings, so the two readings emphasise different parts of the same judgment.
회사가 상법 제418조 제2항에서 정한 사유가 없는데도 경영권 분쟁이 현실화된 상황에서 경영진의 경영권이나 지배권 방어라는 목적을 달성하기 위하여 제3자에게 신주를 배정하는 경우Axis 8 (Open question and revisit condition): Primary “How serious must the effect on the existing shareholders' interests and on the company's control be before a defective share issue becomes void in principle?” vs Independent “How should validity be assessed when a third-party share issuance serves both a genuine urgent financing need and management's interest in retaining control?”
The primary reading asks how serious the effect on shareholders and control must be before a defective issue becomes void. The independent reading asks how to assess validity when genuine urgent financing and control retention coexist.
신주발행에 법령이나 정관을 위반한 위법이 있고 그것이 주식회사의 본질 또는 회사법의 기본원칙에 반하거나 기존 주주들의 이익과 회사의 경영권 내지 지배권에 중대한 영향을 미치는 경우, 신주발행의 효력(원칙적 무효)Raw responses and comparison record: Protocol · Blind readings (JSONL) · Axis comparison (JSONL) · SHA-256 (JSON)
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The Seoul High Court, in its judgment of 26 October 2018 (2017Na2037858), held the new share issue void. It found that the defendant had no reason under Article 418(2) of the Commercial Act or its articles of association, that the issue was made by third-party allotment to secure the control of the incumbent management rather than to improve the financial structure, that it therefore infringed the pre-emption rights of the plaintiffs and the other existing shareholders, and that it brought a serious change to the company's governance and markedly weakened the plaintiffs' control, so that the issue could also be regarded as markedly unfair.
Supreme Court standard: The Supreme Court found no error. Applying the settled rules in Supreme Court Decision 2008Da50776 and Supreme Court Decision 2015Da202919, it held that the court below had properly found no urgent financing need, had reasonably treated the subscribers' funding as strongly suspect, and had rightly seen the issue as a device for friendly shareholdings. It also held that the grounds on which the issue was said to serve a sales partnership with the subscribers were implicitly rejected, and that even if not expressly stated, no error of omission could affect the result, so it dismissed the appeal in full.
Distinguishing conditions
- A third-party allotment backed by a genuine urgent need for financing, which is one of the reasons the articles of association may set under Article 418(2).
- A share issue that breaches a statute or the articles but has no serious effect on the existing shareholders' interests and on the company's control or governance.
- An allotment made where no control dispute has become live and the incumbent management has no purpose of defending its control.
Record verification notes
Set the financial position at the issue date against the reasons relied on: the convertible bonds and cash already raised, the audit report and statement of financial position, and any accounts receivable. Then trace each subscriber's funds back to the company's own officers or counterparties, and compare the large shareholding reports and the speed of the board resolution and payment with the stated reason.
From the official text
Points at issue
[1] 회사가 상법 제418조 제2항에서 정한 사유가 없는데도 경영권 분쟁이 현실화된 상황에서 경영진의 경영권이나 지배권 방어라는 목적을 달성하기 위하여 제3자에게 신주를 배정하는 경우, 주주의 신주인수권을 침해하는지 여부(적극) [2] 신주발행에 법령이나 정관을 위반한 위법이 있고 그것이 주식회사의 본질 또는 회사법의 기본원칙에 반하거나 기존 주주들의 이익과 회사의 경영권 내지 지배권에 중대한 영향을 미치는 경우, 신주발행의 효력(원칙적 무효)
Unofficial English translation
[1] Whether a shareholder's preemptive right to subscribe for new shares is infringed where a company, despite having no grounds provided in Article 418 (2) of the Commercial Act, allocates new shares to a third party in order to achieve the purpose of defending the management or control of the management in a situation where a management dispute has materialized (affirmative) [2] The effect of a new share issuance where the issuance of new shares involves an illegality in violation of statutes or the articles of incorporation and it contravenes the essence of a stock company or the basic principles of company law, or has a serious impact on the interests of existing shareholders and the management or control of the company (null and void in principle)
Summary of the holding
The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Order
상고를 모두 기각한다. 상고비용은 피고가 부담한다.
Unofficial English translation
All appeals are dismissed. The appeal costs shall be borne by the defendant.
Provisions referred to
[1] 상법 제418조 제1항, 제2항 [2] 상법 제418조 제1항, 제2항, 제429조
Read 2026-10-25 · Cross-read 2026-10-25. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.
Every entry is published only after all quotes have been matched character by character against the official text, and audited by an independent second reading from a different model family across all eight axes. Both agreed axes and text-grounded interpretive divergences are recorded openly. The ledger is a research record, not an assessment of the court or advice on any matter.
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