1. Case Overview
a. Parties Represented by Barun Law
We represented Mr. A, a former director of a social welfare corporation (creditor, appellant) ("Corporation B").
b. Case Background
When the former chairperson of Corporation B received prior notice from the Seoul Metropolitan Government regarding dismissal, the chairperson abruptly announced his resignation at a board meeting. However, the notice convening that meeting did not list the appointment of a successor chairperson as an agenda item. Despite this, the board passed a resolution at that meeting to appoint a new chairperson. The newly appointed chairperson subsequently convened another board meeting, during which further resolutions, including the appointment of additional directors, were adopted.
c. Litigation
Mr. A argued that the initial board resolution was marred by serious procedural defects, rendering it invalid, and consequently that all subsequent resolutions adopted on its basis were likewise null and void. He sought an injunction to suspend the duties of the newly appointed chairperson and directors. The first-instance court dismissed his application, prompting an appeal.
2. Decision
The appellate court overturned the lower court's decision and accepted the creditor's claims, ruling to suspend the duties of the chairperson and directors appointed pursuant to the invalid board resolution until a final judgment is rendered on the merits.
3. Grounds of the Decision
The court held that the notice convening the initial board meeting mentioned only "discussion of follow-up measures to the dismissal of corporate officers" and did not specify the appointment of a new chairperson as an agenda item. Therefore, the resolution appointing a new chairperson violated directors' rights to deliberate and prepare for the meeting, constituting a serious procedural defect that rendered the resolution invalid. The court further determined that the subsequent board resolutions convened by an unauthorized person (the improperly appointed chairperson) were also invalid. On this basis, the court reversed the first-instance decision and granted the creditor's application.
4. Our Arguments and Role
We persuasively argued that:
- The creditor, as a resigning director with emergency handling authority, still had a legal interest in seeking confirmation of the invalidity of the resolutions.
- The Articles of Incorporation and the Social Welfare Services Act clearly established the procedural illegality of the initial board meeting.
- Resolutions convened by an unauthorized person must also be deemed invalid.
We further emphasized that allowing the respondents to continue performing their duties would cause substantial harm or imminent risk to the corporation's operations. By thoroughly explaining the circumstances of the disputes surrounding the resignation and appointment of the chairperson and directors, as well as the current state of Corporation B's management, we convincingly demonstrated the necessity of provisional relief. As a result, we successfully reversed the first-instance dismissal on appeal.
5. Significance of the Decision
This case exemplifies overcoming an unfavorable first-instance ruling in an injunction proceeding by meticulously establishing defects in board meeting notices, the scope of agenda items, the ripple effects of procedural flaws, and the necessity of provisional relief. In particular, it highlights that, in disputes concerning the appointment of corporate officers, strict adherence to statutory and bylaw procedures is central to determining the validity of board resolutions. The decision provides meaningful guidance for developing effective litigation strategies in future disputes of a similar nature.
