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Study on the Financial Assistance of a Company for the Purpose of the Acquisition of Shares in Itself

  • DONG-A LAW REVIEW
  • 2011, (53), pp.519-549
  • Publisher : The Institute for Legal Studies Dong-A University
  • Research Area : Social Science > Law

고인배 1

1동아대학교

Accredited

ABSTRACT

In this case, the Supreme Court of Korea has decided as follows: It is acknowledged in this case that the share acquisition price paid by the purchasers of the shares to the public limited company was appropriated from the financial benefits granted by the same company. As a consequence, the first requirement for application of the rules governing the cases of acquisition by a company of its own shares is fullfilled. By contrast, it is not acknowledged that the profit and loss arising out of the same share purchase have gone for the account of the public limited company. In this case, the found facts that financial support was rendered by the public limited company to the potential purchasers for the purpose of financing the acquisition of shares of the same company, in such forms as paying advancements, and that unjust transfer of business and assets have enabled the share purchase have had no influence on the above-mentioned conclusion. The second requirement is hence regarded as not fullfilled. A generalization to the effect that all forms of financial supports offered by a public limited company to potential purchasers of its shares will be governed by rules regarding cases of acquisition of own shares would hardly be acceptable. In cases where the executives have chosen the share acquirer(s) arbitrarily, especially based on personal acquaintanceships, allowing financial support for the share acquisition by way of rendering loans, delaying or, occasionally neglecting the collection of the loans provided to the acquirer(s), granting assistance –which enables the repayment of the loans- out of illegal reserved fund, with the control over the company retained on the side of the original executives, the application of the Art. 341 Korean Commercial Code by way of analogy could come into consideration. Especially as far as the case reviewed in this study is concerned, the executives of a company have acquired, through a corporation of their own establishing, 25 per cent of all issued shares of the former company. This share acquisition was performed under the financial support of the company of the relevant shares, undoutedly under strong influence of the same executives. When it comes to legal formality, the loan rendered for the purpose of acquisition of shares was fully collected by the lender company, which, to the contrary, could hardly be regarded as funded from the borrower company’s own capital. Considering these circumstances, the author doubts whether there was really no room left for application of the rules governing the cases of acquisition by a company of its own shares —by way of analogy.

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