The Intellectual Property and Commercial Court recently issued Civil Judgment No. 42 (2023) in a case involving a petition to remove a director. The Court held that a shareholder who attends a shareholders’ meeting must raise objections at the meeting to defects in the convening procedures or voting process in order to later seek annulment of the resolution. Such objections must specifically identify the alleged illegality or defect; generalized objections are insufficient.
In the case, the corporate shareholder argued that the company failed to notify all heirs of a deceased shareholder and that certain shares were nominee-registered, requiring unanimous heir consent. The Court found that no specific objections were raised during the meeting regarding convening, voting, or counting procedures. Accordingly, the statutory requirements for an annulment action were not satisfied.
The Court emphasized that the objection requirement serves to protect shareholders’ rights and to alert the company to potential procedural defects in real time, thereby avoiding post-meeting disputes.
The Court further confirmed that, for public companies, notice of a shareholders’ meeting is valid if sent based on the shareholder list provided by the centralized securities depository. The company in this case complied with this rule.
Overall, this judgment reiterates the following points:
- A shareholder who has attended a shareholders’ meeting and failed to specifically state the reasons for illegality or deficiencies during the meeting is subsequently barred from petitioning to revoke the shareholders’ resolution pursuant to Article 189 of the Company Act.
- For companies whose shares are publicly issued, notification of the convocation of a shareholders’ meeting is deemed lawful as long as it is issued based solely on the list of stock owners provided by the central securities depository (or centralized book-entry system).
It is recommended that companies fully record the content of any shareholder dissent when convening shareholders’ meetings. Dissenting shareholders should also clearly specify the reasons for illegality or deficiencies during the meeting to protect their rights.
