The Securities-related Class Action Act: Overview
Korea’s Securities-related Class Action Act(hereinafter the “Act”) has been effective from January 1 2005. Currently the Act covers all companies whose securities are listed on the Korea Stock Exchange or registered with the Korea Securities Dealers Association.
There are four causes of action under the Act: (i) damages for false information in a securities report or prospectus; (ii) damages for false information in business reports and semi-annual and quarterly reports; (iii) damages for insider trading or price manipulation; and (iv) claims against auditors.
Damages are calculated in accordance with the Securities and Exchange Act(SEA) and other existing laws. For example, under the SEA, damages caused by false information are calculated by the acquisition price minus (i) the market price at the closing of the courtroom arguments, or (ii) if disposed of earlier, the disposition price. If damages are complex to work out, however, courts may use sampling, averaging, statistical or other rational methods.
In certain cases, the burden of proof of the lack of causal connection between the falsity and damages will fall on the defendant. Damages will then be reduced by the portion that is proven as unrelated to the cause of action.
Class certification requires (i) at least 50 class members, with the total number of their shares constituting 0.01% of all issued and outstanding shares of the company; (ii) commonality of legal or factual issues; (iii) class action being an efficient and suitable means for protection of rights or interests of all members; and (iv) the complaint being properly drafted and not defective. The representative member should be one will the largest stake and capable of fair and proper representation.
The Act also includes provisions on opt-out and preclusion effect on members who did not opt out, Continue reading
Today it was reported that Kookmin Bank would buy a majority stake of Bank Center Credit, the sixth-largest Kazakhstan commercial bank, worth $634 million. The deal is the largest overseas M&A by a Korean financial institution.
Kookmin bank is targeting to become a leading bank not only in Kazakhstan but also in Central Asia, which Continue reading
A Korean cosmetics Company filed a lawsuit against its model, Ivy, a K-pop female singer, alleging her lies and scandal-plagued private life has damaged its brand images.
The cosmetics company had hired Ivy as its advertisement model last April, but after then, Ivy got a scandal with her ex-boyfriend who allegedly had attempted to blackmail her with a revealing video clip showing him with the K-pop star. Ivy has stopped her career until now and the cosmetics company claims it constitutes a breach of contract under which Ivy is required not to harm the image of the company or its brand with any scandalous or improper behavior. You can read the news article here.
There was a similar case between a top T.V star Choi, Jin-Sil and its advertiser. The company claimed that Continue reading
In January 31, the Seoul Central District Court ordered the Samsung Group to repay more than 2.33 trillion won ($2.46 billion) to the 14 creditors of its defunct Samsung Motors, which was the country’s biggest-ever financial civil lawsuit. Samsung Group said yesterday that it will appeal that court ruling.
Samsung Motors applied for a court-administered debt restructuring program in June 1999, and Chairman Lee Kun Hee announced his plan to inject private money. Two months later, Samsung signed a deal with the creditors to cover a 2.45 trillion won debt by the end of 2000. Under the agreement, Lee handed over his 3.5 million shares of the unlisted Samsung Life Insurance Co. to the creditors and promised to list the company. However the insurance firm never went public, and creditors were unable to convert all their share to cash due to the large volume. Creditors filed a lawsuit in December 2005, claiming 5 trillion won including penalties.
One of the biggest issues on this trial was the validity of the agreement between Samsung Group and the creditors. Samsung Group alleged that the agreement is void because it was entered under duress. However the court rejected it.
As I’m a lawyer, it was very interesting who would represent Samsung Group and the creditors. There Continue reading
According to the Korean Commercial Act, a transaction between a director and a company shall acquire an approval by the board of directors(Article 398 of the Commercial Act). This is for the purpose of preventing the director from using his status in engaging in a transaction of the company leading to promoting his or a third party’s interest and causing damages to the company and its shareholders.
Here comes the question: if the general meeting of shareholders adopts a resolution ratifying an interest-conflicting transaction which had not yet been approved by the board of directors, the transaction can be validated ex post facto?
The Supreme Court denied it in its Decision 2005Da4284 Delivered on May 10, 2007.
In this case, Mr. Choi Soon Young, who at that time served as the representative director of Daehan Life Insurance Co., Ltd(the plaintiff) and the president of the Shindonga Educational Institute(the defendant), had donated about 18,000,000 USD to the defendant on behalf of the plaintiff company.
The Supreme Court held that “unless there are special circumstances where there should be the consent of all shareholders or that the approval is stipulated in the articles of incorporation as the right of the shareholders’ meeting, the approval of an interest-conflicting transaction between a director and the company shall be deemed to be subject to an arbitrary decision by the board of directors, so if an interest-conflicting Continue reading