*This content was translated by AI.
In the process of partnering in the form of a startup ecosystem or a corporation, the departure of co-founders is no longer uncommon.
The problem is not the departure itself, but the subsequent legal treatment is neglected. A member who started together in the early days fell out after a month and lost contact, but he is still listed as a director in the register. Delaying the registration of dismissal because the cost is burdensome or because you do not know the procedure becomes a more serious management obstacle than you think.
Ghost Director on the Register, Why the Problem
Being listed as a director on the corporate register is not a simple form. In the case of startups, in the process of attracting investment, VC checks the composition of executives through the register and always asks questions about the existence of directors who are not actually working. In the review of government-supported projects, the consistency of the composition of executives can be an evaluation item. Furthermore, if the director causes problems such as lawsuits or tax arrears from the outside, it may negatively affect the credibility and external image of a corporation. This can be a fatal risk, especially for startups where initial financing is important. On the other hand, even in the case of partnership, there are many inconveniences in relation to whether or not the board of directors and resolutions are satisfied.
In practice, there are many cases of delaying dismissal, saying, "I'm a person who doesn't play any role anyway." However, the moment when the composition of directors becomes an obstacle in various aspects of the company's operation, such as issuing corporate seal certificates, changing bank accounts, and signing contracts, comes without notice. If the dismissal is rushed only after the problem breaks out, procedural mistakes are likely to occur under time pressure.
the legal structure of a resolution to dismiss
According to Article 385 (1) of the Commercial Act, directors of a stock company may be dismissed at any time by a special resolution at the general shareholders' meeting. Here, the expression 'anytime' is important. This means that the director's consent is not a requirement for dismissal, and there is no provision in the Commercial Act that requires prior notification of the reason for dismissal or an opportunity to explain. In other words, the resolution of dismissal is a decision-making area of shareholders, not a procedure that depends on the cooperation of the person subject to dismissal.
If the director subject to dismissal is a non-shareholder, it is not subject to notification of the convocation of the general shareholders' meeting, so only shareholders can proceed with the resolution. If it is a small company with a capital of less than 1 billion won, the convocation procedure may be omitted and replaced by a written resolution when all shareholders agree (Article 363 (4) of the Commercial Act). However, if the person subject to dismissal is also a shareholder, the shareholder is included in the 'all consent', so if you can't reach him, the path of a written resolution may be blocked. In this case, a formal convocation notice should be sent in writing to consider a circumvention method of holding a general shareholders' meeting, and the convocation notice must be sent two weeks before the date (Article 363 (1) of the Commercial Act), so a time plan should also be established.
Notarization, registration, and attendance of those subject to dismissal are not allowed
It is an important point in practice that the attendance of directors subject to dismissal is not required at the notarization stage of the minutes. Under the Notary Act, notary certification is also possible by listening to statements from resolvers of quorum or higher, so the procedure can be completed without a person subject to dismissal. The notary is the role of confirming the truthfulness of the resolution procedure and contents, not the agency that confirms the consent of the person subject to dismissal. However, the minutes should accurately state the date, location, attendance shareholders, and resolution, and if there is an omission or error in the information, the application for registration may be returned, so care should be taken in writing.
two easy-to-overlook risks
First, compensation for damages. The proviso to Article 385 (1) of the Commercial Act stipulates liability for damages in case of dismissal during the term of office without justifiable reason. Since precedents tend to strictly judge justifiable reasons, it is essential to write a written agreement stating consent to dismissal, settlement of remuneration, and abandonment of claims for damages, even if the person subject to dismissal agrees. Verbal agreements alone are difficult to prove in future disputes.
Second, it is the articles of incorporation. If the Supreme Court separately stipulates the reasons for dismissal of directors in the articles of association, it is not a simple cautionary regulation, but a regulation for guaranteeing the status of directors (Supreme Court 2011Da41741). Since the resolution itself may be judged invalid after proceeding with dismissal without confirming the articles of association, the articles of association review is not an option but a must before starting the procedure.
The integrity of the procedure is risk management
Dismissal of directors is a procedure in which multiple legal issues intersect, including shareholder composition, capital, articles of association, and compensation for damages, even in small startups. I think I can end it with just one word, "Just take it out," but one procedural defect can lead to a lawsuit to cancel the dismissal resolution or a dispute for damages. In fact, in practice, there are often cases in which the registration is rejected due to omission of minutes or defects in convocation procedures while directly proceeding with the dismissal registration, or later caught up in a lawsuit for invalidation of dismissal. The surest way to reduce startup management risks is to thoroughly review the articles of incorporation in advance and complete the registration.
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*This content was translated by AI.
