[According to the Law of Discretion] 65. The End of a Partnership: 'Expulsion' — What You Need to Know

*This content was translated by AI.

Partnerships begin with trust.

However, the moment that trust breaks down, many people's first solution is "expulsion." They expect that "removing that person will restore the business to normal."

However, expelling a member from a partnership under the Civil Code is more difficult than it seems. If done improperly, the expulsion may not be recognized as valid, and the party attempting the expulsion may end up bearing the liability.

Article 718 of the Civil Code stipulates that expulsion of a member shall be decided "only when there is just cause and with the unanimous consent of the other members." Both of these critical requirements must be met. First is "just cause." The Supreme Court ruling 2017Da200702 holds that just cause includes not only clear fault such as failure to fulfill capital contribution obligations or misconduct during partnership operations, but also situations where the relationship of trust is fundamentally broken due to conflict and discord, making it difficult to expect continued joint operation. However, courts examine various factors, including the degree of obstruction, whether other solutions were available besides expulsion, the terms of the contract, and the circumstances leading to the dispute. The consistent stance is that expulsion must always be a "last resort."

Here lies a practical pitfall. If it is difficult to definitively assign responsibility for the dispute solely to the other party, expulsion based on the breakdown of the relationship of trust is unlikely to be recognized as justified. In such cases, the issue should instead be addressed through "petition for dissolution" under Article 720 of the Civil Code.

Furthermore, if there are only two members, the procedural requirement of "unanimous consent of the other members" cannot be satisfied, making it, in principle, impossible for one party to expel the other (Busan High Court 2018Na58625 ruling). The notion of two parties in dispute expelling one another is legally blocked from the very start.

An expulsion resolution takes effect at the time of the resolution, but if the expelled member is not notified, the expulsion cannot be asserted against them. If the articles of association or partnership agreement include provisions for an opportunity to explain, these must be observed in substance, not merely in form. Failure to comply constitutes a procedural defect that may render the expulsion itself void.

The party being expelled is not without recourse. They may seek a provisional injunction to suspend the effect of the expulsion and temporarily preserve their membership status, and file a lawsuit to confirm the invalidity of the expulsion resolution or to confirm their status in the main case. If the expulsion is ultimately declared void, there is room to dispute compensation for damages, including undistributed profits received during that period.

Ultimately, the core issue is not "emotion" but "requirements." Whether you are considering expulsion or have already been expelled, the first step is to calmly organize the partnership agreement and all relevant documents. In partnership disputes, the initial response determines victory or defeat.

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*This content was translated by AI.