Book Inspection Orders in South Korea: Why the Daily Penalty Often Never Accrues
Why the Daily Penalty Often Never Accrues
Contents
- 1. Why do shareholders win and still collect nothing?
- 2. What did the Supreme Court decide in 2025Da218465?
- 3. Does issuing both orders at once solve the problem?
- 4. What happens if you apply for indirect compulsion after the window closes?
- 5. When does the daily penalty actually accrue?
- 6. Does the same rule apply to a final judgment on the merits?
- 7. What must the creditor prove to obtain an execution clause?
- 8. How should foreign investors in the IFEZ frame their filings?
- Frequently asked questions
A minority shareholder in South Korea obtains an injunction ordering the company to open its accounting books, backed by a penalty of KRW 500,000 for every day of non-compliance. The company never opens the books. The shareholder tallies up the days and applies for an execution clause. The court then rules that not a single won of penalty ever accrued.
This outcome does not turn on the company’s conduct or the shareholder’s diligence. It turns on a single phrase in the operative part of the order: the compliance window. Where an injunction orders inspection to be permitted for a fixed period, the injunction loses its effect once that period expires, and after that point the company has no inspection duty that can be breached. In February 2026 the Supreme Court of Korea reaffirmed this rule, and in July 2026 the Changwon District Court applied it to a final judgment on the merits, canceling an execution clause covering KRW 63 million.
1. Why do shareholders win and still collect nothing?
Because the compliance window stated in the operative part has expired. Under Korean law, where an injunction orders performance of a non-substitutable act during a fixed period, the injunction ceases to have effect once that period lapses (Supreme Court of Korea, Apr. 7, 2017, 2013Da80627; Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
The right to inspect and copy accounting books is a minority shareholder right under Article 466(1) of the Korean Commercial Act. Because no one else can perform the company’s duty to open its own books, that duty is a non-substitutable act (budaechejeok jagwi uimu). The enforcement mechanism for such a duty is indirect compulsion under Article 261 of the Korean Civil Execution Act, and the daily amount fixed in the indirect compulsion order is the penalty.
The difficulty is that Korean practice routinely inserts a compliance window into the operative part, such as “for 60 days excluding Saturdays and public holidays, beginning three days after service of this decision.” That phrase does two things at once. It tells the company how long to keep the books available, and it also fixes the moment at which the order stops having any force.
| Issue | Operative part fixes a window | No window fixed |
|---|---|---|
| Duty after the window | Extinguished | Continues |
| Later application for indirect compulsion | Dismissed for lack of interest | Available |
| Penalty from the day after expiry | Never accrues | Accrues |
| Execution clause | Unlawful | Lawful if the condition is proven |
2. What did the Supreme Court decide in 2025Da218465?
It held that a penalty ordered to run from the day after the compliance window expires can never arise. Decided on February 26, 2026, this is the most recent Supreme Court of Korea ruling on penalties for refusing shareholder book inspection.
How the case unfolded
Shareholders holding at least 3 percent of the company’s total issued shares applied for both a book inspection injunction and indirect compulsion. On June 3, 2022 the court issued both in a single decision.
| Component | Operative part |
|---|---|
| Injunction | The company shall permit inspection or copying of the listed books and documents between 09:00 and 18:00 for 60 days, excluding Saturdays and public holidays, beginning three days after service of this decision |
| Indirect compulsion | If the company fails to perform that duty, it shall pay each applicant KRW 500,000 per day from the day after expiry of that period until performance |
The decision was served at 00:00 on June 11, 2022. The shareholders claimed they visited the head office and were refused, and sued for an execution clause covering 15 business days of penalties, from September 7, 2022 (the day after the 60-day window closed) through September 29, 2022 — KRW 7.5 million per shareholder.
The holding
The Supreme Court of Korea dismissed the appeal. The reasoning proceeds in two steps.
First, before a court may order a penalty against a company for failing to permit inspection, the company’s inspection duty must be established by the operative part of the injunction for the very period during which the penalty is said to accrue. Here the operative part recognized the duty only for the 60 days following service, while the indirect compulsion order imposed penalties only after that period had ended. The two are contradictory.
Second, once the compliance window expires the injunction loses effect, and thereafter the company has no inspection duty. A penalty premised on breach of a duty that does not exist cannot arise at all.
3. Does issuing both orders at once solve the problem?
No. The Supreme Court of Korea stated expressly that the fact that the indirect compulsion order was issued simultaneously with the injunction is no reason to reach a different conclusion (Supreme Court of Korea, Feb. 26, 2026, 2025Da218465).
This is the practical core of the 2026 ruling. Earlier cases mostly involved an injunction obtained first and indirect compulsion sought some time later, which led practitioners to assume that bundling the two applications would eliminate the timing gap. The Supreme Court rejected that assumption.
The reason is straightforward. The defect is not a gap in timing but a contradiction between two operative parts. If the injunction recognizes the duty only through day 60 while the indirect compulsion order charges a penalty from day 61 onward, that contradiction persists whether the orders issue together or months apart.
4. What happens if you apply for indirect compulsion after the window closes?
The application is dismissed. An application for indirect compulsion presupposes that the injunction remains in force, so once the injunction loses effect — including because the compliance window has run — the application loses its legal interest and becomes inadmissible (Supreme Court of Korea, Mar. 15, 2016, 2015Ma1578).
In that case the injunction required inspection to be permitted for 30 days excluding public holidays from service, and was served on October 21, 2014. The first instance court nonetheless issued an indirect compulsion order on December 8, 2014. The Supreme Court reversed and, ruling on the merits itself, dismissed the application.
Even a final and unappealable indirect compulsion order does not help. The Supreme Court has held that such an order rests on a void enforcement title and fails to satisfy the requirements for compulsory execution, so it cannot serve as an enforcement title for the penalty it fixes; the debtor may then seek cancellation of the execution clause (Supreme Court of Korea, Apr. 7, 2017, 2013Da80627).
| Stage | Result | Authority |
|---|---|---|
| Compliance window expires | Enforcement title loses effect | 2013Da80627 |
| Later application for indirect compulsion | Dismissed for lack of interest | 2015Ma1578 |
| Order nonetheless issued and final | Void title, no enforceable penalty | 2013Da80627 |
| Penalty from day after expiry | Never accrues, even if issued simultaneously | 2025Da218465 |
5. When does the daily penalty actually accrue?
It accrues when the penalty period falls within the period during which the enforcement title recognizes the inspection duty. The Supreme Court has upheld penalties on exactly those facts.
In the case decided on June 24, 2021, the injunction read: “The company shall permit inspection and copying of the listed books and documents for 30 days excluding public holidays from the date of service of this decision. If it violates this order, it shall pay KRW 1,000,000 for each day of violation.” The lower court read the indirect compulsion component as requiring KRW 1 million per day for breaches occurring during those 30 days, and the Supreme Court found no error of law in that reading (Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
One clause separates the two outcomes.
| Issue | Penalty upheld (2016Da268695) | Penalty denied (2025Da218465) |
|---|---|---|
| Penalty period | Days of breach within the 30-day duty window | From the day after the 60-day window expired |
| Relation to the injunction | Consistent | Contradictory |
| Outcome | KRW 1 million per day accrues | No penalty accrues |
It follows that asking whether a creditor “can still collect the penalty even though indirect compulsion is unavailable” misstates the problem. The penalty is not a separate claim; it is the operative part of the indirect compulsion order itself. A valid order must exist before any penalty can arise. Conversely, where a valid order exists and its penalty period sits inside the duty window, penalties for breaches within that window accrue and are enforceable in the ordinary way.
6. Does the same rule apply to a final judgment on the merits?
Yes. The Changwon District Court’s judgment of July 15, 2026 in case 2025GaHap10766 shows this directly. Whereas earlier precedent addressed injunctions, this judgment confirms that the same rule reaches a compliance window written into a final judgment on the merits.
How the case unfolded
A shareholder sued to compel inspection and won at first instance on April 25, 2024. The appeal was dismissed, and on March 13, 2025 the Supreme Court of Korea dismissed the further appeal without deliberation, so the judgment became final on March 20, 2025. Its operative part required inspection to be permitted “for 30 business days, excluding public holidays and Saturdays, beginning three business days after the date this judgment becomes final.”
The shareholder applied for indirect compulsion on April 21, 2025. On May 29, 2025 the court ordered inspection “within 10 days of notice of this decision” and, failing that, payment of KRW 500,000 per day from the day after that period until performance. An execution clause was later issued on October 21, 2025 capped at KRW 63 million.
The court’s reasoning
The court canceled the execution clause and barred enforcement, on three grounds.
First, the compliance window under the final judgment ran for 30 business days from March 26, 2025 (three business days after the judgment became final on March 20, 2025). By May 29, 2025, when the indirect compulsion order issued, that window had already closed and the judgment had lost its force as an enforcement title. An order built on a void title cannot support a penalty.
Second, paragraph 1 of the indirect compulsion order required inspection within 10 days of notice, while paragraph 2 imposed penalties only after that period ended. The court held that the two paragraphs contradict each other, and that failing to permit inspection within 10 days cannot be read as creating a continuing duty thereafter.
Third, the company claimed it had emailed the documents on June 5, 2025 and the shareholder claimed those were not the documents ordered. The court held that the creditor bears the burden of proving which additional documents remained outstanding and that they fall within the enforcement title, and found no evidence to that effect.
This is a district court judgment and the record does not show whether it is final, so anyone relying on it should verify the appellate history.
7. What must the creditor prove to obtain an execution clause?
The creditor must prove that it demanded inspection of specified books and that those books fall within the enforcement title, because an indirect compulsion order of this kind is a conditional enforcement title.
The Supreme Court reasoned that where the operative part imposes a penalty for breach of an inspection duty, the text obliges the company to permit inspection only if the creditor demands inspection of specified books or documents; it does not oblige the company to hand over documents unprompted. The penalty obligation is therefore uncertain as to whether, when, and to what extent it arises, which makes the order conditional within the meaning of Article 30(2) of the Korean Civil Execution Act (Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
To obtain an execution clause, the creditor must accordingly prove:
- that it demanded inspection or copying of specified books or documents from the debtor; and
- that those specified books or documents fall within the scope of the original enforcement title.
The burden runs the other way on existence. Because an order to permit inspection of specified books presupposes prima facie proof that those books exist, a company arguing that it did not breach the order because the books do not exist must prove their non-existence (Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
8. How should foreign investors in the IFEZ frame their filings?
Foreign shareholders in joint ventures and Korean subsidiaries across the Incheon Free Economic Zone (IFEZ) — Songdo International Business District, Cheongna International City, and Yeongjong International City — often reach for book inspection when a local partner controls the accounting function. The drafting points below decide whether the resulting order is enforceable.
| Stage | Point to check |
|---|---|
| Prayer for relief on the merits | Do not insert a fixed window such as “for 30 business days” |
| Merits proceedings | Build a record on the absence of voluntary compliance, the opportunity to be heard, and the appropriate penalty amount, and seek indirect compulsion in the same proceeding |
| Separate indirect compulsion | If the title contains a window, apply and obtain the order before it expires |
| Prayer in the indirect compulsion application | Frame the penalty around days of breach inside the duty window, not “from the day after expiry” |
| Enforcement preparation | Preserve written demands identifying specific books, visit records, and evidence of refusal |
| Challenging the order | Objections to an order issued by a district court panel fall within that panel’s exclusive jurisdiction |
The first point rests on settled authority. Articles 396, 448, and 466(1) of the Korean Commercial Act do not expressly authorize a court to limit the inspection period, so where the requirements are met the court should, absent special circumstances, order inspection without any time limit within the scope sought, and separately fix a reasonable performance period and penalty by way of indirect compulsion (Supreme Court of Korea, Nov. 28, 2013, 2013Da50367). That ruling reversed a lower court judgment whose operative part had confined inspection to “30 days excluding public holidays, beginning three days after this judgment becomes final.”
The same ruling permits a court to order indirect compulsion within the merits proceeding itself, provided that at the close of oral argument it is clear the debtor will not comply voluntarily, the debtor has had a sufficient opportunity to be heard on the propriety of the order, and an appropriate penalty amount can be determined.
The last row reflects Supreme Court of Korea, Apr. 7, 2017, 2013Da80627: an action objecting to a claim or to the grant of an execution clause, directed at an indirect compulsion order issued by a district court panel, falls within the exclusive jurisdiction of that panel. Filing before a single judge means the case is transferred rather than decided.
Frequently asked questions
Q. Can a shareholder collect the daily penalty after the inspection window in a Korean injunction expires?
A. No. Where an injunction orders performance of a non-substitutable act for a fixed period, the injunction loses effect once that period expires. After that point the company owes no inspection duty, so a penalty premised on breach of that duty cannot arise (Supreme Court of Korea, Feb. 26, 2026, 2025Da218465).
Q. Does obtaining the injunction and the indirect compulsion order at the same time avoid the problem?
A. No. The Supreme Court of Korea held that simultaneous issuance is no reason to reach a different conclusion (Feb. 26, 2026, 2025Da218465). The defect is not a gap in timing but a contradiction between the duty period recognized in the injunction and the penalty period fixed in the indirect compulsion order.
Q. What happens if indirect compulsion is sought after the compliance window has closed?
A. The application is dismissed. It presupposes that the injunction remains in force, so once the injunction lapses the application loses its legal interest (Supreme Court of Korea, Mar. 15, 2016, 2015Ma1578). If an order nonetheless issues and becomes final, it rests on a void enforcement title and cannot support the penalty; the debtor may seek cancellation of the execution clause (Supreme Court of Korea, Apr. 7, 2017, 2013Da80627).
Q. When does the daily penalty actually accrue under South Korean law?
A. When the penalty period falls within the period during which the enforcement title recognizes the inspection duty. The Supreme Court upheld a reading under which an injunction requiring inspection for 30 days, with KRW 1,000,000 for each day of violation, imposed that penalty for breaches occurring during those 30 days (Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
Q. Does the same rule apply when the compliance window appears in a final judgment rather than an injunction?
A. Yes. In Changwon District Court, Jul. 15, 2026, 2025GaHap10766, an indirect compulsion order issued after the 30-business-day window in a final judgment had closed was held to rest on a void enforcement title, and an execution clause covering KRW 63 million was canceled. It is a district court judgment, so the appellate history should be verified.
Q. What must a creditor prove to obtain an execution clause for the penalty?
A. That it demanded inspection or copying of specified books or documents from the debtor, and that those books or documents fall within the scope of the original enforcement title. Because the penalty obligation is uncertain as to whether, when, and to what extent it arises, the order is treated as conditional under Article 30(2) of the Korean Civil Execution Act (Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
Q. If the company says the books do not exist, must the shareholder prove otherwise?
A. No. An order to permit inspection of specified books presupposes prima facie proof that those books exist. A company arguing that it did not breach the order because the books do not exist must therefore prove their non-existence (Supreme Court of Korea, Jun. 24, 2021, 2016Da268695).
Q. Should the prayer for relief specify an inspection period?
A. Generally no. Articles 396, 448, and 466(1) of the Korean Commercial Act do not authorize limiting the inspection period, so absent special circumstances the court should order inspection without a time limit within the scope sought, and fix a reasonable performance period and penalty separately by way of indirect compulsion (Supreme Court of Korea, Nov. 28, 2013, 2013Da50367).
Q. Where should a foreign shareholder challenge an indirect compulsion order in South Korea?
A. Before the court that issued it. An action objecting to a claim or to the grant of an execution clause, directed at an indirect compulsion order issued by a district court panel, falls within that panel’s exclusive jurisdiction (Supreme Court of Korea, Apr. 7, 2017, 2013Da80627). Filing before a single judge results in transfer rather than a decision on the merits.
Q. What can a foreign investor do once the window has already lapsed?
A. The lapse extinguishes the enforcement title, not the underlying inspection right under Article 466(1) of the Korean Commercial Act. Where the statutory requirements remain satisfied, seeking inspection afresh is the usual avenue, and the new prayer for relief should omit any time limit (Supreme Court of Korea, Nov. 28, 2013, 2013Da50367). Which route fits depends on the facts of the particular case.
This article is a general explanation based on published South Korean judgments and current statutes. Whether indirect compulsion and its penalty are available depends on the wording of the enforcement title, when the compliance period starts and ends, and how precisely the inspection demand identifies the documents, so it should not be applied directly to any specific matter.
