Shareholders’ Voting Agreements in South Korea: Can You Force a Shareholder to Vote?

Two partners set up a Korean joint venture and agree to split the board evenly. Later, one of them uses a general meeting to elect extra directors from its own side, tilting control. Can the other partner undo that resolution, or only go after the partner who broke the promise?

Shareholders’ agreements are the central tool for allocating control and board seats in joint ventures, investments, and partnerships involving Korean companies. Yet whether a breach lets you attack the corporate resolution itself, or only the breaching party, has long been contested. The Supreme Court of Korea settled the framework in Decision 2020Da219577 (June 12, 2025). This article explains, under South Korean law, the validity of these agreements, the remedies available for a breach, and how a Korean court can compel performance.

What is a shareholders’ voting agreement, and is it valid under Korean law?

A shareholders’ voting agreement is valid between the contracting parties under South Korean law, provided it does not violate mandatory statutes or public policy. Its effect is purely contractual and does not bind the company.

A shareholders’ voting agreement (uigyeolgwon-gusok-yakjeong) is a contract in which a shareholder promises another shareholder to exercise, or to refrain from exercising, voting rights at a general meeting in a particular way. In Decision 2020Da219577, the Supreme Court of Korea confirmed that, under general principles of contract law, such an agreement is in principle valid between the parties unless its content or purpose violates mandatory statutes or public policy.

This means that agreements governing board composition, the right to nominate directors and auditors, and the direction of voting can be valid in a Korean joint venture. The two outer limits to keep in mind are mandatory provisions of Korean company law and public policy, both of which should be reviewed when the agreement is drafted.

Why can’t a breach be used to void the shareholder resolution itself?

Even if a breaching vote produces a shareholder resolution, you generally cannot have that resolution invalidated against the company.

The Supreme Court of Korea held that a voting agreement has no effect on the company’s organizational order, such as the content of shareholder rights. In other words, the agreement creates only contractual rights and duties between the shareholders who signed it; it does not directly bind the company’s decision-making structure.

As a result, when a party breaches the agreement and a shareholder resolution is passed as a consequence, the other party cannot sue the company to challenge the validity of that resolution on the basis of the breach. Instead, it may only exercise rights based on the contract against the breaching party. The route of seeking annulment of the resolution and the route of holding the breaching party contractually liable are kept strictly separate.

The Supreme Court case: what did the court order the breaching shareholder to do?

Where a breach caused extra directors to be elected, the court allowed the non-breaching party to compel the breaching shareholder to vote in favor of removing those directors.

The facts of Decision 2020Da219577 were as follows. On October 16, 2016, the plaintiff (X) and the defendant (Y) entered into a joint venture agreement on the establishment and operation of the company at issue, which provided that the board would consist of four directors, with each party appointing two. Accordingly, the defendant (Y) was obliged to keep the number of directors at four, both at the time of incorporation and afterward.

The defendant (Y) nonetheless breached that obligation by voting in favor of an agenda item to elect three additional directors at an extraordinary general meeting held on August 6, 2018. Because the resulting resolution was passed, the plaintiff (X) was no longer able to challenge its validity. The plaintiff (X) therefore sued the defendant (Y), seeking to compel a vote in favor of removing three of the five directors who had been elected on the defendant’s nomination.

The Supreme Court of Korea characterized the clause as a voting agreement, because it used restrictions on the exercise of voting rights to fix matters such as the total number of directors and the right to appoint them, which would ordinarily be set out in the company’s articles of incorporation. Since each party was bound to vote in conformity with the agreement whenever the board composition departed from it, the plaintiff (X) could compel the defendant (Y) to vote in favor of removing the three excess directors. (The lower appellate decision was Seoul High Court 2019Na2035276; the appeal was dismissed.)

How do Korean courts enforce a voting obligation through indirect compulsion?

An obligation to vote is a non-substitutable affirmative obligation, so a court can enforce it by ordering a daily payment for non-performance, a mechanism known as indirect compulsion.

In Decision 2020Da219577, the Supreme Court of Korea treated the obligation to vote as a non-substitutable affirmative obligation and allowed indirect compulsion (ganjeopgangje). Indirect compulsion under Article 261(1) of the Civil Execution Act is an enforcement method that pressures the obligor to perform by threatening monetary sanctions for non-performance (citing Supreme Court of Korea 2020Da248124, en banc).

An order for indirect compulsion sets out the obligation and a reasonable period for performance, and may direct the obligor to pay a specified amount for the period of delay if performance does not occur within that period. A reasonable period means the time the obligor reasonably needs to perform once notified of the obligation, taking into account the nature of the obligation and how easily it can be performed.

The amount serves both as psychological pressure and as a statutory sanction for non-performance (citing Supreme Court of Korea 2012Da26398). A court therefore sets the amount by weighing factors such as the background of the case, the parties’ resources, the nature and difficulty of the obligation, the obligor’s conduct and the degree of breach, the benefit the obligor expects from the breach, and the harm to the obligee and the difficulty of recovery. Here, the lower court ordered the defendant to pay KRW 1 million for each day from the day after the judgment became final until performance was complete, and the Supreme Court upheld that order.

How have Korean lower courts ruled on breaches of voting agreements?

Lower courts interpret the existence of a voting obligation strictly from the contract language, and award contractual penalties or liquidated damages against the breaching party where the obligation is clear.

Because Decision 2020Da219577 limits the remedy for a breach to rights based on the contract, the real questions become how the contract is interpreted and what conditions trigger a penalty. The following lower-court rulings illustrate this.

The voting obligation must be clearly set out in the contract

In Seoul Central District Court 2021Gahap583966, the court reviewed the whole of a joint-business contract but found no express provision requiring the shareholders to maintain joint management and to vote within the scope of that duty. It held instead that the shareholders were to exercise their voting rights freely and decide by resolution, and so denied any voting obligation and dismissed the plaintiff’s (X) claim.

In Seoul Western District Court 2022Gahap35650, by contrast, the court confirmed that an agreement to exercise voting rights jointly remained valid (granting the claim for a declaration of validity). However, because the agreement merely required the parties to exercise the “same” voting rights without specifying the content for or against particular items, the court held that a duty to pay the penalty would arise only once the specific content of the vote had been identified. It therefore rejected the claim for the penalty (set at KRW 30 billion in the agreement) and for damages.

Where the agreement is clear, the breaching party can be made to pay penalties

Gwangju High Court 2023Na26393 (first instance: Gwangju District Court 2021Gahap63230) recognized an obligation to vote in concert under a special agreement between shareholders. The court read that obligation, which was meant to secure the plaintiff’s (X) construction rights, as extending to a duty to vote against any agenda item under which a construction company other than the plaintiff would enter into a contract with the company at issue. Finding that the defendant (Y) had breached it, the court ordered payment of the contractual penalty (KRW 4.9 billion, claimed as an express partial claim out of a maximum of KRW 49 billion) with delayed-payment interest, and delivery of the share certificates.

In Seoul Central District Court 2023Gahap83743, the shareholders’ agreement required the plaintiff’s (X) prior written consent for the appointment and removal of directors, the representative director, and the auditor. The court found that the defendant (Y) had seriously breached the agreement by applying for permission to convene an extraordinary general meeting without the plaintiffs’ prior written consent, removing the existing auditor and electing new directors, and ordered payment of the penalty fixed in the agreement (KRW 6 billion to plaintiff A and KRW 3 billion to plaintiff B).

Some claims failed where the clause was ineffective or no breach was shown

In Seoul Central District Court 2020Gahap507439, the court declined to grant claims for share transfer and damages based on an alleged breach of a shareholders’ agreement. It reasoned that certain clauses, such as the right to appoint the accounting and finance officer and a consent right over employee hiring and salaries, concerned matters within the authority of management, such as the representative director, and that enforcing them against a shareholder carried a high risk of infringing a director’s duty of loyalty and care and the principle of shareholder equality, so those clauses had no effect as to that shareholder. The court also did not find a breach of the voting obligation regarding the appointment of directors and auditors on the facts, dismissing the injunction and indirect-compulsion claims and rejecting the remainder.

The principle of shareholder equality does not directly apply between shareholders

Decision 2023Gahap83743 also confirmed, relying on the principle that a contract a shareholder concludes with another shareholder (rather than with the company) is not directly subject to the principle of shareholder equality (citing Supreme Court of Korea 2022Da290778), that the penalty agreed between the shareholders was enforceable. At the same time, a clause making the company itself, as a party to the shareholders’ agreement, unconditionally and jointly liable for a major shareholder’s breach was held void, as it would grant superior rights to some shareholders in violation of the principle of shareholder equality. Accordingly, in that same decision the penalty claim against the breaching shareholder (Y) was granted, while the joint-liability claim against the company was not.

What should foreign companies and investors in the IFEZ keep in mind?

For foreign investors structuring a joint venture in South Korea, the voting provisions of a shareholders’ agreement should state exactly what, on which agenda items, and how each party must vote.

Many foreign companies enter the Korean market through joint ventures based in the Incheon Free Economic Zone (IFEZ), which spans the Songdo International Business District, Cheongna International City, and Yeongjong International City. The decisions above translate into several practical points for those agreements.

• Specify the general meeting and agenda items, and the precise “for” or “against” content of the required vote. A vague duty to “cooperate” or to “maintain joint management” may not be enforceable as a voting obligation or trigger a penalty (Seoul Central District Court 2021Gahap583966; Seoul Western District Court 2022Gahap35650).
• Set out the duration and termination of the agreement, and the requirements and amount of any penalty or damages for breach.
• Remember that matters that belong in the articles of incorporation, such as the total number of directors and the right to appoint directors and auditors, bind only the parties to the agreement and not the company itself, and plan dispute strategy on that basis.
• Clauses that force matters within management’s authority onto a shareholder may be held ineffective because of conflicts with a director’s duty of loyalty or the principle of shareholder equality (Seoul Central District Court 2020Gahap507439).
• A clause making the company an unconditional joint obligor under the shareholders’ agreement may be void for violating the principle of shareholder equality, so the company’s obligations should be structured with care (Seoul Central District Court 2023Gahap83743).
• To secure performance of a voting obligation, it is effective to seek both an order to vote and indirect compulsion.

Atlas Legal advises on the design and review of joint venture and shareholders’ agreements, as well as claims to compel voting and claims for contractual penalties in corporate disputes. Because the outcome turns heavily on how the agreement is drafted, review with potential disputes in mind from the contract stage is essential.

Frequently Asked Questions

This article is intended as a general explanation of the law, and the outcome of any particular case will depend on its specific facts.

About the Author

Taejin Kim | Managing Partner

Corporate Counseling, Corporate Disputes, White-Collar Crime

Former Public Prosecutor | Judicial Research and Training Institute, 33rd Class

Korea University LL.B. & LL.M. (Criminal Law), University of California, Davis LL.M.

Atlas Legal | Incheon Songdo, South Korea

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