{"id":1429,"date":"2026-07-05T23:06:54","date_gmt":"2026-07-05T23:06:54","guid":{"rendered":"https:\/\/atlaw.kr\/en-blog\/director-representative-authority-abuse-south-korea\/"},"modified":"2026-07-05T23:08:32","modified_gmt":"2026-07-05T23:08:32","slug":"director-representative-authority-abuse-south-korea","status":"publish","type":"post","link":"https:\/\/atlaw.kr\/en-blog\/director-representative-authority-abuse-south-korea\/","title":{"rendered":"Abuse of Representative Authority in South Korea"},"content":{"rendered":"<p><!-- ATLAS_HREFLANG_START -->\n<link rel=\"alternate\" hreflang=\"ko\" href=\"https:\/\/atlaw.kr\/kr-blog\/director-representative-authority-abuse-kr\/\" \/>\n<link rel=\"alternate\" hreflang=\"en\" href=\"https:\/\/atlaw.kr\/en-blog\/director-representative-authority-abuse-south-korea\/\" \/>\n<link rel=\"alternate\" hreflang=\"x-default\" href=\"https:\/\/atlaw.kr\/kr-blog\/director-representative-authority-abuse-kr\/\" \/>\n<!-- ATLAS_HREFLANG_END --><\/p>\n<p><!-- ATLAS_SEO_BLOCK_START --><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"Article\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/director-representative-authority-abuse-south-korea\/#article\",\"mainEntityOfPage\":{\"@type\":\"WebPage\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/director-representative-authority-abuse-south-korea\/#webpage\"},\"headline\":\"Abuse of Representative Authority in South Korea: A Notarial Deed Voided Despite Shareholder Approval\",\"description\":\"A Seoul court (Seoul Northern District Court 2024Gahap21529, May 14, 2026) voided a notarial deed by which a representative director diverted the company's KRW 680 million receivable to himself, holding that shareholder approval does not cure an abuse of representative authority and breach of trust; enforcement was barred.\",\"datePublished\":\"2026-07-06T09:00:00+09:00\",\"dateModified\":\"2026-07-06T09:00:00+09:00\",\"inLanguage\":\"en-US\",\"author\":{\"@type\":\"Person\",\"@id\":\"https:\/\/atlaw.kr\/taejin-kim\/#person\",\"name\":\"Taejin Kim\",\"alternateName\":\"\uae40\ud0dc\uc9c4\",\"jobTitle\":\"Managing Partner\",\"worksFor\":{\"@id\":\"https:\/\/atlaw.kr\/#legalservice\"}},\"publisher\":{\"@type\":\"LegalService\",\"@id\":\"https:\/\/atlaw.kr\/#legalservice\",\"name\":\"Atlas Legal\",\"url\":\"https:\/\/atlaw.kr\"},\"about\":[\"Abuse of representative authority under Korean law\",\"Director self-dealing under Article 398 of the Korean Commercial Act\",\"Whether a shareholder resolution cures a breach of trust\",\"Seoul Northern District Court 2024Gahap21529\",\"Korean Supreme Court 2017Da253829\",\"Korean Supreme Court 2005Do4915\"]}<\/script><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/director-representative-authority-abuse-south-korea\/#faqpage\",\"inLanguage\":\"en-US\",\"mainEntity\":[{\"@type\":\"Question\",\"name\":\"Can a representative director still be liable even after board or shareholder approval?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. The Korean Supreme Court holds that a representative director must faithfully serve the company and must not blindly follow a board or shareholder resolution whose content has an unlawful purpose harmful to the company's creditors. A breach of trust is therefore not justified merely because a board or shareholders' meeting approved it (Supreme Court 2005Do4915; 2014Da11888). In 2024Gahap21529, a notarial deed approved by the shareholders was still voided as an abuse of representative authority.\"}},{\"@type\":\"Question\",\"name\":\"What is abuse of representative authority under Korean law?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"It is where a representative director exercises corporate authority not for the company's business purpose but to pursue his own or a third party's interest. Such an act is presumptively valid, but it becomes void as to the company if the counterparty knew or could have known the director's true (improper) intent (Supreme Court 2017Da253829), applying by analogy Article 107(1) proviso of the Korean Civil Act.\"}},{\"@type\":\"Question\",\"name\":\"Does a small Korean company need a board resolution to dispose of important assets?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Not if it has no board. A company with stated capital under KRW 1 billion that keeps only one or two directors does not form a board; each director (or the representative director) performs the board's function (Articles 383(1) proviso and 383(6) of the Korean Commercial Act). Such a company may dispose of important assets without a board resolution (Supreme Court 2024Da207053). A company with three or more directors, which does have a board, must obtain a board resolution.\"}},{\"@type\":\"Question\",\"name\":\"Why was the deed void even though shareholders approved the self-dealing?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Because approval under Article 398 (director self-dealing) is separate from the questions of abuse of representative authority and breach of trust. Even with shareholder approval, a transaction whose substance improperly drains corporate assets can be void as an abuse of representative authority. A company and its shareholders are separate legal persons, so even a sole shareholder-director commits breach of trust by harming the company (Supreme Court 99Do1040).\"}},{\"@type\":\"Question\",\"name\":\"Is the protection standard the same for a missing board resolution and for abuse of authority?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"No. For a missing board resolution on important-asset transactions under Article 393(1), the Supreme Court en banc decision 2015Da45451 (2021) relaxed the counterparty-protection standard from 'good faith and no negligence' to 'good faith and no gross negligence' \u2014 the transaction is void only if the counterparty knew or was grossly negligent. By contrast, abuse of representative authority still voids the transaction where the counterparty knew or could have known the director's true intent, so even a merely negligent counterparty is not protected.\"}},{\"@type\":\"Question\",\"name\":\"Can the company claim damages from the representative director?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. The Supreme Court has held that where self-dealing harms the company, the company may pursue a damages claim under Article 399 of the Korean Commercial Act, or a tort damages claim for abuse of representative authority, regardless of whether the board approved it (Supreme Court 87Nu760). If enforcement under a notarial deed is already underway, the company should consider an objection suit together with a stay of compulsory execution.\"}}]}<\/script><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":[\"LegalService\",\"LocalBusiness\"],\"@id\":\"https:\/\/atlaw.kr\/#legalservice\",\"name\":\"Atlas Legal\",\"alternateName\":[\"\ubc95\ubb34\ubc95\uc778 \uc544\ud2c0\ub77c\uc2a4\",\"Atlas Law Firm\"],\"url\":\"https:\/\/atlaw.kr\/en\/home-en\/\",\"telephone\":\"+82-32-864-8300\",\"email\":\"info@atlaw.kr\",\"priceRange\":\"$$$\",\"address\":{\"@type\":\"PostalAddress\",\"streetAddress\":\"B-2901, 323 Incheon Tower-daero\",\"addressLocality\":\"Yeonsu-gu, Incheon\",\"addressRegion\":\"Incheon Metropolitan City\",\"postalCode\":\"22007\",\"addressCountry\":\"KR\"},\"geo\":{\"@type\":\"GeoCoordinates\",\"latitude\":37.399438,\"longitude\":126.629812},\"openingHoursSpecification\":[{\"@type\":\"OpeningHoursSpecification\",\"dayOfWeek\":[\"Monday\",\"Tuesday\",\"Wednesday\",\"Thursday\",\"Friday\"],\"opens\":\"09:00\",\"closes\":\"18:00\"}],\"areaServed\":[{\"@type\":\"Country\",\"name\":\"South Korea\"},{\"@type\":\"Place\",\"name\":\"Songdo International Business District\"},{\"@type\":\"Place\",\"name\":\"Cheongna International City\"},{\"@type\":\"Place\",\"name\":\"Yeongjong International City\"},{\"@type\":\"Place\",\"name\":\"Incheon\"},{\"@type\":\"Place\",\"name\":\"Seoul Metropolitan Area\"},{\"@type\":\"Place\",\"name\":\"Incheon Free Economic Zone (IFEZ)\"}],\"knowsAbout\":[\"Abuse of Representative Authority in South Korea\",\"Director Self-Dealing under the Korean Commercial Act\",\"Breach of Trust (Corporate Crime) in South Korea\",\"Objection to Compulsory Execution in South Korea\",\"Corporate Disputes in South Korea\"],\"serviceType\":[\"Corporate Dispute Resolution\",\"Director and Officer Liability\",\"White-Collar Crime Defense\",\"Enforcement and Notarial Deed Litigation\",\"Foreign Direct Investment Legal Services\"]}<\/script><br \/>\n<!-- ATLAS_SEO_BLOCK_END --><\/p>\n<style>@import url('https:\/\/cdn.jsdelivr.net\/gh\/orioncactus\/pretendard@v1.3.9\/dist\/web\/static\/pretendard.css'); :root { --global-content-narrow-width: 1290px !important; } .entry-content-wrap { max-width: 1290px !important; } .entry-content { margin-top: 0 !important; } *, *::before, *::after { box-sizing: border-box; margin: 0; padding: 0; } :root { --navy: #0a2540; --navy2: #1a3353; --wine: #722f37; --text: #1a1f36; --muted: #697386; --rule: #e3e8ee; } body { font-family: 'Pretendard', -apple-system, BlinkMacSystemFont, 'Apple SD Gothic Neo', sans-serif; background: #fff; color: var(--text); font-size: 18px; line-height: 1.82; -webkit-font-smoothing: antialiased; } .hero { max-width: 1000px; margin: 0 auto; padding: 72px 48px 48px; text-align: center; } .category-tag { font-size: 11px; font-weight: 700; letter-spacing: 1.5px; text-transform: uppercase; color: var(--wine); display: block; margin-bottom: 20px; } .hero h1 { font-size: 44px; font-weight: 700; line-height: 1.22; color: var(--navy); margin-bottom: 28px; word-break: keep-all; } .hero-title { font-size: 44px; font-weight: 700; line-height: 1.22; 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color: var(--text); margin-top: 2px; } .author-link { display: inline-block; margin-top: 8px; font-size: 15px; font-weight: 600; color: var(--wine); text-decoration: none; } .author-link:hover { text-decoration: underline; } .author-section-label { font-size: 15px; font-weight: 700; letter-spacing: 1px; text-transform: uppercase; color: var(--muted); margin-bottom: 8px; } .author-detail { font-size: 16px; color: var(--text); line-height: 1.7; margin-bottom: 1px; } @media (max-width: 640px) { body { font-size: 15px; } p { font-size: 15px; } li { font-size: 15px; } .hero { padding: 32px 14px 24px; } .hero h1 { font-size: 22px; } .hero-title { font-size: 22px; } .hero-info { font-size: 12px; } .content { padding: 28px 0 60px; } .toc-nav { margin-left: -14px; margin-right: -14px; border-radius: 0; border-left: none; border-right: none; padding: 12px 4px; margin-bottom: 28px; } .toc-label { font-size: 16px; } .toc-nav ol li { font-size: 14px; padding: 3px 0; } h2 { font-size: 20px; margin: 44px 0 10px; } h3 { font-size: 15px; margin: 24px 0 8px; } .lead-text { font-size: 16px; } .summary-text { font-size: 15px; } .context-text { font-size: 14px; } th { font-size: 13px; padding: 8px 10px; } td { font-size: 13px; padding: 8px 10px; } .faq-q { font-size: 14px; } .faq-item p:not(.faq-q) { font-size: 14px; } .author-box { display: block; overflow: hidden; } .author-avatar { float: left; width: 36px; height: 36px; margin-right: 10px; border-radius: 50%; } .author-section-label { display: inline; font-size: 11px; letter-spacing: 0; margin: 0 3px 0 0; } .author-name { display: inline; font-size: 14px; } .author-detail { clear: both; font-size: 13px; line-height: 1.55; margin-top: 8px; margin-bottom: 1px; } .author-detail ~ .author-detail { clear: none; margin-top: 2px; } .author-link { clear: both; display: block; font-size: 13px; margin-top: 8px; } p.closing { font-size: 14px; } }<\/style>\n<div class=\"hero\">\n  <span class=\"category-tag\">Corporate Disputes<\/span><\/p>\n<div class=\"hero-title\">Abuse of Representative Authority in South Korea:<br \/>A Deed Voided Despite Shareholder Approval<\/div>\n<div class=\"hero-meta\">\n<div class=\"hero-info\">\n      <strong>Taejin Kim<\/strong> \u00b7 Managing Partner, Atlas Legal<br \/>\n      Seoul Northern District Court 2024Gahap21529 (May 14, 2026)\n    <\/div>\n<\/p><\/div>\n<\/div>\n<div class=\"content\">\n<div class=\"direct-answer\">\n    <strong>Key answer:<\/strong> In Seoul Northern District Court 2024Gahap21529 (decided May 14, 2026), a representative director created a notarial deed diverting the company&#8217;s KRW 680 million receivable to himself. Even though the shareholders had approved the self-dealing, the court held the deed void as an abuse of representative authority and a breach of trust that improperly drained corporate assets, and it barred compulsory execution based on that deed (see Korean Supreme Court 2005Do4915 and 2017Da253829).\n  <\/div>\n<div class=\"toc-nav\">\n<p class=\"toc-label\">Contents<\/p>\n<ol>\n<li><a href=\"#sec-1\">1. Why does this ruling matter?<\/a><\/li>\n<li><a href=\"#sec-2\">2. What happened in this case?<\/a><\/li>\n<li><a href=\"#sec-3\">3. Does a small Korean company need a board resolution?<\/a><\/li>\n<li><a href=\"#sec-4\">4. So why was the deed ultimately void?<\/a><\/li>\n<li><a href=\"#sec-5\">5. Is it a breach of trust even with a shareholder resolution?<\/a><\/li>\n<li><a href=\"#sec-6\">6. Are the protection standards the same?<\/a><\/li>\n<li><a href=\"#sec-7\">7. What should companies and investors do?<\/a><\/li>\n<li><a href=\"#sec-faq\">Frequently Asked Questions (FAQ)<\/a><\/li>\n<\/ol><\/div>\n<p class=\"lead-text\">After handing over control of a company, a departing representative director quietly turned a KRW 680 million receivable that belonged to the company into a debt the company supposedly owed to him \u2014 recorded in an enforceable notarial deed that he later used to seize the company&#8217;s assets.<\/p>\n<p class=\"summary-text\">On its face, the deed had cleared the company&#8217;s internal procedures. The company was small enough that no board of directors existed, so no board resolution was required, and the self-dealing had even been approved at an extraordinary shareholders&#8217; meeting. Nonetheless, Seoul Northern District Court 2024Gahap21529 (decided May 14, 2026) held the deed void as to the company for <strong>abuse of representative authority<\/strong> and barred enforcement based on it.<\/p>\n<p class=\"context-text\">The lesson is that clearing internal corporate procedures does not, by itself, shield a director. Under South Korean law, a representative director must not blindly follow a board or shareholder resolution whose content unlawfully harms the company or its creditors. This decision applies that principle in the concrete setting of enforcement under a notarial deed.<\/p>\n<p><\/p>\n<h2 id=\"sec-1\">1. Why does this ruling matter?<\/h2>\n<p class=\"lead-text\">The message is clear: even where the formal &#8220;procedure&#8221; \u2014 a board or shareholder resolution \u2014 is in place, a transaction whose &#8220;substance&#8221; harms the company can be void as an abuse of representative authority.<\/p>\n<p>Korean corporate law requires a representative director to obtain a board or shareholder resolution when disposing of important assets (Article 393(1) of the Korean Commercial Act) or engaging in self-dealing that conflicts with the company (Article 398). This creates a common assumption that &#8220;approval equals safety.&#8221;<\/p>\n<p>But the Korean Supreme Court has held that a representative director must faithfully serve the company and must not blindly follow a board or shareholder resolution whose content has an unlawful purpose harmful to the company&#8217;s creditors. Where the director commits a breach of trust, the existence of a board or shareholders&#8217; meeting resolution does not justify it (Supreme Court 2005Do4915; 2016 decision 2014Da11888). This case applies that rule directly.<\/p>\n<p><\/p>\n<h2 id=\"sec-2\">2. What happened in this case?<\/h2>\n<p class=\"lead-text\">A former representative director converted the company&#8217;s receivable into his own personal claim through a notarial deed. The players are the company (A), the former representative director (B), and the party that acquired control (D).<\/p>\n<p>Company A was a small construction-development firm with stated capital of KRW 50 million and 10,000 issued shares, and it had only two directors \u2014 representative director B and one inside director \u2014 so no board of directors was formed. In 2019, B and the other existing shareholders transferred all of their shares and the ongoing project to D, handing over management control.<\/p>\n<p>The problem arose on the very day control changed hands. Acting as the company&#8217;s representative director, B executed a notarial deed (a quasi-loan-for-consumption agreement) stating that the company &#8220;owed B KRW 680 million in unpaid consulting fees,&#8221; with default interest of 24% per year and no fixed maturity. In reality, that KRW 680 million was a receivable representing the entire profit the company had earned by investing in a development project, and the deed served to divert that receivable to B personally.<\/p>\n<p>In 2024, B used the deed to attach and collect a receivable the company held against a third party. Having discovered this, the company (D&#8217;s new management) filed an objection to compulsory execution to stop the enforcement.<\/p>\n<p><\/p>\n<h2 id=\"sec-3\">3. Does a small Korean company need a board resolution?<\/h2>\n<p class=\"lead-text\">Not if it has no board. What matters is not the &#8220;size&#8221; label but the fact that no board of directors is formed. Conversely, a company with three or more directors \u2014 which does have a board \u2014 must obtain a board resolution to dispose of important assets.<\/p>\n<p>Article 393(1) of the Korean Commercial Act requires a board resolution to dispose of important assets or borrow large sums. But a board is composed of all directors, so where a company has only one or two directors, no board comes into existence in the first place. The law therefore provides that in a small company with stated capital under KRW 1 billion that keeps only one or two directors, each director (or the representative director designated by the articles) performs the board&#8217;s function (Articles 383(1) proviso and 383(6)). The representative director of such a company may, absent special circumstances, dispose of important assets without a board resolution (Supreme Court 2024Da207053).<\/p>\n<p>Company A had only two directors \u2014 representative director B and one inside director \u2014 so no board existed. Its argument that &#8220;disposing of the receivable required a board resolution under Article 393(1)&#8221; was therefore rejected. Had the company had three or more directors and thus a board, this argument might have come out differently.<\/p>\n<p>Self-dealing under Article 398 works the same way. A small company without a board obtains a shareholders&#8217; resolution instead of a board resolution (Article 383(4)). Here, before executing the deed, B convened an extraordinary shareholders&#8217; meeting at which all shareholders attended and unanimously approved the item. So the self-dealing approval requirement of Article 398 was, formally, satisfied \u2014 and the company&#8217;s arguments on board resolution and self-dealing approval were all rejected.<\/p>\n<p><\/p>\n<h2 id=\"sec-4\">4. So why was the deed ultimately void?<\/h2>\n<p class=\"lead-text\">Because even with the procedures in place, a transaction whose substance abuses representative authority against the company&#8217;s interest is void as to the company.<\/p>\n<p>The Korean Supreme Court holds that where a representative director exercises authority not for the company&#8217;s business purpose but to pursue his own or a third party&#8217;s interest, it is an abuse of representative authority; and where the counterparty knew or could have known the director&#8217;s true intent, the transaction is void as to the company (Supreme Court 97Da18059; 2016Da222453; 2017Da253829). The rule applies Article 107(1) proviso of the Korean Civil Act (a declaration of intent not matching true intent) by analogy.<\/p>\n<p>Applied here, the conclusion is plain. By diverting the company&#8217;s receivable to himself and creating a deed enabling enforcement against the company&#8217;s assets to realize it, B pursued his own interest, unrelated to the company&#8217;s purpose, and extinguished the company&#8217;s claim \u2014 a textbook abuse of representative authority. Moreover, the counterparty to the deed was B himself (both creditor and representative director), so there is no question that the counterparty &#8220;knew&#8221; the director&#8217;s true intent. The deed was therefore void as to the company. Indeed, the Supreme Court has likewise voided, as to the company, a notarial deed that a representative director issued in the company&#8217;s name to his own creditor, where the counterparty knew or could have known of the self-interested purpose (Supreme Court 2012Do2142).<\/p>\n<p><\/p>\n<h2 id=\"sec-5\">5. Is it a breach of trust even with a shareholder resolution?<\/h2>\n<p class=\"lead-text\">Yes. The mere fact that a shareholders&#8217; meeting approved it does not justify the breach of trust.<\/p>\n<p>The Supreme Court holds that a representative director must not blindly follow a board or shareholder resolution whose content has an unlawful purpose harmful to the company&#8217;s creditors, but must faithfully perform his duties for the company. Thus, if the director commits a breach of trust that harms shareholders or corporate creditors, the existence of a board or shareholders&#8217; meeting resolution does not justify it (Supreme Court 89Do1012; 2005Do4915; 2014Da11888).<\/p>\n<p>Nor does the &#8220;this is effectively a one-person company, so shareholder consent is enough&#8221; argument work. A company and its shareholders are separate legal persons and corporate assets are not the personal property of a shareholder, so even a sole shareholder-director commits a breach of trust by acting against his duty and harming the company (Supreme Court 99Do1040; 2005Da36236).<\/p>\n<p>Here, even though B controlled the company as both representative director and shareholder, diverting the company&#8217;s receivable to himself was a breach of trust that improperly drained corporate assets and injured the company. Clearing an extraordinary shareholders&#8217; meeting did not justify it.<\/p>\n<p><\/p>\n<h2 id=\"sec-6\">6. Are the protection standards the same?<\/h2>\n<p class=\"lead-text\">No. The two doctrines protect the counterparty under different standards, and one of them was changed by a 2021 en banc decision \u2014 a point often confused in practice.<\/p>\n<p>First, a <strong>missing board resolution<\/strong>. Where a representative director transacts without a board resolution on important-asset dispositions under Article 393(1), the Supreme Court en banc decision 2015Da45451 (2021) relaxed the counterparty-protection standard from &#8220;good faith and no negligence&#8221; to &#8220;good faith and no gross negligence.&#8221; The transaction is now void only where the counterparty knew, or was grossly negligent in not knowing, that no board resolution existed; a merely negligent counterparty is protected.<\/p>\n<p>Second, <strong>abuse of representative authority<\/strong>. This standard was not changed. Abuse of authority still voids the transaction, as to the company, where the counterparty knew or could have known the director&#8217;s true intent (Supreme Court 2017Da253829). Because even ordinary negligence defeats protection, the abuse-of-authority standard is stricter on the counterparty.<\/p>\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th>Missing board resolution (Art. 393(1))<\/th>\n<th>Abuse of representative authority<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Legal basis<\/td>\n<td>Commercial Act Arts. 209(2), 389(3)<\/td>\n<td>Civil Act Art. 107(1) proviso, by analogy<\/td>\n<\/tr>\n<tr>\n<td>When the transaction is void<\/td>\n<td>Counterparty knew or was <strong>grossly negligent<\/strong><\/td>\n<td>Counterparty knew or <strong>could have known<\/strong> (ordinary negligence)<\/td>\n<\/tr>\n<tr>\n<td>Merely negligent counterparty<\/td>\n<td>Protected (transaction valid)<\/td>\n<td>Not protected (void as to company)<\/td>\n<\/tr>\n<tr>\n<td>Change in precedent<\/td>\n<td>Relaxed by 2015Da45451 en banc (2021)<\/td>\n<td>No change<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The two doctrines coexist. Even if a transaction survives the board-resolution standard, it can separately be void if it amounts to an abuse of representative authority and the counterparty knew or could have known. In this case the counterparty was the director himself, so it was void under either standard \u2014 and because the company had no board, the board-resolution issue did not arise at all.<\/p>\n<p><\/p>\n<h2 id=\"sec-7\">7. What should companies and investors do?<\/h2>\n<p class=\"lead-text\">If you acquire control of a Korean company, audit the notarial deeds and self-dealing left behind by the former management, and, where problems surface, plan an objection suit together with damages and criminal responses.<\/p>\n<p>Practical checkpoints:<\/p>\n<ul>\n<li>On acquiring a company or transferring control, review every notarial deed, quasi-loan and debt-acknowledgment document, and receivable assignment executed by the former representative director.<\/li>\n<li>A transaction that diverts corporate assets to a particular individual can be challenged as an abuse of representative authority and breach of trust even if the shareholders approved it \u2014 do not be deterred by an &#8220;it was approved&#8221; defense.<\/li>\n<li>If enforcement under a notarial deed (attachment and collection) is already underway, file an objection to compulsory execution together with a stay of execution (Korean Civil Execution Act Arts. 44, 46, 47).<\/li>\n<li>The company may claim damages from the director under Article 399 of the Korean Commercial Act, or in tort for abuse of representative authority (Supreme Court 87Nu760), and may pursue criminal breach of trust where warranted.<\/li>\n<li>For self-dealing and important-asset dispositions, secure not only the board\/shareholder approval but also the substantive fairness of the terms, to head off later abuse-of-authority challenges.<\/li>\n<\/ul>\n<p><strong>Note for foreign investors.<\/strong> Foreign companies and investors acquiring Korean subsidiaries \u2014 including those operating in the Incheon Free Economic Zone (IFEZ) across Songdo International Business District, Cheongna International City, and Yeongjong International City \u2014 should treat pre-closing legal due diligence on hidden notarial deeds and insider self-dealing as essential, because such instruments can be enforced against company assets after closing. Atlas Legal advises on corporate disputes, director liability, and white-collar crime in South Korea.<\/p>\n<p>Drawing on extensive experience handling corporate control disputes and corporate crime (breach of trust and embezzlement), Atlas Legal advises step by step \u2014 from objection suits against enforcement under notarial deeds to director-liability claims and criminal breach-of-trust responses.<\/p>\n<p><\/p>\n<h2 id=\"sec-faq\">Frequently Asked Questions (FAQ)<\/h2>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Can a representative director still be liable even after board or shareholder approval?<\/p>\n<p>A. Yes. The Korean Supreme Court holds that a representative director must faithfully serve the company and must not blindly follow a board or shareholder resolution whose content has an unlawful purpose harmful to the company&#8217;s creditors. A breach of trust is therefore not justified merely because a board or shareholders&#8217; meeting approved it (Supreme Court 2005Do4915; 2014Da11888). In 2024Gahap21529, a notarial deed approved by the shareholders was still voided as an abuse of representative authority.<\/p>\n<\/p><\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. What is abuse of representative authority under Korean law?<\/p>\n<p>A. It is where a representative director exercises corporate authority not for the company&#8217;s business purpose but to pursue his own or a third party&#8217;s interest. Such an act is presumptively valid, but it becomes void as to the company if the counterparty knew or could have known the director&#8217;s true (improper) intent (Supreme Court 2017Da253829), applying by analogy Article 107(1) proviso of the Korean Civil Act.<\/p>\n<\/p><\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Does a small Korean company need a board resolution to dispose of important assets?<\/p>\n<p>A. Not if it has no board. A company with stated capital under KRW 1 billion that keeps only one or two directors does not form a board; each director (or the representative director) performs the board&#8217;s function (Articles 383(1) proviso and 383(6) of the Korean Commercial Act). Such a company may dispose of important assets without a board resolution (Supreme Court 2024Da207053). A company with three or more directors, which does have a board, must obtain a board resolution.<\/p>\n<\/p><\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Why was the deed void even though shareholders approved the self-dealing?<\/p>\n<p>A. Because approval under Article 398 (director self-dealing) is separate from the questions of abuse of representative authority and breach of trust. Even with shareholder approval, a transaction whose substance improperly drains corporate assets can be void as an abuse of representative authority. A company and its shareholders are separate legal persons, so even a sole shareholder-director commits breach of trust by harming the company (Supreme Court 99Do1040).<\/p>\n<\/p><\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Is the protection standard the same for a missing board resolution and for abuse of authority?<\/p>\n<p>A. No. For a missing board resolution on important-asset transactions under Article 393(1), the Supreme Court en banc decision 2015Da45451 (2021) relaxed the counterparty-protection standard from &#8220;good faith and no negligence&#8221; to &#8220;good faith and no gross negligence&#8221; \u2014 the transaction is void only if the counterparty knew or was grossly negligent. By contrast, abuse of representative authority still voids the transaction where the counterparty knew or could have known the director&#8217;s true intent, so even a merely negligent counterparty is not protected.<\/p>\n<\/p><\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Can the company claim damages from the representative director?<\/p>\n<p>A. Yes. The Supreme Court has held that where self-dealing harms the company, the company may pursue a damages claim under Article 399 of the Korean Commercial Act, or a tort damages claim for abuse of representative authority, regardless of whether the board approved it (Supreme Court 87Nu760). If enforcement under a notarial deed is already underway, the company should consider an objection suit together with a stay of compulsory execution.<\/p>\n<\/p><\/div>\n<p class=\"closing\">If you need to challenge enforcement under a notarial deed left by former management, or to pursue a director&#8217;s liability for abuse of representative authority and breach of trust in South Korea, please contact Atlas Legal. We review your company&#8217;s ownership structure and the circumstances of the transaction to advise on a practical response.<\/p>\n<div class=\"author-box\">\n    <img decoding=\"async\" class=\"author-avatar\" src=\"https:\/\/atlaw.kr\/wp-content\/uploads\/2022\/12\/\uae40\ud0dc\uc9c4-1.png\" alt=\"Taejin Kim, Managing Partner \u2014 Atlas Legal\"><\/p>\n<div class=\"author-text\">\n<div class=\"author-section-label\">About the Author<\/div>\n<div class=\"author-name\">Taejin Kim | Managing Partner<\/div>\n<div class=\"author-detail\">Corporate Counseling, Corporate Disputes, White-Collar Crime<\/div>\n<div class=\"author-detail\">Former Public Prosecutor | Judicial Research and Training Institute, 33rd Class<\/div>\n<div class=\"author-detail\">Korea University LL.B. &amp; LL.M. (Criminal Law), University of California, Davis LL.M.<\/div>\n<div class=\"author-detail\">Atlas Legal | Incheon Songdo, South Korea<\/div>\n<p>      <a class=\"author-link\" href=\"https:\/\/atlaw.kr\" target=\"_blank\" rel=\"noopener noreferrer\">Visit Atlas Legal Homepage \u2192<\/a>\n    <\/div>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Corporate Disputes Abuse of Representative Authority in South Korea:A Deed Voided Despite Shareholder Approval Taejin Kim \u00b7 Managing Partner, Atlas Legal Seoul Northern District Court 2024Gahap21529 (May 14, 2026) Key answer: In Seoul Northern District Court 2024Gahap21529 (decided May 14, 2026), a representative director created a notarial deed diverting the company&#8217;s KRW 680 million receivable&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_kadence_starter_templates_imported_post":false,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[223],"tags":[807,809,808,441,810],"class_list":["post-1429","post","type-post","status-publish","format-standard","hentry","category-corporate-disputes","tag-abuse-of-representative-authority-korea","tag-breach-of-trust-korea","tag-director-self-dealing-korea","tag-korean-commercial-act","tag-notarial-deed-enforcement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ 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