What If the Company Deleted You from the Shareholder Register?
During internal corporate disputes, shareholders may be unilaterally deleted from the shareholder register or fail to receive notices of shareholder meetings. Let’s explore how to protect shareholder rights through a case where Atlas Legal recently won at the Incheon District Court.
The Case Details: Breach of Promise and Deprivation of Shareholder Status
The Situation
The plaintiffs had been shareholders of Company A since 2018, each holding 6,000 shares. In January 2020, the company promised to pay 12% monthly returns, but failed to fulfill this commitment. In May 2022, the company unilaterally deleted the plaintiffs from the shareholder register. Subsequently, despite holding multiple shareholder meetings, the company did not send convocation notices to the plaintiffs, completely depriving them of their voting rights.
The Company’s Defense
During the first trial, the company belatedly restored the plaintiffs to the shareholder register but continued to deny their shareholder status, claiming that “this is merely to respect the court’s judgment; the actual shareholder is nominee B.”
How Did the Court Rule?
Criteria for Recognizing Shareholder Status
The court stated that while mere entry in the shareholder register does not create shareholder status, the following factors must be comprehensively considered to determine actual shareholder status:
- ① Payment of new share subscription funds
- ② Circumstances and purpose of shareholder register entry
- ③ History of exercising shareholder rights
(Reference: Supreme Court Decision 2016Da240338, May 16, 2019)
Grounds for Victory
The plaintiffs had been registered in the shareholder register for approximately two years from 2020. The company sent convocation notices for shareholder meetings in 2021 and 2022 to the plaintiffs, and the plaintiffs actually exercised their voting rights. Based on these facts, the court clearly recognized the plaintiffs’ shareholder status.
Recognition of Damages and Consolation Money
Liability of the Company and Executives
The court recognized the liability of the company and its CEO for damages resulting from deleting shareholders from the register and failing to send convocation notices, thereby violating shareholder rights. In particular, the court ordered payment of consolation money to each plaintiff for the CEO’s arbitrary deprivation of shareholder status and the auditor’s failure to prevent such violations.
Response Strategy for Shareholder Rights Violations
1. Immediately Secure Evidence
Secure objective evidence such as proof of new share subscription payment, copies of the shareholder register, shareholder meeting convocation notices, and dividend payment records.
2. File Shareholder Status Confirmation Lawsuit
If the company arbitrarily deletes you from the shareholder register or fails to send meeting notices, promptly file a shareholder status confirmation lawsuit.
3. Claim Damages
You can also claim damages for being deprived of the opportunity to attend shareholder meetings and consolation money for mental distress.
Conclusion
Atlas Legal won both the first trial and appeal at the Incheon District Court in this case, successfully protecting shareholders’ rights. If you are experiencing difficulties with internal corporate disputes, shareholder conflicts, or management disputes, please seek professional assistance and respond promptly.