Kim, KonSik, Shareholder Agreements on Board of Directors’ Execution of Duties, The Journal of Comparative Private Law, Vol. 26, No. 1 (2019), pp. 335-378.
<Abstract>
The subject of this paper is shareholder agreements intended to restrain the power of the board of directors (“the BOD agreements”). This paper purports to examine the BOD agreements from a comparative and theoretical perspective. In Korea, it is not in dispute that shareholder agreements in general are valid between the parties. The BOD agreement, however, seems to be viewed in a negative light by judges as well as commentators. Underlying this negative view on the BOD agreement exists the deep-rooted perception that the BOD agreement, restricting the room for board discretion, conflicts with the director’s fiduciary duties. The purpose of this paper is to demonstrate that this perception is not acceptable not only from a comparative, but also from a theoretical perspective. This paper proceeds as follows. Part II briefly discusses general shareholder agreements to the extent that is necessary for examining the BOD agreement. Parts III and IV provide a comparative analysis. Part III deals with the historical developments in the U.S., while Part IV covers Japanese law. Part V focuses on the court decisions and views of commentators in Korea. Based on the foregoing discussion, Part IV attempts to support the validity of the BOD agreement from a theoretical perspective. The gist of the theoretical examination may be summarized as follows. First, the BOD agreement does not necessarily conflicts with the fiduciary duties of directors. Second, although the BOD agreement performs the function of restraining the room for director discretion, this should not necessarily render it void contractually. In practice, agreements purporting to control director discretion are widely entered into. Third, from the perspective of actual need in practice, the BOD agreement’s validity should be accepted. Fourth, recognizing the validity of the BOD agreement is in line with the trends in advanced jurisdictions such as US., Japan, Germany and UK.
<Keywords>
shareholder agreements, fiduciary duties, closely-held corporations, procure clause
Kim, KonSik, Shareholder Agreements on Board of Directors’ Execution of Duties, The Journal of Comparative Private Law, Vol. 26, No. 1 (2019), pp. 335-378.
<Abstract>
The subject of this paper is shareholder agreements intended to restrain the power of the board of directors (“the BOD agreements”). This paper purports to examine the BOD agreements from a comparative and theoretical perspective. In Korea, it is not in dispute that shareholder agreements in general are valid between the parties. The BOD agreement, however, seems to be viewed in a negative light by judges as well as commentators. Underlying this negative view on the BOD agreement exists the deep-rooted perception that the BOD agreement, restricting the room for board discretion, conflicts with the director’s fiduciary duties. The purpose of this paper is to demonstrate that this perception is not acceptable not only from a comparative, but also from a theoretical perspective. This paper proceeds as follows. Part II briefly discusses general shareholder agreements to the extent that is necessary for examining the BOD agreement. Parts III and IV provide a comparative analysis. Part III deals with the historical developments in the U.S., while Part IV covers Japanese law. Part V focuses on the court decisions and views of commentators in Korea. Based on the foregoing discussion, Part IV attempts to support the validity of the BOD agreement from a theoretical perspective. The gist of the theoretical examination may be summarized as follows. First, the BOD agreement does not necessarily conflicts with the fiduciary duties of directors. Second, although the BOD agreement performs the function of restraining the room for director discretion, this should not necessarily render it void contractually. In practice, agreements purporting to control director discretion are widely entered into. Third, from the perspective of actual need in practice, the BOD agreement’s validity should be accepted. Fourth, recognizing the validity of the BOD agreement is in line with the trends in advanced jurisdictions such as US., Japan, Germany and UK.
<Keywords>
shareholder agreements, fiduciary duties, closely-held corporations, procure clause