The matter of primary concern of this dissertation is oppression of the minority shareholders by those in control of a close corporation and its remedies in the United States, and its applicability to Korean corporate law. In other words, I research w...
The matter of primary concern of this dissertation is oppression of the minority shareholders by those in control of a close corporation and its remedies in the United States, and its applicability to Korean corporate law. In other words, I research what the oppressive conduct is, observing the status and relationship of the participants in a closely held small corporation, what the standard of oppression decision is, what should be protected, and what kind of remedy should be selected.
For these purposes, this dissertation is arranged in the order as follows:
The second chapter deals with shareholder oppression in the close corporation in the United States of America. In this chapter I observe the special problems the close corporation shareholders are faced with in the United States and the causes of shareholder oppression action. After that, observing the theories about the definition of oppression, I examine the developing history of the oppression theory in American judicial precedents. And I research into the possibility of solving oppression problems with contract law, the causes justifying the shareholder oppression theory independent of the contract law, and the areas the oppression theory can be extended to.
In the United States, judicial interpretation of the term "oppressive" may be divided into three broad approaches. First, some decisions state the standard in very general terms such as "wrongful conduct." A second approach, comprising a substantial body of case law, provides somewhat greater definition by relating oppression to "breach by controlling shareholders of their fiduciary duties." Third, a few states deem oppression to be "a breach of the reasonable expectations of minority shareholders"-an approach that shifts emphasis away from wrongfulness of the conduct of those in control. Under the reasonable expectations approach, oppression can be found even if the acts of the controlling shareholders are in good faith and consistent with their fiduciary duties.
In the third chapter, I discuss legislation and judicial application in the United States concerning selecting the appropriate remedies which will be ordered in case of judicial decision of oppression, observe the contractual remedies, and think of the standards for measuring appropriate remedies.
Over the years, the courts and legislatures in the United States have allowed shareholders to bring suits requesting broader relief when the controlling shareholder''''s actions are illegal, fraudulent, or oppressive. Courts permits shareholders to request relief pursuant to statutory authorization or pursuant to the courts'''' inherent equitable power. When minority shareholders are successful, courts sometimes order dissolution of corporations because of shareholder dissension. The courts also increasingly order one shareholder to purchase the interest of another. Courts have used their equitable powers to a lesser extent to order: partition of the corporation''''s assets, a receiver to operate the corporation, payments of dividends, reform of bylaw, forfeiture of salaries, invalidation of corporate actions, appointment of provisional directors or special agent, or removal of directors.
In the fourth chapter, I observe the real picture of oppression of minority shareholders in Korea and research into how the doctrine of shareholder oppression which has been developed in the United States can be applied to Korean corporate law.
In Korea, in case that an oppression occurs in a closely held small stock corporation but cannot be solved by the law, bylaw, shareholders agreement, etc., this kind of unfairness problems are much more difficult to solve than in the United States because a direct relationship between the shareholders is not acknowledged in Korea. As the result, a shareholder''''s damage cannot be remedied through a direct suit. For the purpose of solving this problem, the fiduciary duty(or duty of loyalty) of the controlling shareholders or the reasonable expectation theory can be introduced. In addition, an oppression clause can be established to replace or supplement the existing dissolution clause. Finally, either a voluntary or court-ordered majority buyout of the minority shareholder''''s stock can be introduced to solve the shareholder oppression.