Shareholders right to receive dividends is an important right enjoyed in the position of shareholders, but shareholders right to claim dividends is nothing more than an abstract right to mean that it is possible to receive dividends in the future. Tha...
Shareholders right to receive dividends is an important right enjoyed in the position of shareholders, but shareholders right to claim dividends is nothing more than an abstract right to mean that it is possible to receive dividends in the future. That is because the Korean Supreme Court’s firm legal principle is that shareholders will not be recognized the right to claim specific and definitive dividends until the profit dividend is approved by the Financial Statements at the general shareholders’ meeting. In other words, if in the general shareholders’ meeting or in the board of directors it is decided not to pay dividends, shareholders have no right to claim for dividends.
However, different classes of shares concerning profit dividends were introduced under the revised Commercial Act in 2011, and legal principles on how to view the right to claim dividends for different classes of shares concerning profit dividends were not established. About 10 years have passed since the revised Commercial Act took effect, and an important legal principle on different classes of shares concerning profit dividends was laid down in the Supreme Court ruling sentenced on August 19, 2022. In the first and second trials, adhering to the existing Supreme Court law it was judged that shareholders could not claim dividends unless the company made a decision on dividends. However, the Supreme Court determined that in the case of different classes of shares concerning profit dividends, there is a specific right to claim profit dividends as prescribed by the articles of association without the company's decision on dividend.
Therefore, in this paper, the meaning of the Supreme Court ruling was reviewed by issue along with the facts of the case and the progress of the lawsuit. First, this paper examines the effect of converting common shares into different classes of shares concerning profit dividends and reviews the basis for recognizing the specific right to claim profit dividends for different classes of shares concerning profit dividends.