On November 9, 2017, the Supreme Court ruled that beneficial shareholders may claim access to beneficial ownership information of their companies. The Court reasoned that under Article 396(2) of the Commercial Act, the register of beneficial shareholders prepared pursuant to the Financial Investment Services and Capital Markets Act (“FSCMA”) has the same effect as the register of shareholders under the Commercial Act.

Background:

In this case, the Solidarity for Economic Reform claimed access to – and copy of – the register of shareholders of large construction companies which were administratively fined for collusion in the “Four major river project,” for the purpose of taking derivative actions as the beneficial shareholders of such companies.

However, the companies rejected the Solidarity for Economic Reform’s claim on the ground that disclosure of the register of beneficial shareholders may violate the Personal Information Protection Act (“PIPA”). In rejecting its request, the companies stated that the reason for denial is due to the registers containing shareholders’ personal information, such as his/her name or address, and the FSCMA provides no supporting provision to grant access. For this reason, in July 2013, the Solidarity for Economic Reform filed a claim with the court for the rights to access and copy the register of shareholders.

Court’s Reasoning:

In rendering its decision, the Court explained that it recognized shareholders’ rights to access and copy the register of shareholders under the Commercial Act. The Court further clarified that through its decision, the goal is to protect the interest of shareholders and companies through the exercise of the shareholder rights, and to prevent controlling shareholders from abusing their rights of controlling shareholders.

In effect, the Court’s ruling allowed beneficial shareholders to claim access to and to copy the register of beneficial shareholders of their companies. The Court further reasoned that this access and copy right is allowed under Article 396(2) of the Commercial Act, since the register of beneficial shareholders pertaining to listed shares deposited at the Korea Securities Depository in accordance with the FSCMA has the same effect as the register of shareholders under the Commercial Act. In addition, the Court stated that under Article 396(2) of the Commercial Act, the scope in which the claim for access or copy is allowed (according to the above provision) is not limited to “all of the matters indicated in the register of beneficial shareholders.” Moreover, “the matters indicated in the register of shareholders” – such as shareholder’s name and address, the type of shares by shareholder and the numbers thereof – access to, or copy of, the register of beneficial shareholders is also within this scope. Thus, the claim cannot be regarded as violating the PIPA, limiting the collection or provision of personal information to third parties.

Significance of the Decision:

The register of shareholders of listed companies prepared under the Commercial Act only indicates the Korea Securities Depository as the shareholder of the entire deposited shares, but not the name of the beneficial shareholders. Hence, this is why the access to, and copy of, the register of beneficial shareholders under the FSCMA is important.

However, as opposed to the Commercial Act, the FSCMA does not include any supporting provision for the access to, and copy of, the register of beneficial shareholders, and the rights thereto, restricting the exercise of the rights of minority shareholders by beneficial shareholders.

Through this decision, the Supreme Court made it clear that Article 396(2) of the Commercial Act may also analogically apply to the register of beneficial shareholders, and thus, allowed the claim for the access to, and copy of, the register of beneficial shareholders.

Going forward, it is expected that the claim for the access to, and copy of, the register of beneficial shareholders will be widely recognized in exercising the rights of minority shareholders.