부실계열사 합병과 합병비율 ― 대법원 2008. 1. 10. 선고 2007다64136 판례평석 ―

Abstract

This paper is an analysis on a Supreme Court Case provided early 2008. In that Case, a parent company carried out a statutory merger with its subsidiary under financial distress. Minority shareholder in parent company brought a lawsuit arguing the merger was null and void because (i) the deal violated the regulations of capital increase while statutory merger under the Korean Commercial Code(the "KCC"), (ii) given the subsidiary was insolvent, the merger with a insolvent company is not allowed under the KCC, and/or (iii) parties in the merger didn't fully comply with the provisions in the Securities Exchange Act(the "SEA") that stipulate detailed evaluation formula in takeover deals. The Supreme Court as well as the lower courts denied those argument. It turned out the parent, being a listed company subject to the SEA, complied with the takeover regulations in the SEA. The cause of action that the merger violated general regulations in the KCC lost its ground because the SEA provisions would override conflicting provisions in the KCC. In view of the relationship between the KCC and the SEA, the conclusion of the decision seems reasonable. However, the discussion aforementioned leads us more fundamental question: what if no listed companies had been involved and therefore only the KCC had been applied? Many commentators assume the KCC has implicit hurdles for statutory merger as were pointed to by the plaintiff: capital increase in surviving company is subject to strict regulation; and merger with an insolvent company is not allowed. While the Supreme Court didn't clearly mentioned about these alleged limitations under the KCC, I am of opinion that, if both parties agree, a merger whereby the capital of merging firm is to increase more than the net asset value of the target company should be allowed; and a merger whereby a financially distressed firm is involved should also be allowed. Further, the current M&A regulations set out in the SEA should be revised: we need to adopt different regulation over parent-subsidiary merger as opposed to arm's-length-transaction; (and/or) if the SEA is to keep interfering with the valuation in an M&A, the current formula which might be subject to manipulation by the controlling shareholders or managers should be varied.