Guide to Company-Related Liability and Shareholder Rights

Based on 134 consultation cases · Updated October 4, 2026 · Translated from the Korean original.

As a rule, a company and its shareholders, directors, and representative directors are separate legal persons, so a company’s debts cannot be claimed directly from an individual. However, liability and remedies may vary depending on the specific circumstances, including the appearance of authority to represent the company, a director’s breach of duty, abuse of the corporate form, or infringement of shareholder rights.

Company and related parties → Company → Shareholders → Directors → A company debt or dispute involving its people → Did an unauthorized director use a title suggesting authority, with an appearance the company created or permitted? → Yes Commercial Act Article 395 → No → Was the other party grossly negligent in believing the director had authority? → Was the company merely a formality or abused to evade the law? → Yes Commercial Act Article 331 → Liability may arise under a recognized exception → Ordinarily, the company and its people remain legally separate → Check board approval and whether the other party knew or could know it was missing → Check director duty breach and company loss All-shareholder consent may not erase all liability → Check shareholder rights Records requests and third-party share allotments have separate rules → Board approval → Director duties and liability → Sha…

Key points

A company may be liable when a director without authority to represent it uses a title suggesting that they have such authority. However, the company must have created or permitted that appearance, and the other party may not be protected if they were grossly negligent (Commercial Act, Article 395 (상법 제395조), Cases 1, 7, and 10).
Even if the representative director entered into a transaction requiring a board resolution without one, the transaction may be valid unless the other party knew or could have known that the resolution was absent. As a rule, the company must assert and prove those circumstances (Commercial Act, Article 393 and Article 389(3) (상법 제393조·제389조 제3항), Cases 19 and 20).
A director who neglects their duties and causes loss to the company may be liable to compensate the company. A release based on the consent of all shareholders may not extinguish a director’s liability under the Commercial Act and tort liability to the same extent (Commercial Act, Articles 399 and 400 (상법 제399조·제400조), Cases 2 and 3).
The company’s assets are, as a rule, separate from the personal assets of its shareholders and directors. However, in specific legal relationships, the company’s separate legal personality may be disregarded if the company is merely a formality or has been abused as a means of evading the application of the law (Commercial Act, Article 331 (상법 제331조), Cases 9, 14, and 24).
Allotting new shares to a third party is an exception and requires not only a basis in the articles of incorporation but also necessity to achieve a business purpose, such as introducing new technology or improving the company’s financial structure. An allotment to a third party made solely to defend management control may infringe shareholders’ preemptive rights (Commercial Act, Articles 418 and 429 (상법 제418조·제429조), Case 6).
Shareholders may request to inspect and copy board minutes, accounting books, and other records, but the company may refuse if it proves that the request is improper, taking into account its purpose and circumstances. An attempt to carry out a hostile takeover does not, by itself, make the request improper (Commercial Act, Article 391-3 and Article 466 (상법 제391조의3·제466조), Cases 16 and 21).
For a company division, the divided company and the newly established company are, as a rule, jointly and severally liable for debts incurred before the division. A special resolution and creditor-protection procedures are relevant if liability is to be divided as an exception. A reduction in the principal debt under a rehabilitation plan does not, as a rule, affect the guarantor’s liability (Commercial Act, Article 530-9 (상법 제530조의9); Debtor Rehabilitation and Bankruptcy Act, Article 250 (채무자 회생 및 파산에 관한 법률 제250조), Cases 4 and 11).

Frequently asked questions

Q. Can I claim money the company has not repaid from its representative director personally?

If a company is a party to the loan document or contract, a claim should, as a rule, be brought against the company’s assets, and cannot be brought directly against the representative director personally. However, the representative director may potentially be held separately liable if they personally agreed to assume the debt or if circumstances establish that they abused the company’s separate legal personality.

Case 9, Case 14, Case 24

Q. I ordered goods from a managing director who did not have authority to represent the company. Can I claim the price from the company?

A company may be liable for a transaction entered into by a director using a title, such as managing director, that could give the appearance of authority to represent the company. However, the company must have created or permitted that appearance, and the company may not be liable if the other party to the transaction was grossly negligent in believing that the director had authority to represent it.

Case 1, Case 7

Q. If the representative director borrowed money in the company’s name without board approval, does the company have to repay it?

Even if a transaction requires a board resolution, it is not necessarily invalid simply because no resolution was adopted. The transaction may be valid unless the company asserts and proves that the other party knew or could have known that the resolution was absent or invalid.

Case 19, Case 20

Q. Can all shareholders’ consent eliminate all of a director’s liability for harm to the company?

Consent from all shareholders may be grounds for releasing a director from liability to the company under the Commercial Act. However, the case explains that such a release does not automatically extinguish a claim for damages arising from a tort.

Case 2, Case 3

Q. Can existing shareholders challenge a company’s issuance of new shares to outsiders during a control dispute?

Even if the articles of incorporation provide a basis for allotting shares to a third party, the allotment must be necessary to achieve a business purpose, such as introducing new technology or improving the company’s financial structure. If new shares were allotted to a third party solely to protect management’s control, the allotment may be challenged on the grounds that it infringes existing shareholders’ preemptive rights.

Case 6

Q. Can a shareholder attempting a hostile takeover inspect the minutes of board meetings?

The fact that a shareholder is attempting a hostile takeover does not, by itself, make a request to inspect and copy records improper. Such a request may be permitted if it is made to protect the interests of the company and its shareholders, and there are no special circumstances—such as a risk that the information obtained will be used in a competing business or that the timing would be excessively detrimental to the company.

Case 16, Case 21

Q. If a company’s debt is reduced under a rehabilitation plan, is the joint and several guarantor’s debt reduced too?

According to the explanation in the case, a reduction in the principal debt or a change to its repayment date under a rehabilitation plan does not, as a rule, affect the scope of the guarantor’s liability. Accordingly, the guarantor may remain liable for the original claim independently of the rehabilitation plan.

Case 11

Q. If a company is divided, must a pre-division debt be claimed only from the newly established company?

When a company is divided, the divided company and the newly established company are, as a rule, jointly and severally liable to repay the debts of the company before the division. However, if an exception dividing liability is established by a special resolution, creditor-protection procedures become relevant. Whether a debt is assumed should therefore not be determined solely from the division plan.

Case 4

Relevant laws

Commercial Act, Article 37(1) (상법 제37조 제1항)
Commercial Act, Article 209 (상법 제209조)
Commercial Act, Article 232 (상법 제232조)
Commercial Act, Article 288 (상법 제288조)
Commercial Act, Article 331 (상법 제331조)
Commercial Act, Article 335 (상법 제335조)
Commercial Act, Article 337(1) (상법 제337조 제1항)
Commercial Act, Article 341 (상법 제341조)
Commercial Act, Article 341-2 (상법 제341조의2)
Commercial Act, Article 342-2 (상법 제342조의2)
Commercial Act, Article 360 (상법 제360조)
Commercial Act, Article 362 (상법 제362조)
Commercial Act, Article 368(1) (상법 제368조 제1항)
Commercial Act, Article 371 (상법 제371조)
Commercial Act, Article 374(1), subparagraph 1 (상법 제374조 제1항 제1호)

Watch out for

If you entered into a transaction with someone who lacked authority to represent the company, do not rely only on their title. You should also consider whether the company approved or permitted the use of that title and whether the other party to the transaction was grossly negligent.
A claim for damages should distinguish whether it is based on breach of contract or on a tort. The cases explain that the burden of proof and limitation period may differ depending on the type of claim.
The case guidance states that an action to invalidate an issuance of new shares must be brought within six months from the date the shares were issued under Commercial Act, Article 429 (상법 제429조).
The case explains that even where the company’s separate legal personality may be disregarded, the enforceability of a final judgment against the existing company does not automatically extend to the newly established company.

Does a Company’s Debt Reduction in Rehabilitation Apply to the Guarantor?

Source cases

This guide was compiled by AI from the following Korea Legal Aid Corporation consultation cases (in Korean).

This guide is general legal information about Korean law, not legal advice for your situation. For a specific case, consult a lawyer or the Korea Legal Aid Corporation (call 132 in Korea).