In a recent case involving indemnity action (2004Na64267) filed by Korea Credit Guarantee Fund (KCGF), the Seoul High Court made a ruling to the effect that directors?joint liability may only be applicable to those directors who have actually or likely to have controlled or participated in management of a company, thereby reversing the lower court’s decision.
KCGF had provided its guarantee for a company A which obtained loans from a bank, and, after the company A could not repay the loan principal to the bank, KCGF had to make the loan payment as a guarantor and subsequently sued the company A and its directors for indemnity, and the Seoul District Court rendered its judgment in favor of KCGF.
However, the Seoul High Court, in reviewing the above case that was later appealed, stated that a son of the representative director of the company A, though a director registered in the company’s commercial registry, could not be jointly held liable for the indemnity amount because he was not actually involved in the management of the company (perhaps lending his name to the company for a registered director position). So, although, at the time of providing its guarantee to the bank, KCGF had directors of the company A provide to it the joint guarantees for the loaned amount, KCGF could only enforce the indemnity claim against the directors who were actually involved in the decisions of the company A.