Civil Act | Analysis of a Supreme Court Judgment Holding That a Written Resolution Not Provided for in the Rules Must Be Deemed Void

Those who filed the Civil Act litigation were members of Association A, an incorporated association.

Association A, to which they belonged, decided to conduct its extraordinary general meeting of delegates in 2020 by written resolution.

The agenda item of the general meeting at the time was to delete the sentence stated in the association's articles of association providing that "the president may be reappointed only once."

Association A requested each delegate to submit a written resolution form on the agenda item to amend the articles of association.

Accordingly, 449 of the 454 registered delegates submitted resolution forms expressing their "approval," and, as a result, the provision in the articles of association limiting the president's reappointment to one term was deleted.

B, who served as the association's president at the time, subsequently ran as the sole candidate in an extraordinary general meeting of delegates held in person and again took office as president.

B, who had already been reappointed once in the past, would ordinarily have been unable to run, but, because the articles of association were amended through the written resolution, it became possible for him to serve as president for one additional term.

Some members raised objections.

They argued that there were serious defects in the written resolution process, and they filed a lawsuit seeking confirmation of the nullity of the extraordinary general meeting of delegates' resolution.

In connection with the Civil Act litigation, the court of first instance ruled in favor of the association.

It found that the amendment of the articles of association made through the written resolution was valid and that B's election was therefore also valid.

However, the appellate court reached a different determination.

The appellate court determined that a general meeting resolution may not be substituted in writing without a procedure for convening the meeting.

It pointed out that, in the case of a general meeting of members, the principle is to reach a resolution after sufficient discussion, whereas in a written resolution the expression of intent can only take the form of an alternative choice such as approval, disapproval, or abstention.

The appellate court further emphasized that, because the written resolution method is not a democratic decision-making method that gathers and deliberates on the intentions of multiple members but rather an irregular decision-making method, it is inappropriate as a method for the general meeting of an incorporated association.

It also offered an interpretation of Article 72 (2) of the Civil Act, which provides that "a member may exercise his or her voting rights in writing or through a proxy."

As to that provision, the appellate court determined that it merely relaxed the requirements for a resolution by allowing members who find it difficult to attend to express their intent on the agenda items in writing or through a proxy, in order to prevent the general meeting from being adjourned due to a failure to meet the quorum.

The Supreme Court's determination on the Civil Act litigation was also the same as that of the appellate court.

The Supreme Court stated that a general meeting resolution of an incorporated association under the Civil Act must be regarded, as a rule, as one in which the members directly attend and pass the resolution at a general meeting that has gone through the procedures of convening and holding the meeting.

It then pointed out that a written resolution, in which the decision is made in favor of the side that obtains the majority by collecting only a simple yes-or-no vote in writing, can restrict the exercise of membership rights.

However, in the case of Association A, the general meeting resolution was conducted by writing alone even though there was no provision to that effect in any statute or in the articles of association, and the Court therefore added that such a resolution must be regarded as having a serious defect.

In addition, Association A argued during the trial that the written resolution had been unavoidable due to the spread of COVID-19, but the Supreme Court rebutted this as well.

It explained that it was not clear whether, around the time of the resolution to amend the articles of association, it was difficult to hold a general meeting attended by many people, and that, even if such a situation existed, there appeared to be no circumstance indicating that it was necessary to pass the resolution to amend the articles of association in this case at that particular time.

In connection with the Civil Act litigation, we have analyzed a Supreme Court judgment holding that conducting a resolution solely in writing, without actually holding a general meeting, cannot be regarded as a proper procedure.

In the past, as COVID-19 spread nationwide, many incorporated associations passed resolutions in "writing" rather than in person.

This Supreme Court ruling, that a written resolution cannot be permitted where no relevant provision exists in the articles of association, appears likely to have a significant effect on related litigation currently pending.

Even for those who have not yet become embroiled in litigation, it may be worth reviewing each organization's articles of association once again.

At Daeryun Law Firm LLP, attorneys experienced in handling a wide range of civil matters provide solutions tailored to each client's circumstances.

If you have any inquiries regarding the Civil Act, you are welcome to request a consultation with Daeryun Law Firm LLP at any time.