Corporate Attorney Assistance Case | Claim for Return of Retained Earnings Dismissed in Full

Retained earnings refers to the portion of the profits a company has earned through its business activities since its founding that has not been used for dividends, transfer to capital, or the like, but has been retained within the company.

In other words, as a component of ‘capital’ in corporate accounting, it means the portion of ‘surplus’ exceeding ‘paid-in capital’ that has profits, such as operating income, as its source.

To put it more simply, retained earnings is precisely the amount left within the company, rather than going outside, out of the net profit remaining after taxes and expenses are deducted from the revenue the company has earned.

There is no single provision that directly governs a suit claiming retained earnings.

However, in this case, Article 105 and Article 741 et seq. of the Civil Act may serve as a basis for interpretation.

If the agreement to return retained earnings asserted by the plaintiff was made by agreement between the parties, Article 105 of the Civil Act may be used as a basis for interpretation.

Civil Act Article 105 (Discretionary Provisions)

In other words, this means that where the parties have agreed on terms that differ from the statutory provisions, the agreement between the parties applies in priority over the statutory provisions.

In addition, if the assertion of an "in-house plant" is accepted and the premise is established that the plaintiff's assets are in substance retained by the client, the suit may also be filed in the nature of a claim for return of unjust enrichment.

Civil Act Article 741 (Definition of Unjust Enrichment)

The plaintiff argued that “the defendant company was in effect operated as a subsidiary and had no independent management rights.”

In response, the corporate attorney rebutted this on the basis of the following materials, asserting that the client had operated as an independent business operator.

The attorney also emphasized the fact that the client had a record of substantive transactions with parties other than the plaintiff, and that fund management and facility investment were likewise carried out independently.

The plaintiff argued that "the retained earnings were set aside on the premise of a long-term internal settlement, and there was an agreement to return them."

In response, the corporate attorney confirmed that no agreement document or special accounting treatment record concerning the return of the retained earnings existed.

Through this, the attorney emphasized that the retained earnings had been held internally solely in accordance with the accounting standards of the client's company.

The attorney also established that the 'statement' and other materials submitted by the plaintiff were nothing more than a conveyance of an interpretive intent without legal binding force.

The plaintiff sought the return of unjust enrichment, claiming that “the defendant suffered loss because the defendant holds a benefit without legal grounds.”

In response, the corporate attorney argued that the requirements for the ‘unjust enrichment’ claimed by the plaintiff (absence of legal grounds, occurrence of loss, and so on) were not satisfied at all.

The attorney then demonstrated, with accounting records, that there had been payment of consideration in accordance with an ordinary transactional relationship.

This case is one in which, in a situation where the opposing party retained one of the domestic 'Big 3' large law firms and aggressively filed suit, Daeryun's corporate attorney accurately grasped the essence of the case, rebutted it logically, and brought about a result of complete dismissal of the claim.

This was not a matter of merely the transactional relationship; it was a case requiring a deep understanding of the actual relationships between the companies, the flow of funds, and the management structure.

For that reason, it was a case in which the assistance of an attorney with specialized knowledge of the industry and accounting, as well as extensive experience in corporate litigation, was important.

As shown here, a high-value lawsuit against a company allows for a stable defense only when an attorney with expertise and practical experience is involved.

Drawing on extensive experience with corporate cases across various industries and a systematic response strategy, Daeryun LLC provides reasonable and professional legal services to protect the rights and interests of companies.

If you are facing difficulty due to a corporate dispute or lawsuit, we invite you to entrust your case at any time through a 🔗legal consultation appointment.