When there are certain fundamental corporate changes, appraisal rights provide dissenting shareholders the option to sell their shares back to the corporation for fair value. Examples of fundamental corporate changes are following; mergers, acquisition, divisions-mergers, consolidations, serious charter amendments, sales of substantially all the corporation"s assets and so on. The purpose of appraisal rights is to protect minority shareholders who do not want fundamental changes nor be forced to invest in new corporations against their free will.
If proposed corporate action for fundamental corporate changes requiring appraisal rights becomes effective, the corporation must give a notice to all shareholders who are entitled to assert appraisal rights before shareholders" meeting. However, in the Supreme Court"s case(대법원 2010. 7.22. 선고 2008다37193 판결), minority shareholders who held about 9% of the total corporation"s shares were deprived of their appraisal rights because the corporation missed to give them a notice about fundamental corporate changes requiring appraisal rights before shareholders" meeting. Superior court of New Jersey in Applestein v. United Board & Carton Corp., held that majority shareholders, no matter however overwhelming it may turn out to be, may not deprive appraisal rights of minority shareholders, no matter how few they may be in number. Like this decision, the dissenting shareholders have right to object to corporation"s plan and obtain appraisal right of their respective shares. To do so, the corporation should have given minority shareholders (no matter how few they may be in number) a notice about fundamental corporate changes requiring appraisal rights before shareholders" meeting.
This article focuses on discussing whether defects which deprived minority shareholders of appraisal rights make resolution at shareholders" meeting void or voidable. Part II reviews detail facts of the Supreme Court"s case to clarify the issues of this article. This part also overviews history and role of dissenter"s appraisal rights and finds out that shareholders in division-merger cases are able to have statutory appraisal rights like shareholders in merger cases. Part III addresses whether defects which deprived minority shareholders of appraisal rights make resolution at shareholders" meeting void or voidable under the Supreme Court"s case laws. Part IV discusses whether defects which deprived minority shareholders of appraisal rights make resolution at shareholders" meeting void or voidable under the U.S. case laws. Part V compares the Supreme Court"s case with another Supreme Court"s case(대법원 1993. 10. 12. 선고 92다28235, 28242 판결) which is factually similar to the former. Lastly, part VI, as a conclusion, proposes that defects which deprived minority shareholders of appraisal rights should make resolution at shareholders" meeting void to protect minority shareholders.