Fiduciary Duty Cases in Korea

In the Anglo-American law of corporation fiduciary duty is composed of duty of careand duty of loyalty. However, even though Korea introduced duty of loyalty undersection 382-3 of the KCA in 1988, case laws view it as only explaining duty of careadditionally and specifically. Therefore, basic structure of fiduciary duty under the KCAis quite different from that of the Anglo-American corporation law. In short, the scopeof fiduciary duty under the KCA is narrower than that of the Anglo-American law. Since there is no standard with respect to duty of care, the business judgment ruleplays an important role in deciding directors' negligence in performing their duties. Even though Korean Supreme Court cases use the word “business judgment rule”, theimplementation of the rule is quite different from the Anglo-American corporation lawin that the Korean Supreme Court reviews even the content of the business judgment. Also if a director violates laws and regulations with slight negligence, the businessjudgment rule cannot apply. In addition, the presumption which the business judgmentrule of the USA recognizes is not allowed in Korea. If a director's violation of duty ofcare is established by a plaintiff's proof of director's negligence, it may not easy for adirector to escape the liability by proving his or her absence of negligence. The Korean Supreme Court clarified the standards of business judgment rule, inSupreme Court Decision 2006Da33609, decided on July 26, 2007. The Court held thatstandard of reasonableness was applied to the process of business judgment, andstandard of rationality was applied to the content of business judgment. It alsoarticulated factors to consider when collecting, researching and reviewing necessaryinformation in case of providing financial support to affiliated companies. However, inorder to enhance the predictability of business judgment decision, it needs to developmore specific and patterned standards of duty of care.