The Shareholders’ Meeting Was Held—So Why Wasn’t the Statutory Auditor Replaced?

– Issues in the Lawsuit to Invalidate or Revoke Resolutions of INFINITT Healthcare’s Extraordinary General Meeting of Shareholders

1. An Extraordinary General Meeting Was Held, but Shareholders’ Wishes Were Not Reflected

On June 23, 2025, an extraordinary general meeting of shareholders of INFINITT Healthcare (the “Company”) was held following a lawful request by minority shareholders to convene the meeting. The minority shareholders put forward proposals to remove the incumbent statutory auditor, Park Woo-chil, and appoint the applicant, Heo Kwon, as statutory auditor. To secure their passage, they submitted electronic proxies representing approximately 2.2 million shares. These proxies were valid electronic documents prepared in accordance with the Electronic Signature Act and other applicable laws.

However, the Company rejected the validity of all these proxies without legitimate grounds, excluding approximately 9% of the total voting rights from the count. As a result, the proposal to remove Park Woo-chil was rejected, and the proposal to appoint Heo Kwon never even reached a vote. Meanwhile, the Company’s proposed amendment to the articles of incorporation passed. The amendment imposed excessively stringent qualifications for statutory auditors, effectively restricting minority shareholders’ rights to nominate and appoint them.

This article examines, in turn, why the resolution approving the amendment to the articles of incorporation is unlawful and therefore invalid, and why the resolution rejecting the statutory auditor’s removal should be revoked on the grounds of serious procedural defects.

2. Why Is the Resolution Approving the Amendment to the Articles of Incorporation Invalid? – Agenda Item 1-3

A. The Substance of the Amendment Restricting Eligibility for Statutory Auditors

Agenda Item 1-3, approved at this extraordinary general meeting, substantially tightened the qualifications for statutory auditors through the articles of incorporation. Under the amended articles, anyone appointed as statutory auditor must have at least 1 year of experience working at an accounting firm and at least 3 years of experience as a statutory auditor of a listed company, and must not be engaged in the day-to-day operations of another corporation. On their face, these requirements may appear to be measures intended to ensure the auditor’s expertise and independence.

In practice, however, very few people meet all these requirements and would be willing to serve as a full-time statutory auditor for annual compensation of KRW 22 million. Ultimately, the amendment can only be seen as intended to effectively block minority shareholders from exercising their rights to appoint and remove statutory auditors.

B. An Unlawful Resolution Exceeding the Limits of Autonomy in Setting the Articles of Incorporation

Although the Commercial Act allows companies to determine their articles of incorporation autonomously within certain limits, the courts have consistently held that their provisions must not contravene laws or public order.

This amendment exceeds those limits. Article 542-12 of the Commercial Act limits major shareholders’ voting rights to 3% when appointing or removing statutory auditors, with the aim of ensuring minority shareholder participation. Yet this amendment made the qualifications for statutory auditors so stringent that it effectively foreclosed the possibility of minority shareholders proposing or appointing candidates.

This blocks minority shareholders’ rights in the name of autonomy in setting the articles of incorporation and is ultimately an unlawful resolution that exceeds the bounds permitted by law. It should therefore be denied legal effect.

3. Why Should the Resolution Rejecting the Statutory Auditor’s Removal Be Revoked? – Agenda Item 2

A. The Company’s Unlawful Blanket Exclusion of Minority Shareholders’ Electronic Proxies

Agenda Item 2, rejected at this extraordinary general meeting, proposed removing the incumbent statutory auditor, Park Woo-chil. The proposal was rejected on the grounds that the number of shares voted in favor by shareholders present did not meet the statutory voting threshold, but the process involved serious procedural defects.

The minority shareholders submitted electronic proxies representing approximately 2.2 million shares. These electronic documents contain electronic records of identity verification, electronic signatures, access IP addresses, and creation times, making it possible to verify how they were prepared and the intentions of the parties concerned. The electronic signature platform used is also an internationally security-certified system with a level of technical stability and reliability generally accepted by listed companies, providing ample evidence of the electronic documents’ authenticity.

Nevertheless, the Company invalidated all the proxies, and the proposal to remove the statutory auditor was rejected for failure to meet the required voting threshold. As grounds for invalidating the proxies, the Company cited ▲the absence of express provisions authorizing electronic proxies in the articles of incorporation or applicable laws, ▲the electronic signature platform’s lack of credibility, ▲the use of identical fonts or errors in entries, and ▲difficulties verifying authenticity. These arguments, however, are not only inconsistent with the facts but also contrary to the purpose of the relevant laws.

B. How Should the Invalidation of Electronic Proxies Be Assessed Legally?

Article 369(1) of the Commercial Act expressly provides that shareholders have one vote per share and may exercise their voting rights by proxy. Proxies are not limited to paper documents: the Framework Act on Electronic Documents and Transactions, the Electronic Signature Act, and other laws also permit electronic proxies. Indeed, electronic proxies are widely used by many listed companies, and denying their validity solely because the articles of incorporation contain no express provision for them cannot be legally justified.

The formal errors found in some electronic proxies were largely unavoidable during preparation, arising from a systemic problem: the shareholder register provided by the Company omitted key identifying information, such as resident registration numbers and dates of birth.

In addition, the Company and the minority shareholders had already agreed to invalidate certain proxies, including those completed by people who were not shareholders. Nevertheless, contrary to that agreement, the Company denied the validity of all electronic proxies, including those that were properly completed. This constitutes a serious defect in the resolution procedure, and the shareholder resolutions affected by it should therefore be revoked.

C. Why Is It Necessary to Revoke a Resolution Rejecting a Proposal?

One might ask whether revoking a resolution rejecting a proposal means that the proposal is immediately deemed to have passed. Revocation, however, is a mechanism for setting aside a resolution adopted through unlawful procedures. Although it does not turn rejection directly into approval, it restores the legal position so that the proposal can be considered again through proper procedures.

The courts, too, generally do not permit the revocation of resolutions rejecting proposals. As an exception, however, they allow revocation where the rejection is based on serious procedural illegality and has caused harm to shareholder rights that is difficult to remedy.

In this case, the Company unlawfully caused the proposal to remove the statutory auditor to be rejected. As a result, the proposal to appoint a statutory auditor, which the minority shareholders had intended to have considered at the extraordinary general meeting, was not even put forward. The resolution rejecting Agenda Item 2 should be revoked, if only to remedy this infringement of their rights.

4. Conclusion

This case concerns the Company’s denial, without legitimate grounds, of the validity of electronic proxies submitted by minority shareholders, and its pursuit of an amendment to the articles of incorporation that effectively blocked the appointment of a statutory auditor. Throughout this process, the wishes of minority shareholders were completely disregarded.

General meetings of shareholders are a key means for shareholders to oversee a company’s operations and demand accountable management. Their resolutions must therefore be procedurally fair and substantively legitimate. We hope this lawsuit will provide an opportunity to reaffirm that principle.