Supreme Court Decision 2017Da222368 Decided November 11, 2021 【Companyrelated Lawsuits】

【Main Issues and Holdings】
[1] Where a representative director neglects another director in violation of a duty
to monitor another director due to bad faith or negligence thereof even though there
exist reasonable grounds to doubt that the execution of business by another director
is illegal, whether the representative director is liable for damage caused to the
company resulting therefrom (affirmative)

[2] On the sole basis of the circumstance that a representative director and
directors in charge of each business of a large company have no choice but to
handle each professional field exclusively in accordance with the internal division of
affairs, whether they can be exonerated from a duty to monitor the execution of
business of other directors (negative in principle) and the form of an internal control
system that can be constructed in such a case
Where a representative director makes no effort to construct an internal control
system related thereto and make it work properly or does not prevent other directors,
etc. from carrying out unlawful execution of business by intentionally disregarding the
performance of the duty of inspection and supervision through the above system
even though a high legal risk is expected in light of the purpose or size of the
company, the nature of business thereof, regulations by the statutes that can be
applied thereto, etc., whether he/she can be seen to have neglected his/her duty to