From an economic perspective, parent and subsidiary corporations typically constitute a single enterprise. Although their business lines may or may not be related to each other, the corporations are in many real senses integrated. A parent corporation typically has the power to control its subsidiary. As the majority or sole shareholder of the subsidiary (whether directly or indirectly), the parent selects the members of the subsidiary's board of directors. The board of the subsidiary commonly consists largely, and in many cases entirely, of persons who serve as officers and/or directors of the parent.
When the parent vote for the members of the subsidiary's board of directors, the voting rights are existed to the parent's board of directors. Parent corporation shareholders completely are exclude of dominating subsidiary. For protection of parent corporation shareholders, this articles proposed an alternatives. We need to introduce the so-called double derivative action for a parent corporation shareholder can sue against subsidiary corporation director.
The Seoul High Court's decision in August 22, 2003(2002 NA 13746) represents a significant landmark with respect to the issue of standing in shareholder derivative actions. The court held that the shareholders of a corporation have standing to file a double derivative action on behalf of one of the corporation's subsidiaries against the subsidiary's directors, even where they possess no shares of the subsidiary. But the Korean Supreme Court had judgement to deny a double derivative action(2003 Na 49221). This article suggested the legislation's necessity about double derivative action. A double derivative suit compensates the parent's shareholders. A recovery for the subsidiary indirectly benefits the parent corporation, which indirectly benefits the parent's shareholders. Without a double derivative suit, the harm to the subsidiary would ultimately fall on the parent's shareholders.