[비즈한국] Companies sometimes make decisions that are difficult to explain based solely on money. Understanding the underlying laws and systems can help explain the details. "Useful Business Laws (Al-Sseul-Bi-Beop)" introduces clues to help understand the flow of business.
In small or private companies, there are cases where the CEO or management withdraws and uses company money without much thought when the business relevance is ambiguous. Since using a company account as a personal safe is clearly not advisable, there are many cases where it is difficult to judge whether the action is wrong after hearing the surrounding circumstances.
The reason for this is that there are many instances where company funds are used for personal purposes, and many people do not consider this behavior a problem. In fact, some even retort, "A CEO doesn't usually spend their own money. If they can't even use company money, why run the company?" Because the economy is currently in a downturn, it is difficult for small businesses to turn a profit, and with insufficient resources to receive money in the form of dividends or salaries, many CEOs use company expenses to maintain their livelihoods.
Next, in small companies, the assets of the company and the assets of the founder often remain indistinguishable from the time of startup. For example, if a company is established and operated through the sacrifices of the founder—such as the company leasing the founder's real estate for free—the founder's awareness of the problem regarding using company assets for personal purposes tends to become dull.
Because the shareholders and management of small companies are often in close relationships, and because it is unlikely that anyone will raise an issue despite knowing about the withdrawal of company funds, the personal use of company money is often handled as if it were no big deal.
However, using company funds for personal use can lead to enormous legal liability. Just because it is a common practice in your circle and no one is raising an issue does not guarantee that there will be no problems in the future.
In one lower court ruling, it was stated: "If a CEO withdraws and uses a large amount of company funds for purposes other than company expenditures under the guise of temporary payments (ga-ji-geum), without any agreement on interest or repayment dates, and without going through proper legal procedures such as board resolutions, it exceeds the range of what is typically acceptable and is no different from arbitrarily lending or disposing of company funds for private use by abusing the CEO's position, thereby constituting embezzlement."
This means that if you cannot prove that the use of funds was for business purposes, did not go through internal company procedures, and applied more favorable lending conditions than other transactions, the crime of embezzlement is established even if the CEO went through the formality of classifying it as a temporary payment.
This logic applies equally to one-person companies where an individual holds 100% of the company's shares or family-owned businesses. The lower court ruling states, "Even in a one-person company where the shares of a corporation effectively belong to a single shareholder, the company and the shareholder are clearly separate legal entities, and the assets of a one-person company cannot be viewed as directly belonging to that single shareholder. Even if one is effectively a sole shareholder, the act of arbitrarily disposing of company funds constitutes embezzlement."
Such disputes usually start from internal conflicts within the company. This is because information about who used company funds, when, and for what purpose is known only to insiders, such as partners, employees, and management.
What is usually done as a matter of routine within a company often surfaces after management disputes, conflicts between partners, or reports from former employees, leading to investigations on charges of embezzlement and breach of trust. A partner might have verbally approved the use of company funds or raised no issues in the past, but once a management dispute occurs, they might compile all the records of past company fund usage and file a complaint for embezzlement.
Therefore, even when booked as a suspect, there are cases where one appeals their innocence, and while investigative agencies may show flexibility depending on the circumstances, they may also conduct very thorough investigations if they deem the potential for criticism to be high.
Even small companies undergo regular tax audits, so sometimes people collect simple receipts to disguise personal usage as company expenses, or even gather wedding invitations to process them as entertainment expenses. Investigative agencies view such proactive efforts to hide something negatively.
Looking at objective data, there are cases where traces of regular and periodic siphoning of company funds are found. "Card-kking" (illegal credit card cash-out) or "gift voucher-kking" involves repeatedly transacting with businesses whose substance is unclear. Since such transactions rarely occur just once, traces of regular, repetitive transactions with specific businesses for specific amounts remain. Investigative agencies consider such actions to be highly punishable.
If management withdraws company funds under the guise of an advance payment (ga-su-geum), even if they go through the process of repaying the advance or settling surpluses or deficits within a certain period, or even if they have a claim against the company, repetitive advance payment transactions can be misunderstood as embezzlement.
According to principles and rules, it is correct not to use company funds at all. However, if it has already happened and it becomes a problem, the wisest strategy might be to honestly explain the situation to the investigative agency. This can be done by explaining that at the time of use, all members, including shareholders, approved it, and that the expenditure was related to the company's business and operations to a certain extent.
Even with such an explanation, the subsequent developments vary from case to case. Sometimes, the situation gets bogged down if a disgruntled employee reports that they "had no choice but to cooperate with unauthorized use despite unreasonable orders," or if a business partner raises complaints about being asked for a rebate. Conversely, there are cases where investigative agencies show some leniency if they perceive that the motivation for the complaint was merely a private or emotional dispute between partners or management.
A lawyer is someone who crafts a response strategy based on the given facts and evidence, so they will construct a logical argument regardless of the situation. However, the difficulty of the case will vary greatly depending on the client's reputation or the kindness they have shown to others in the past, should something unexpected occur.