12/17/2014

"Cause" Needed to Terminate During Probationary Period in Korea?

Korean Labor & Employment law is a labyrinth that the majority of our clients struggle with on a near daily basis.  For many foreign-capital invested companies, doing business in Korea, the major risk shall be from employees. 
  
One issue that a client has, recently, requested answered is if an employer needs "cause" to terminate an employee during a contractually imposed 3-month probationary period.  The answer is a resounding YES.

An employer must provide some reason to an employee for termination even under a contractually imposed probationary.

The Supreme Court has noted that:
"An employers have a broad right to cancel a contract. However, even in (the case of a probationary employee), the reasons of dismissal must be rational, objective and should be considered a proper decision based on social norms"
Supreme Court and lower court decisions have applied a lower standard than the typical "cause" standard applied by the Korean Courts.  However, the burden of proof is still, seemingly, on the employer to establish cause for termination of the employee even if the employee is within a three-month probabtionary period.

Other articles that may be of interest:
To learn more about IPG's Labor & Employment Law Team, please see:
IPG's Labor Law Team

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

The Korean Law Blog cited by the Washington Post on the Freedom of the Press in Korea

We are proud to note that The Korean Law Blog was cited by the Washington Post on an article discussing the Freedom of the Press in Korea.  The article quoted our translation and comments on a landmark Supreme Court case on the issue of the freedom of speech in Korea.

The Washington Post article may be found at: In South Korea, journalists fear a government clampdown on the press.

The article notes, in part, that:
"In the 27 years since democracy arrived here, South Korea has become home to rowdy election campaigns, a vibrant protest culture and dozens of daily newspapers traversing the full political spectrum. It’s a place where people don’t have to be asked twice for their opinions.
But now, analysts and journalists are expressing concern that a central tenet of democracy — a free press — is under threat.

President Park Geun-hye’s administration has launched an aggressive crackdown on media outlets that run reports it considers unfavorable, leading to a raft of domestic defamation cases and one high-profile lawsuit against a conservative Japanese journalist."
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

12/16/2014

Piercing the Corporate Veil in Korea: Suing the Shareholders of the Bankrupt Korean Company

It is possible, in some situations, for a shareholders to be sued for acts of a corporation.  The concept is called piercing the corporate veil.

The Supreme Court of Korea has noted that the corporate veil may be pierced and a shareholder may be sued:
"Where a company maintains the external appearance of a juristic person while it merely takes the form of a juristic person and, in substance, it is equivalent to other person's private enterprise behind the corporate veil or used without justifiable reason in order to circumvent the application of laws against the person behind the corporate veil, the denial of any responsibility of the person behind the corporate veil with respect to an action of the company, based on the ground that such person is a separate entity and the legal effect of such action is attributed only to the company, cannot be permitted. It cannot be allowed in light of justice and equity for the individual to abuse the corporate entity in violation of the principle of trust and good faith. Therefore, the company as well as the person behind the corporate veil must be responsible for the actions of the company."
The "test" imposed by the Korean Supreme Court has lead to Korea courts to look to, inter alia, whether:
  • Funds were commingled between a shareholder and the company; 
  • Corporate formalities were observed; 
  • All the assets were transferred to another company controlled by a dominate shareholder; 
  • Company failed to maintain an arm’s length relationship with a related entity or individuals;
  • Siphoning of corporate funds by a dominant shareholder occurred; 
  • Two or more companies acted as a single economic unit; 
  • Company falsified corporate records; and/or
  • Company is otherwise being utilized as a facade to shield a shareholder from liability. 
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

12/11/2014

CLIENT ALERT: Advice to the Press, Bloggers & Corporations Concerning Free Speech Protection in Korea

Cheong Wa Dae (Korea's Office of the President) has been instrumental in the filing of 13 lawsuits against media sources.  Six cases are still pending including cases against reporters/media from: Hankyoreh (Korean Liberal-leaning newspaper); Segye Ilbo (Korean Conservative-leaning newspaper); Chosun Ilbo (Korean Conservative-leaning newspaper); Sankei Shimbun (Japanese Conservative-leaning newspaper); CBS News; and A Sisa.

The majority of the cases were filed by officials at Cheong Wa Dae or by a conservative civil group that supports President Park Geun-hye.

Reporters, corporate PR departments and bloggers please be aware that, in most cases, the truth, in Korea, is not a defense to a criminal or civil defamation charge.

In these changing times, in Korea, it is best to consult with an attorney concerning any news you intend to report on concerning issues that Cheong Wa Dae considers vital.  Please obtain an attorney with significant experience in Constitutional Law and litigation.  Your corporate attorney may not be the best choice.

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

12/09/2014

Tax Audits in Korea

Tax Audits, in Korea, often led to extreme stress for our clients.  However, understanding the system and having an experienced tax accountant and sometimes a tax lawyer with experience in audits, normally, leads to a decent outcome from the National Tax Service of Korea.

Yes, you will, likely, be audited during your time doing business in Korea.  However, in all but the most flagrant of violations, the financial damage is, typically, minimal .

The NTS has a decent basic explanation of the audit procedure in English.  The pamphlet may be found at: Audits in Korea: NTS.  We will be writing more about the audit procedure in the near future.

The National Tax Service of Korea is an agency we are happy to say has a website with a great deal of useful information.  The NTS website may be found at: NTS.
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info@ipglegal.com

12/08/2014

Korean Year-End Tax Settlement: Common Errors & Omissions

The end of the year leads, typically, to two men visiting your house, one mythical and one that you may wish is mythical.

Yes, expect a visit from the Tax Man and not Santa this year.   No worries, with a little understanding and a decent tax accountant this year the Tax Man may be bringing you more than a mere lump of coal. 

Taxes in Korea are, often, less complicated than in the United States, Canada, Australia, New Zealand, Ireland, U.K. and the rest of the Western world, however, we see some common errors and omissions year-on-year caused by the following issues:
  1. Withholding Tax Assumptions If you are employed in Korea, your employer should have deducted income tax monthly based on, inter alia, the following assumptions:

    • Full-year Income Tax Assumption:
      Your company will assume that whenever you joined or resigned from employment, deduct income tax witholdings as if one full-year of service occurred.  Thus, if you work for eight months in a calendar year; and
    • No Individual Itemized Deduction Assumption:
      No other deductions for individual deductible items such as credit card deductions (e.g. KRW 5 mio.won deduction) are assumed by your employer.

      Because of these and other filing assumptions, often, it is possible to obtain a tax refund by either filing an amended return or properly filing your return in the first place.  We find that a large number of foreign employees are eligible for a refund.

      An easy manner of obtaining your refund is to hire a proactive tax accountant.  The accountant may file an amended return on your behalf. 

  2. Failure to File
    We see many cases of Korean and foreign SMEs not filing their taxes.  This, often, leads to penalties and inability to receive tax refunds.  Check with your employer if a tax filing has been made on your behalf.
  3. Careless Filing
    The largest reason for audits, missed deductions and other issues with the Tax Man is careless filing.  If you have a suspicion that the person filing the taxes in your office is less than capable - get an outside accountant to assist with this 
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by Joseph SY ZOH
jz@ipglegal.com or info@ipglegal.com

Accounting & Tax Consulting Services in Korea: JZ Associates

Most of the accounting needs at IPG are performed by JZ Associates.  The majority of our client's accounting needs are, also, peformed by this accounting firm. 

The firm performs for our client's Payroll Services, Statutory Bookkeeping Services, Corporate Secretarial Services, Tax Advisory Services & often assists us on Customs, Tax & other Administrative Audits. 

It is very difficult to find accountants, in Korea, that advise in a proactive manner.  Most are mere bookkeepers  - JZ Associates has a team of some of the most proactive accountants that we have met.

If you would like a consultation on a tax matter either contact me at the email below or contact JZ Accounting at jz@ipglegal.com.

Over the next couple of weeks, JZ Associates will be posting a weekly post on this blog concerning tax and basic business advice for foreigners doing business in Korea. 



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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

12/03/2014

Corporate Bankruptcy/Restructuring in Korea: The Line Begins Here (Korea's Chapter 7 & 11 Bankruptcy)

Corporate bankruptcy/insolvency procedure in Korea is similar, in many respects, to the U.S. Chapter 7 & Chapter 11 bankruptcy procedures with some significant differences.

Korean corporate insolvency structure is legislated via the Korean Debtor Rehabilitation and Bankruptcy Law (KDBRB).  The KDBRB replaced a convoluted and often conflicting myriad of laws in the form of the Corporate Rehabilitation, Composition and Bankruptcy Act.  On April 1, 2006 this new law became effective.

Bankruptcy Basics in Korea (Chapter 3 of Korean Debtor Rehabilitation and Bankruptcy Law)

Bankruptcy, in Korea, is a court-managed liquidation procedure.  The procedure is governed by Chapter 3 of the KDBRB.  The basic salient aspects of bankruptcy in Korea are:

  1. The bankruptcy procedure commences after a filing by either a debtor, creditor or group of creditors and determination by the court that a company is "bankrupt."  
  2. The holding of the court that a company is "bankrupt" suspends any execution actions based on unsecured claim of creditors.  
  3. The court will appoint a trustee and the trustee shall have the authority, under the law, to dispose of the assets of the Korean company to the creditors.  A "audit" may be performed via the court/audit commissioners.
  4. Claims are paid based on the proportionate share of the total debt and relevant statutory priorities.
  5. Secured creditors should act fast.  Secured creditors are the top priority and can execute claims prior to liquidation.
Rehabilitation Basics in Korea (Chapter 3 of Korean Debtor Rehabilitation and Bankruptcy Law)
Rehabilitation actions in Korea are governed by Chapter 2 of the KDBRB.  The rehabilitation procedure, in Korea, is a court-managed procedure that allows a company to continue operations and reduce its debt burden.
The major features of the rehabilitation procedure in Korea are:
  1. A rehabilitation procedure, inter alia, may be filed by a creditor holding claims equal to or greater to 10 percent of the paid-in capital or a shareholder holding 10 percent of the shares of the company.
  2. The court may grant, at or near the time of filing the matter to the court, a "preservation stay," thus, allowing the company to operate without the ability of present creditors to execute attachment or judgments.  
  3. After the court rules that a rehabilitation action is accepted by the court, the "preservation stay" is finalized until the completion of the matter. 
  4. The court will appoint a receiver to act as the representative for the proceedings.  The court, normally, appoints the representative director as the representative.  However, in cases where the representative director is deemed to have committed misconduct or malfeasance with regard to his duties to the company, another party may be appointed.
  5. The duties of the receiver includes the compiling of a list of claims.  The claim list is, typically, accepted by the court unless a creditor posses an argument that a claim is not present or should not be present on the creditor list. 

Please note that this is a very brief description of a process that is less than brief.

For more information on bankruptcy and rehabilitation in Korea please take a look at other articles on the Korean Law Blog including:
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

11/24/2014

Texas International Law Journal: Call For Papers (50th Anniversary Edition)

Great opportunity for scholars in Korea.  

ABOUT THE TEXAS INTERNATIONAL LAW JOURNAL (TILJ)

Founded in 1965, the Texas International Law Journal is a student edited and managed legal journal comprised of students of the University of Texas at Austin School of Law.

The Journal seeks to advance the study, practice, and awareness of international and comparative law. TILJ (ISSN: 0163-7479) is a 501 (c)(3) organization that publishes three issues of high quality secondary source material annually and hosts scholarly symposia as well as activities and online engagement committed to promoting international legal understanding and debate.

What: Call for Papers, Fifty Years of International Law Scholarship
Who: The Texas International Law Journal (“TILJ”) at The University of Texas School of Law Deadline: Paper submissions due January 1, 2015 for publication in fall of 2015.

The Texas International Law Journal will be celebrating its 50th year in 2015. As a part of this celebration, the Journal will be publishing a special 50th Anniversary Issue as part of Volume 50. This special issue will bridge the Journal’s storied history with its bright future.

In addition to republishing a few seminal articles from its past, the Journal is seeking authors who are leaders in their respective fields of international law to comment on the most significant developments in international law over the past fifty years while also offering their perspective about the most significant developments or issues arising in the near future.

Papers may address any topic in international or comparative law.

For more information on TILJ submission and editorial policies please see:
 www.tilj.org/submissions.