Debtor's Liability to New Owner after Transfer of Business and Trade Name

A developer recently contacted me concerning a dispute with a supplier of building materials. The developer purchased building materials from a supplier with payment to be forwarded 30-days after receipt of the materials. This is a common practice when a supplier has a long-term relationship with a developer, provides a consistent flow of supplies to a developer, and the developer is solvent.

Here comes the problem. The supplier was sold and the business and trade name was transferred to a new owner. The problem arose when the developer paid the old owner, who the manufacturer believed was still the owner of the supplier, for the building materials.

The developer paid the old owner at the business office of the supply business without noticing any difference in ownership and without being informed by the old owner of the change of circumstances.

As expected, the new owner charged the client for the supplies, since the new owner claims that the old owner, through the sales contracts, transferred all rights including the credits for the shipped supplies to the new owner.

The old owner is nowhere to be found and likely collected from multiple creditors leaving the new owner with credits that were reflected in the sale price of the supply business.

Article 25 of the Korean Commercial Code states that:

(1) A trade name may be transferred on in cases where business is discontinued or it is transferred together with the business.
(2) Transfer of a trade name shall not be effective as to third persons unless it has been registered.

The business trade name was properly transferred and registered by the new owner under Article 25.

However, Article 43 states that:

. . . a performance made to the transferee in respect of any obligation that has arisen from the business of the transferor shall be valid, in cases where the obligor effecting the performance has acted in good faith and without gross negligence.

Therefore, since the old owner did not inform the developer of the transfer, the payment was made at the companies business address - the developer is not liable to to the supplier.

To clarify for the author of another law blog who seemed a little confused - The transferee-old owner was paid by the obligor-developer and acted in good faith and without gross negligence, since the developer paid at the company office and was never informed of the transfer -thus the developer is not liable.

The converse and what the court will look to is the bad faith of the old owner. The deceptive practice of taking the money at the business office of the company will alleviate the burden on the plaintiff to prove good faith. I was trying to state this in my former post, but I assumed a level of understanding that I should have not assumed.

A letter from a law firm explaining the law on the matter would usually settle these types of disputes and often the business relationship can still continue.

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SeanHayes@ipglegal.com

Korean Company Law

Appeared in the Korea Times on Feb. 29, 2008
by Sean Hayes (Host of Blog)

Dear Mr. Sean Hayes:We are considering opening a subsidiary in Korea. We are a NASDAQ listed company that will enter the Korean market in this coming year. Our first question is what corporate forms are allowed in Korea? We would also like to know what corporate form is the most common for Korean companies and foreign companies in our shoes? Michael in the United States.

Dear Michael, under the Korean Commercial Code four basic corporate entities are available. Part III of the Korean Commercial Code details the four corporate entities available in South Korea. It must be noted that most incorporated businesses in Korea chose the ``jusik hoesa'' corporate form.

1. Jusik Hoesa (Stock Company)
Jusik Hoesa is the only form of corporate entity that is allowed to publicly issue shares. The vast majority of corporations in Korea chose the Jusik Hoesa corporate form. It is also the most common corporate form that foreign companies chose for their subsidiaries.

2. Yuhan Hoesa (Limited Liability Company)
Yunhan Hoesa is a closely held company that is prohibited from having more than 50 shareholders. In recent years a few foreign companies have chosen the Yuhan Hoesa, however, most foreign companies are advised and will form a Jusik Haesa. A few companies, recently, have chosen this form because of possible U.S. tax benefits.

3. Hapja Hoesa (Limited Partnership)
In a Hapja Hoesa one or more partners may have unlimited liability and one or more partners may maintain limited liability. The entity, as all incorporated entities, is responsible for corporate taxes.

4. Hapmyeong Hoesa (Partnership)
In a Hapmyeong Hoesa two or more partners form the partnership. The partners must maintain unlimited liability. The entity, as all incorporated entities, is responsible for corporate taxes.

Aug. 26, 2011 update: The Korean Commercial Code has been amended. An update to this article can be found at: Establishing a Company in Korea

SeanHayes@ipglegal.com

Elimination of Automatic Acquisition of a Patent Attorney License for Korean Lawyers

The Legal Times reports, in Korean, that attorneys may no longer be able to use the title "Patent Attorney," but attorneys will still be able to perform patent attorney work if a bill pending at the Legislation Judiciary Committee passes.

The Legal Times reports that:

After a revised bill of the Tax Accountant Act, which eliminates automatic acquisition of a tax accountant license for lawyers, was presented to the Legislation Judiciary Committee, a revised bill of the Patent Attorney Act, having the same contents as the Tax Accountant Act was passed by the Commerce, Industry and Energy Committee and now is waiting deliberation at the Legislation Judiciary Committee.

Especially, because the new president of the Korea Patent Attorneys Association, who was elected on Feb 20. 2008, advocated the bills, patent attorneys are expecting that they are likely to pass.

On the other hand, lawyers understand that "it is reasonable to grant licenses of tax accountants and patent attorneys to lawyers" according to the Act 3 on the Attorney Law. Therefore they are anticipating that even though these bills pass, they will have no effect on lawyers' work.

A person with the Korea Patent Attorneys Association said that "Although the field of lawyers' work won't be curtailed on the basis of the interpretation by the Ministry of Justice, lawyers won't be able to act using a title of patent attorney anymore. And nobody knows whether or not the court would admit the interpretation by the Ministry of Justice."

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SeanHayes@ipglegal.com

Female Judges on the Rise

67 of the 96 judges appointed this year are woman. Woman judges now comprise 21.5% of the total judiciary.

The selection of judges is determined by averaging the judicial exam score with the grade point average at the Judicial Research and Training Institute (2 year training program). The highest grades are able to be offered jobs as judges and the second highest as prosecutors. Most Korean judges and prosecutors begin their service in their late 20s.

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SeanHayes@ipglegal.com

Transfer Pricing Reform In Korea

A U.S. NASDAQ listed company requested information concerning a specific transfer price scheme, amongst other issues, in Korea. The company has recently decided to enter the Korean market after having successfully entered the Japanese and other Asian markets.

For obvious reasons, I can’t answer the question here, but a brief description of recent amendments to the law may be of interest to those that have considered global transfer price issues.

The transfer pricing rules underwent a major change a couple of the years back. In 2006, the Law for the Coordination of International Tax Affairs (LCITA) and a Presidential Enforcement Decree were amended.

The Law and Decree were amended in order to codify the “substance over form” rule, encourage investment overseas by Korean companies, improve the application of the “arm’s length principle,” to discourage treaty shopping, and to clarify the numerous ambiguities that have developed, since the enactment of the original law in January 1, 2006.

The most notable changes are:

1. Substance over Form
The first major change was the codification of the substance over form rule. It seemed that before the change the National Tax Service employed the substance over form rule for the interpretation of international transactions and treaties. This amendment codifies this changed practice.

2. Berry-ratio Method
The amendment recognizes the Berry-ratio method as having the same priority as the transactional-net-margin method and the profit split method..

3. Cost Contribution Arrangement (CCA)
Cost contributions, according to the law, must reflect the expect benefit. The amended law, however, allows adjustments to cost contributions when the CCA is held to be in violation of the arm’s length principle.

4. Rollback of Unilateral APAs.
Rollbacks are now available for unilateral and bilateral advance price agreements for the length of the statutory corporate tax amendment period of three years.

5. Offset of Transfer Prices
Non-arm’s length transfer prices can be offset if the transactions occur in the same taxable years, are performed in the same overseas office, or there is an advance agreement.

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SeanHayes@ipglegal.com

Bills Pending at National Assembly Concerning the Relationship between Lawyers and Tax Accountants

There are a couple of pending bills concerning the relationship between lawyers and tax accountants at the National Assembly. One bills concerns allowing lawyers to obtain tax accountant licenses and the second bill concerns allowing tax accountants to jointly represent clients with lawyers.

The first bill proposed by Lee Sang Min, a assemblyman in the United New Democratic Party, was transferred to the Legislation Judiciary Committee through the Finance and Economy Committee. Deliberations have begun on the bill at an Investigative Committee.

The bill is likely to pass. The bill was proposed by an attorney and received no objections at the Legislation Judiciary Committee on February 13, 2008. However, the Korean Bar Association has noted that the bill may cause confusion, in that some of the public may believe that attorneys are not able to represent clients in these matters even though the Attorney Act allows lawyers to represent clients in tax matters. I suspect this will be the major sticking point for the bill, but since it is proposed by an attorney it is likely to pass.

The second bill, concerning allowing tax accountants to jointly represent clients with attorneys, will have an uphill battle. The Korean Bar has already expressed its intention to oppose the bill. The Korean Bar Association expressed in a written opinion to the Finance and Economy Committee and the Ministry of Justice that "In a view that lawyers has as much specialty as tax accountants and jobs similar to lawyers should be eliminated because there would be many specialized lawyers graduating from law schools, the bill is incompatible with future's tendencies . . .As following the bills logic, it means that we should permit all professional specialists to represent clients in lawsuits, which is nonsense. Moreover, clients would bear added economical burdens since they should appoint both a lawyer and a tax accountant at the same time."

It seems, however, that the real concern is that the Korean Bar Association, as expressed in their opinion, fears “that lawyers would be assigned by tax accountants who made reliable relationship with clients before and lawyers assigned by tax accountants couldn't help performing only in a way tax accountants want. This would bring about a result different from the purpose of the bill which lets tax accountants just assist lawyers assigned by clients.”
I will update the reader if and when the bills pass HERE.

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SeanHayes@ipglegal.com

Microsft Loss to Korean Professor at Seoul High Court

Microsoft lost a case to a Korean professor of the Korean Aerospace University. Microsoft was held to have violated part of a patent held by Professor Lee Keung-hae.

The patent Prof. Lee prevailed on was for a program that automatically switches characters from Korean to English in Microsoft Word. I despise this function in Word, since because of my poor typing skills I often miss type and the program often switches from Korean to English or English to Korean.

The damages in the case have not yet been announced.

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SeanHayes@ipglegal.com

Bank Antipathy To Foreigners

This article appeared in the Korea Times on Feb. 20, 2008.

By Sean Hayes

President-elect Lee Myung-bak's plan to make Korea a more hospitable place for foreigners is a welcome development for many of us long-term residents of Korea; however, the plan will fail unless private enterprises follow suit and realize that foreigners play an integral part in the Korean economy.

I have been writing legal Q&A column for this and other papers for over five years. I receive more complaints and questions about the banking sector than any other area combined. The complaints are real and the questions are because of the banks seeming incapability of understanding and explaining bank rules and government regulations.

Since I came to Korea more than 10 years ago, I have seen little development in the consumer banking sector and my bank, Kookmin Bank, has even deteriorated.

Bank employees are ill informed, incapable of performing even the most rudimentary transactions in an efficient manner and are too often willing to blame most of their missteps on the government. Senior management is unwilling to provide even the most basic services to foreigners in a convenient and consistent fashion.

For example, many foreigners, including myself are plagued with the problem of not being able to use our Korean ATM cards in foreign countries even though the card states, in Korean, that the card can be used in foreign nations. I was hit by this new bank rule a few years back when I went to the Philippines to present a speech. I brought my bankcard, a few hundred thousand Korean won, and the understanding that since I used the same card in the Philippines in the past that the Kookmin card would work.

Too my surprise, the card didn't work, the airport banks wouldn't exchange Korean money, and Philippine taxi drivers are so kind that they even take passengers without money. Luckily, the hotel was generous enough to overcharge my credit card and give me a cash refund for the overcharged amount and a former student was kind enough to send me money by Western Union. Obviously, this caused a good deal of embarrassment and a great deal of anxiety.

When I returned to Korea I confronted the bank manager at my local bank. He, in a not so kind manner, explained that this was a new Korean government regulation. I informed him that he was full of hot air. Korea has no regulation prohibiting foreigners from using international ATM cards, but the nation does prohibit foreigners from withdrawing more than $10,000 per exit from the country. Kookmin and other banks just feel its easier to block foreigners from using cards, than to create a system that prohibits foreigners from withdrawing more than $10,000 per exit from the country.

I was also a little alarmed by my bank a few weeks ago when I went to the bank to transfer funds overseas. I was given a form, in Korean, that stated that I must inform the bank of my reason for transferring the money. The form has multiple boxes and I was forced to pick one if I wanted to send money. I was also informed that I could only send money from this specific branch. I was lucky enough to be able to read and understand the form, but many foreigners would not have been.

I asked the bank to translate the form and get the form back to me, but three weeks later I never heard a word from the bank. I assume, as usual, Kookmin Bank employees are still pointing to a box and simply telling foreigners to check here, sign here, and initial here without foreigners even knowing what they are signing.

The Korean bank industry and other service industries will never improve until they realize that foreigners are a needed component for the future development of the local economy. This realization should be pushed on private industries by the new administration.

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SeanHayes@ipglegal.com

Korean Corporate Forms under the Korean Commerical Code

There are four basic corporate entities under the Korean Commercial Code.

1. Chusik Hoesa (Joint Stock Company)
Only form of corporate entity that is allowed to publicly issue shares. An article will be posted on the specifics of forming a Chusik Hoesa in the next couple of weeks and a link will appear HERE when the article is completed.

2. Yuhan Hoesa (Limited Liability Company)
A closely held company that is prohibited from having more than 50 shareholders. In recent years a few foreign companies have chosen the Yuhan Hoesa, however, most foreign companies are advised and will form a Chusik Hoesa. A few companies, recently, have chosen this form because of possible U.S. tax benefits. I will explain the tax benefits in a follow-up article. A link will appear HERE when the article is completed.

3. Hapja Hoesa (Limited Partnership)
One or more partners may have unlimited liability and one or more partner may maintain limited liability. The entity is responsible for corporate taxes.

4. Hapmyung Hoesa (Partnership)
Must be formed by two or more partners and each partner maintains unlimited liability. The entity is responsible for corporate taxes.

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SeanHayes@ipglegal.com

New Minister of Justice

Korean President-elect Lee Myung Bak nominated Kim Kyung-Han as the new Minister of Justice. Mr. Kim served as the Prosecutor General at the Supreme Public Prosecitors' Office and Vice-Minister at the Ministry of Justice.

Mr. Kim wrote and interesting law review article entitled: "The Study on the Evaluation of the Korean Government Reform Performance: Focusing to the Introduction of New Management Programs in the Kim Dae Jung Administration (김대중정부의 신관리기법 도입을 중심으로)"
The article is critical of the performance-based reform measures implemented by the Kim Dae Jung Admininstration.

The article is published in Korean in the 서울행정학회 (2005/02).

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SeanHayes@ipglegal.com

Report on Korea-US FTA by Peterson Institute

The Peterson Institute, the most influential nonpartisan think tank dedicated to international economics, published an excellent work assessing the Korea-U.S Free Trade Agreement. All interested in Kor-US FTA should read this report.

The summary of the report notes:

The Korea-United States Free Trade Agreement (KORUS FTA) opens up substantial new opportunities for bilateral trade and investment in goods and services and promotes important foreign policy interests of both countries.
The FTA quickly removes most tariff barriers to auto trade and substantially reduces tax and regulatory burdens that impede sales of US cars in Korea; improves access to the Korean market for a wide range of US farm products; and opens up the Korean services market in key areas such as financial services, insurance, express delivery, and legal and accounting services. onetheless the ratification of the KORUS FTA has been controversial.
In the United States attention has focused on both the auto sector, which accounts for almost one-quarter of bilateral trade and a large share of the US trade deficit with Korea, and Korean restrictions on US beef imports due to bovine spongiform encephalopathy (BSE) concerns. Several automakers and auto unions have opposed the deal, and the Democratic leadership in the US House of Representatives has demanded that the auto provisions be recast.
In the US Senate, the resolution of the beef problem-which is now being addressed by Korean regulators-is a prerequisite to passage of implementing legislation. No clear timetable exists for the congressional vote and action may be deferred until 2008.
The Bush administration will have to respond constructively to Democratic concerns about the FTA before the deal can be ratified and should consider new federal programs to help promote the competitiveness of US automakers. Doing so should attract a substantial minority of Democrats in the House, along with the majority of Republicans, to support the FTA.
The stakes-in terms of both US economic and security interests in East Asia-are too great, and the costs too high, to reject the pact or defer a decision.

The complete report can be found HERE.

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SeanHayes@ipglegal.com

Korean Labor Law Checklist for Employers and Employees

The Korean Ministry of Labor created this list with revisions by Sean Hayes and IPG.  I will update the list periodically. The checklist is intended for all employers that employ five or more workers.

The list contains many generalizations, thus, don't take this as the end all list.  I suggest, also, clicking on the label to the right entitled Korean Employment Law.
This note that Korea's Labor Law is evolving rapidly, thus, this list may not reflect recent changes.  

KOREAN LABOR STANDARDS ACT

• A Korean company should conclude a labor contract with every worker whom it directly employs.
• An employer, when concluding a labor contract, should clearly state terms of employment prescribed by the act. (Fine up to 5 million Won)
• An employer ordinarily, employing ten workers or more, should prepare rules of employment and submit them to the Ministry of Labor. (Civil fine up to 5 million Won)
• An employer ordinarily, employing ten workers or more, should keep workers informed of the rules of employment by posting or keeping the rules where workers can have free access to them. (Civil fine up to 5 million Won)
• Wages should be paid at least once per month on a fixed day. (Imprisonment up to 3 years or fine up to 20 million Won)
• If a worker retires, an employer should pay the wages, compensation, and other money or valuables within 14 days. (Imprisonment up to 3 years or fine up to 20 million Won)
• An employer should preserve a register of workers and other important documents regarding labor contracts for three years. (Civil fine up to 5 million Won)
• An employer should additionally pay fifty percent or more of the ordinary wages for overtime work, night work (work provided from 10 p.m. to 6 a.m.) or holiday work. (Imprisonment up to 3 years or fine up to 20 million Won)
• Over-time work is done based on agreement with workers. Overtime should not exceed 12 hours per week. (Imprisonment up to 2 years or fine up to 10 million Won)
• An employer should not require a pregnant worker and a worker aged less than 18 years old work from 10 P.M to 6 A.M. and on holidays. (Imprisonment up to 2 years or fine up to 10 million Won)
• For each minor under 18, an employer should keep, in the workplace, a certificate proving the child's family relationship and the written consent of the child's parent or guardian. (Civil fine up to 5 million Won)
• An employer should allow a worker more than one-day holiday with pay per week on the average.  (Imprisonment up to 2 years or fine up to 10 million Won)
• An employer should grant 15 days' paid leave to a worker who has registered more than 80 percent of attendance during one year. After the first year of service, an employer should grant one day's paid leave for each two years of consecutive service in addition to the leave for the first year. (Imprisonment up to 2 years or fine up to 10 million Won)
• An employer should grant one day's paid leave per month to a worker whose consecutive service period is shorter than one year, if the worker has offered work without absence throughout a month. (Imprisonment up to 2 years or fine up to 10 million Won)
• Working hours per week should not exceed 40 (or 44) hours excluding break hours. (Imprisonment up to 2 years or fine up to 10 million Won)
• Working hours of a person aged between 15 and 18 should not exceed seven hours per day and 40 hours per week. (Imprisonment up to 2 years or fine up to 10 million Won)
• An employer should grant a pregnant female worker 90 days of maternity leave before and after childbirth and should allocate 45 days or more after the childbirth. The first 60 days of leave is paid. (Imprisonment up to 2 years or fine up to 10 million Won)
• Employer should not dismiss any worker during a period of temporary interruption of work for medical treatment of an occupational injury or disease and within 30 days thereafter and any female worker before and after childbirth during a period of maternity leave and within 30 days thereafter. (Imprisonment up to 5 years or fine up to 30 million Won)
• An employer should give advance notice to a worker at least thirty days before dismissal. If the notice is not given thirty days before dismissal, ordinary wages of thirty days or more should be paid to the worker in lieu of notice. (Imprisonment up to 2 years or fine up to 10 million Won)
• If an employer intends to dismiss a worker, the employer should notify the worker of the reasons for and day of dismissal in writing.

EMPLOYEE RETIREMENT BENEFIT SECURITY ACT OF KOREA

• An employer should pay workers who retire 30 days or more of average wages for each year of consecutive service as severance pay.
  (Imprisonment up to 3 years or fine up to 20 million Won)
• If an employer intends to choose a type of retirement benefit scheme or change the chosen type into a different one, the employer, if there is a labor union composed of the majority of worker, should obtain the consent of the labor union, and if there is no such labor union, should obtain the consent of the majority of workers. If an employer intends to change the contents of a retirement benefit scheme, the employer should consider the opinion of workers in the same way as above. (Fine up to 5 million Won)

MINIMUM WAGE ACT OF KOREA

• An employer should pay a worker a wage not less than minimum wage.
  (Imprisonment up to 3 years or fine up to 20 million Won)
• An employer should keep workers informed of the minimum wage by posting it where workers will have free access or by other appropriate means. (Civil fine up to 1 million Won)

EQUAL EMPLOYMENT ACT OF KOREA

• An employer, senior workers, or other workers shall not engage in sexual harassment at work. (Civil fine up to 10 million Won)
• An employer shall conduct educational programs in order to prevent sexual harassment at least once a year pursuant to act. (Civil fine up to 3 million Won)
• An employer shall not discriminate, in recruitment and hiring, based on gender. When recruiting and hiring female workers, an employer should not present nor demand certain physical conditions such as appearance, height, weight, etc., unmarried status, and other conditions determined by the ordinance of the Ministry of Labor which are not required to perform a certain job for which the employer intends to recruit or hire. (Fine up to 5 million Won)
• An employer should keep documents related to recruitment and hiring as determined by the act for 3 years. (Civil fine up to 3 million Won)
• An employer should pay an equal wage for work of equal value in the same business regardless of gender. (Imprisonment up to 3 years or fine up to 20 million Won)
• An employer should not discriminate against men or women in managing welfare programs, training, deployment, and promotion. (Fine up to 5 million Won)
• An employer should not discriminate against men or women with respect to retirement age, retirement and dismissal. (Imprisonment up to 5 years or fine up to 30 million Won)

ACT ON THE PROTECTION OF DISPATCHED WORKERS OF KOREA

• An employer should not use a dispatched worker who is offered by a person who did not acquire the permission for worker dispatch undertakings from the Ministry of Labor or who violated restrictions on employment and reasons for worker dispatch as prescribed by the act. (Imprisonment up to 3 years or fine up to 20 million)
• The length of a dispatch period of a dispatched worker should not exceed two years in total. (Imprisonment up to 3 years or fine up to 20 million Won)
• An employer should directly employ a dispatched worker if the employer uses the worker in excess of two years. (Civil fine up to 30 million Won)
• An employer should selects a person in charge of the management of using dispatched workers, prepare a ledger for management of using dispatched workers and preserve it for three years. (Civil fine up to 3 million Won)

ACT ON THE PROTECTION OF FIXED-TERM AND PART-TIME EMPLOYEES OF KOREA

• When an employer drafts a labor contract with fixed-term or part-time employees, the employer should clearly state in writing matters determined by the act. (contract period, working and rest hours, wages, holidays and leave, place of work, jobs to do, and etc) (Civil fine up to 5 million Won)
• An employer should hire fixed-term employees for a period not exceeding two years.
• If an employer hires fixed-term employees for more than two years, the fixed-term employees are considered as workers who have made a labor contract with no fixed-term.

THE PROMOTION OF WORKER PARTICIPATION AND COOPERATION ACT OF KOREA

• A Korean company with 30 or more permanent workers should establish a labor-management council, draw up bylaws governing the organization and operation of the council, and submit related documents to the Ministry of Labor. (Failure to establish the council: Fine up to 10 million Won) (Failure to submit the bylaws:Civil fine up to 2 million Won)
• A labor-management council should be composed of an equal number of members representing the employer and the workers, respectively, the number of which is not less than 3 nor more than 10. There should be a chairman and a secretary for the council.
• A labor-management council should hold meetings once every three months. The council should draw up and keep minutes of its meetings.
  (Failure to hold meetings:Civil fine up to 2 million Won)
• A company with 30 or more permanent workers should have grievance handling members consisting of three members or less representing labor and management. (Civil fine up to 2 million Won)
• A grievance handling members should draw up and keep a ledger relating to the receipt and handling of grievances and should preserve the ledger for one year.
• An employer should seek resolution of the labor-management council on matters determined by Act. The council should notify workers, without delay, on matters on which resolutions are made. (Failure to seek the resolution: Fine up to 10 million Won)
• The hours spent by a member to attend the labor-management council and engage in activities directly related thereto are regarded as hours devoted to work.

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Sean may be contacted at: SeanHayes@ipglegal.com
http://www.ipglegal.com/

Sailing in Korea

My yacht club, 700 Yacht Club, which I am the vice-commodor of, is commencing an interesting project. We will be building four i550 sportsboats.

If anyone is interested in sailing or knows how to build boats, please contact me and we can discuss a membership. The membership fee is reasonable for most (W3.8mil/year) and includes sailing lessons and the use of the boats. Please see the website for more details.

The yacht club presently has a 33-foot cat, four 21-foot racing trimarans, a 26-foot yamaha, a 25-foot Hunter, a Campion 545i powerboat, and the yacht clubs racing team has an Admiralty 30. Oh, I almost forgot our two dingies which are often used, but never appreciated.



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SeanHayes@ipglegal.com

Law School Plan May Be Delayed

I was photographed, in what I have been told is the "worst hate in the world," protesting against the Ministry of Justices selection and quota for law schools next to the President of Kookmin University. They forced me to hold up the English sign, but I was not forced to wear the hat.

A number of universities have formed a union to protest against the plan, some schools are to file a suit at the Constitutional Court, Korea University has threatened to withdrawal its application because the number of students allowed is too small, many students have demonstrated, and numerous articles have been written blasting the plan.

It is probable that the plan will be delayed and the new administration will increase the cap. It will be interesting to see what the Constitutional Court does when a case is filed.

I wrote an article for the Korea Times on the unconstitutionality of a lawyer cap. The article can be found on this blog and HERE.

Many other article appear on this blog concerning this issue. Korea Times also has many good articles on the issue.

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SeanHayes@ipglegal.com

Deceptive Practices Under Korean Commercial Code

This article appeared in the Korea Times on Feb. 15, 2008.


Deceptive Practices Under Commercial Code

Dear Professor Sean Hayes:

I lent my name to an ex-friend so he could open up a bar in Seoul. My friend is a non-Korean and I am Korean. I met this man when I was an exchange student. He thought it would be easier for him to open the business under my name. However, the business failed and now he owes a sizable amount of money to food, spirits, beer and other vendors. A food vendor has already sued me and I expect to be sued by others. My ex-friend is nowhere to be found and it seems that when he knew he was going to go under he ordered a large amount of products from multiple vendors and skipped town. Am I responsible for the debt? What can I do? Potentially Broke in Seoul.


Dear Potentially Broke:

Article 23 of the Korean Commercial Code considers allowing one to use another name to open a business as a practice considered to be engaged in for an unfair business practice.

Thus, Article 24 of the Korean Commercial Act provides protection for those that have been deceived by the Act. Article 24 states that: "A person, who has allowed another person to carry on business using his name or trade name, shall be liable jointly and severally with such other person to effect performance in respect of any obligation arising from a transaction in favor of a third person who has effected such transaction in the belief that such other person was the proprietor of the business."

Thus, the creditors of the business have a right to make a claim against you for unpaid debts.

However, the Supreme Court (91 Da 18309 ) ruled that the Article 24 was intended to impose liability on name lenders only in order to protect innocent third parties who effected the transaction because of the deception.

The Supreme Court (2000 Da 10512), however, noted that it is the burden of the lender of the name to affirmatively prove that the creditor knew that the name was lent or the creditor was reckless in not knowing that the name was lent.

Thus, if you can prove that the creditors actually knew or were reckless in not knowing that you lent your name, then you will not be held responsible to pay the debt. However, if you fail to prove the aforementioned then the creditors will likely prevail in the suit.

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SeanHayes@ipglegal.com

Misunderstanding of Suspension of Sentence

There are many misconceptions concerning suspension of the execution of sentences in Korea.

Today, Brendan Carr, an American attorney working for a medium-sized law firm, noted on his blog that in the first jury trial case a 4-year sentence was suspended. It is impossible to suspend a 4-year sentence.

Criminal Act
Article 62 (Requisites for Suspension of Execution of Sentence)
(1) In cases where a sentence of imprisonment or imprisonment without prison labor for not more than three years is to be imposed and there are extenuating circumstances taking account of the provision of Article 51, the execution of the sentence may be suspended for a period of not less than one year but not more than five years . . .

For example, if a mandatory minimum sentence is 10 years and the judge uses his discretionary mitigation (1/2 of min. sentence), then the sentence is 5 years and the execution of the sentence can't be suspended. In general, for completed crime two mitigations are possible, however, the second mitigation is next to impossible to obtain. For an attempted crime three mitigations are possible, but the final mitigation is next to impossible. Each mitigation is 1/2 half the mandatory minimum sentence. Thus, 60 months -30 months -15 months.

In general, when a sentence is three years or under the sentence is suspended if a defendant settles with the victim or if extenuating circumstance exist.

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SeanHayes@ipglegal.com

Dismissal of Workers for Operational Emergency Declared Invalid under Korea Labor Standards Act.

Incheon District Court (2007 KaHap 4420) recently ruled that the dismissal of 5 workers for an "operational emergency" is in violation of the Labor Standards Act, since "In order for an employer to dismiss a worker due to operational reasons, there should be and emergency in operations. But defendant has maintained profit since 2000 and only had a loss in 2006." The Court also noted that employer did not have debt and was sufficiently solvent.

The employer was ordered to pay the defendant for wages "which they could be paid if continuing to work. So the plaintiff should pay them for wages from the next day after the dismissal to the reappointed day."

Here is a general article I wrote for the Korea Times last year that may be useful when an employer dismisses an employee or when an employee is dismissed. Ahnse Law Offices successfully represented the employee asking the question in the article below.

Corporate Downsizing the Korean Way

Lex Pro Bono Column
Korea Times May 18, 2007


Dear Professor Sean Hayes, I am working for a company that has notified us that they will layoff around 25 workers. I heard that under the Korean Labor Law an employer cannot dismiss employees without just cause. Is this true and what can I do to protect my job? Worried in Yeouido.

Dear Worried, the Korean Labor Law provides some protection from dismissal by employers, but provides little protection for employees that are dismissed because of serious economic difficulties facing an employer.

Korean Labor Law is codified in the Korean Labor Standards Act (LSA). The LSA is a statute that dictates the working standards for most workplaces. The statute is vague and most of its language has been developed through case law.

Article 30 and 31 of the LSA assist in guaranteeing employment security. The LSA states that an employee under contract cannot be terminated unless "just cause" exists for the termination. Case law has established that just cause includes "fault directly attributable to the employee" and "urgent managerial necessity."

So accordingly, employers that intend to lay off workers must assert that an "urgent managerial necessity" exists. Urgent managerial necessity includes mergers and acquisitions, business relocations and most serious economic difficulties.

However, the LSA provides some protection even when an urgent managerial necessity exists. LSA 31 (2) states that the employer must "make every effort" to avoid layoffs.

The (Korean) Supreme Court has noted that to make every effort means that an employer may need to offer early retirement packages, reduce working hours, obtain labor concessions, and institute a freeze on hiring before being able to satisfy this requirement.

The LSA also provides that an employer must select those to be laid off in a "reasonable and fair way." For instance, laying off only women or elder employees will immediately raise red flags.

The LSA also requires that after a layoff occurs an employer who wishes to increase the number of workers within two years of the layoff must give "preferential treatment" to former employees.

If you believe that an employer is terminating employees in violation of the LSA an employee may institute either an administrative complaint with the Labor Relations Commission, a criminal complaint with a local prosecutor's office, or a civil complaint with a local court.

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SeanHayes@ipglegal.com

France 24 on Korean Jury Trial System

France 24, a publication that interviewed me about the Korean Jury Trial system, has published one of the only decent pieces on the Korean jury trial system in English.

The article can be found here.

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SeanHayes@ipglegal.com

First Jury Trial in Korea Defendant Found Guilty

In the first jury trial in Korea the defendant was found guilty.

The defendant a 27-year old man admitted to battery and robbery of a 70-year old woman in her home, but claimed that he did so because his younger sister needed money in order to pay debt collectors that were threatening the life of his sister.

A month, prior to the trial, The Daegu District Court, notified 230 citizens of the district that they were called for jury duty. Surprisingly, 86 jurors showed up for jury duty and the prosecutor and the defense attorney selected, amongst the 86, 9 jurors and 3 alternates. Six men and six women were chosen.


During the trial, the prosecution attempted to persuade the court and jury that they must apply the law and not consider the plight of the defendant and his family. The defense attorney urged the court and jury to be lenient on the defendant because of his plight.

The jury voted unanimously, after 2-hours of deliberations, to find the defendant guilty. The court approved the non-binding finding of the jury. The jury also advised the court to suspend the jail sentence. The court approved the recommendation and suspended a 2 1/2 year jail sentence and ordered the defendant to complete 80 hours of community service.

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SeanHayes@ipglegal.com

Lawyer Cap Unconstitutional

This article, written by Sean Hayes, appeared in the Korea Times on February 13, 2008


By Sean Hayes

Any numerical limitation on the number of law schools, law students or Korean Judicial Exam passers is unconstitutional under Article 15 of the Korean Constitution.

Most of the world's constitutional democracies don't impose numerical caps on the number of law schools, law students, and bar passers. Korean people are smart enough to realize that these numerical limitations are only tools to protect the livelihood of lawyers, and increasingly lawyers are being perceived by the public as greedy, dispassionate about clients' needs, and unwilling or incapable of handling unique and sophisticated legal matters.

The Korean Bar, therefore, for the good of the nation and legal system should voluntarily give up its insistence on protecting lawyers at the expense of their nation, law, legal system and the Korean people and should insist that colleges of law create real professional graduate law schools with rigorous programs, professors capable of not only lecturing but teaching in the Socratic Method, and schools with faculties that comprise licensed and experienced lawyers.

If the Korean Bar is unwilling, the Constitutional Court, as it has so many times over the past two decades must stand-up for the rights of the people and the nation and declare these caps unconstitutional under Article 15 of the Korean Constitution.

Article 15 of the Constitution guarantees the freedom of occupation. If the clause has any meaning at all, it means that all applicants with good moral character and that are competent to practice law must be allowed to enter the profession.

Any law or regulation that does not focus on moral character and competency, as noted by the deceased Professor and Supreme Court litigator George Ethridge, is simply ``undemocratic and tends to create by law a favored class of professional aristocracy to consist alone of those who have the good luck to be born well off financially, or who have rich friends who will let them have the means to take up these long years of study.''

The Constitutional Court, therefore, as the U.S. Supreme Court did in Schware v. Board of Bar Examiners of New Mexico, should allow the government to ``require high standards of qualification, such as good moral character or proficiency in its law, before it admits an applicant to the bar,'' but must demand that all professional licensing laws and regulations have ``a rational connection with the applicant's fitness or capacity to practice law.''

Thus, the Constitutional Court should declare, the present 1000 lawyer yearly limit unconstitutional, since it has no ``rational connection with the applicant's fitness or capacity to practice law.'' If, for example, in one year 2000 applicants are fit and have the capacity to practice law only 1000 are allowed to pass the examination. This quota has no relation to the individual competency or character of the applicant and is simply a ``gate keeping'' tool to protect this ``professional aristocracy.'' Under the new plan the judicial exam pass cap is increased, and the barrier to entry simple becomes the number of students allowed to enter law school and the number of law schools, thus, the same unconstitutional illogic is espoused.

Hopefully, the Court, for the nation, its institutional integrity, and the sanctity of the Korean Constitution and Korean Constitutional Law will do the obviously correct thing and declare, if the cap on the number of law schools, law students, and judicial exam passers is challenged - unconstitutional.

The Constitutional Court, comprised of a group of justices and researchers that are overwhelmingly licensed lawyers, would be perceived as a true bastion for democracy and the rule of law if it declares, against their own and their colleagues interest these caps unconstitutional.

The determination of the case will be a clear sign of the willingness and ability of the justices of the Court to be isolate themselves from pressure from the Korean Bar, the ordinary judicial system, and their colleagues and will show to the people that the Court is a truly the ``guardian of the constitution.''

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SeanHayes@ipglegal.com

First Jury Trial in Korea Held

The first jury trial in Korea was held in Daegu yesterday.

The case concerned the aggravated battery and robbery of a woman in her 70s.

The first most alarming aspect of the case is that the defendant requested the trial on Jan 10 and the trial was held yesterday. Korea does have an efficient criminal justice system even in the case of their first jury trial.

I have spoken to a judge that is friends with the chief judge in the case and will update the reader on the specifics of the case in the next couple of days.

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SeanHayes@ipglegal.com

New Public Defender System Successful

The Law Times, a Korean language law newspaper, reported that the new public defender system, initiated a few years back, has received positive reviews by defendants and judges.

The court system recruited attorneys, throughout Korea, with at least 2 years experience in criminal matters. Many of the attorneys had numerous years of experience and have been noted for zealously advocating for defendants.

A criminal judge at the Seoul Central District Court noted, "High-quality trials are possible now, since the public defenders eagerly argue whatever could be beneficial to the accused in every case.”

Shim Hoon-Jong, a 72 year-old public defender stated that: "Working as a public defender is so valuable. At first I started this work with a thought that I will just volunteer, but now I feel so happy and satisfied."

Mr. Shim received a letter from a convict sentenced to death. The death row inmate who was accused of attacking a prison guard wrote "I have not ever seen anyone who treated me with such humanity like this. Thank you for treating me well.”

Attorney Shim said that it is possible for attorneys to treat defendants with humanity, since work as a public defender is for the public good and not for fees.

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SeanHayes@ipglegal.com

Managers Can Advocate for Corporation without Hiring of Korean Licensed Attorneys

An issue has recently circulated concerning the legality of company managers acting in a legal role for a company without being a Korean licensed attorney.

A manager of a company, who does not have a license to practice law in Korea, can act in a legal role for a company and even perform litigation for a company.

Many companies have individuals educated in law, but that don’t have licenses to practice law. These individuals negotiate settlements, file attachments, and even litigate for their companies. These individuals are not violating the Attorney Act, the Criminal Code, or other acts or regulations if they are bona fide managers that are not being paid a fee based on performance in the case or the number of cases handled.

Article 11(1) of the Commercial Act allows bona fide managers to perform duties normally reserved for the licensed attorneys. "A manager may perform all judicial and extra-judicial acts relating to his business on behalf of the proprietor of the business."

However, a district court noted, "Allowing a manager the right of an attorney is recognized, since the law recognizes that a manager has a right of inclusive representations related to business as a chief assistance of an owner.” However, if an individual is employed just to complete a “a company's credit relationships and perform litigations concerning it, the person does not have the right of the attorney because he does not have any substance as a manager and works just for the convenience of the litigations.” (서울지법 1986. 1. 20. 선고 85가단5402 판결) (Seoul District Court 1986. 1. 20. 85KaDan5402)

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SeanHayes@ipglegal.com

Criminal Punishment of Corporation for Acts of Employees

According to the Law Times, a Korean legal vernacular, laws which punish corporations or presidents of corporations, regardless of their "intent" or "negligence," when a corporation's manager commits a crime may be amended in the near future. President-Elect Lee intends to abolish most of these criminal laws and allow sanctions to be handled through administrative procedures.

The Ministry of Justice and some progressive NGOs may oppose the amendments. However, some noted academics and lawyers have already shown their support for the amendments.

Kang Dong-Bum, a professor at Ewha University, said that "Calling corporations and presidents to criminal account only because of the acts of an employer is wrong and they should be called to criminal account only when they have intention or negligence" Kang also noted, however, tha fines allowed to be imposed through administrative actions should be drastically increased.

Expect amendments to be enacted in the later part of this year.

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SeanHayes@ipglegal.com