3/13/2013

Disputes Between Joint Representative Directors in Korea

A typical issue that we assist multinational companies solve is disputes between companies with two representatives.  One representative director is appointed to the role by a Korean shareholder and the other representative director is appointed to the role by the foreign shareholder.

Usually, the Korean side representative director is deemed the Joint Representative Director (JRD)/President and the foreign representative director is the JRD/Vice-President.  

JRD/President is, normally, via the Joint Venture Agreement (JVA) given power over HR, Sales and Marketing, Production and the JRD/Vice-President is given power over Finance, Quality Control and Engineering.

Disputes arise, frequently, because of JRD/President delegating his powers to an agent with the JRD/President retiring to a home in Hawaii (common with Korean conglomerates who often given these positions in suppliers to retired employees of the conglomerate), stepping into the other JRDs discretionary powers, the inability of the JRD/Vice-President to receive cooperation from Korean employees of the company, lack of cooperation of the JRD/President, lack of updates from the JRD/President and ignoring JVA proscriptions.

We find these issues are caused by hastily drafted joint venture agreements/shareholder agreements, lack of a clear understanding of the roles by each side, the lack of job specifications and the foreign shareholder being too quick to consider a "great opportunity" without much consideration of "obvious risks."

Prior to engaging in any joint venture agreement - get an attorney to explain to you the issues the attorney has seen.  I strongly recommend getting an attorney that works with a business professional with experience working in these type of relationships.  The better law firms should have access to former JRDs that personally dealt with these type issues that would happily explain pitfalls and will happily work with the attorneys to alleviate the ramifications of these pitfalls.

If you have an attorney that is not working with a business professional with this type of experience, you may have hired the wrong attorney in Korea.

This rant is because of an issue we are dealing with caused, in part, by a joint venture agreement that is nothing more than a hastily drafted form agreement that has been passed around for years.   You wouldn't believe the amount that this ubiquitous firm charged for this garbage.
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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 only non-Korean to have worked as an attorney 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.