All the typical forms of combinations including business transfers, cash-out mergers, triangular mergers, spin-offs, and the like are available in Korea, since the recent revisions to the Korean Commercial Code.
However, the difficulty in getting a deal done in Korea is, often, frustrated, because of bureaucratic uncertainty and the varying laws that govern transactions.
You will find, though, that most of the least political sensitive acquisitions in Korea can be accomplished cost-effectively and efficiently with proactive counsel in Korea.
The present Park administration is, attempting, to reduce some burdens on foreign investors, however, numerous political obstacles are in place, because of the present political dynamics. We don't expect any changes in Korean Law in the near future with regard to M & As, however, we will update the reader if changes occur.
This is not meant as an exhaustive list, but, only a tool to make sure your attorney in Korea is checking all the major boxes.
Statutes, Rules & Regulations Governing M & As in Korea: Only the Basics
- Foreign Investment Promotion Law: Most foreign-capital investments should be reported to government via a foreign exchange bank. The procedure is as simple as filing out a form.
- Financial Services & Capital Markets Act of Korea: Most transactions involving listed companies must be reported to Stock Market Division/KOSDAQ Division of the Korea Exchange and the Financial Services Commission. The reporting requirement is cumbersome.
- Monopoly & Fair Trade Laws of Korea: Some transactions involving the acquisition of the majority of company; 20 % ownership in a company; and mergers between enterprises that exceed KRW 200 billion require reporting to varying government agencies and the Fair Trade Commission of Korea. In some cases, a pre-transfer review is necessary by the Fair Trade Commission of Korea and other government bodies.
- Various Tax Laws & Regulations: Some transactions will trigger taxes and stamp duties.
- Specific Industry Regulations & Reporting Requirements: Certain industries such as banking, defense and some service industries require approval from varying government or quasi-government bodies prior to an acquisition. Some transactions are prohibited.
Other articles that may be of interest concerning business combinations in Korea:
- Stock Purchase/M & A Due Diligence
- Entering into a Joint Venture or Partnership in Korea
- Tax Qualified Mergers in Korea
- Minority Shareholder Rights: Listen to my Mother
- Establishing a Company in Korea: New Corporate Forms
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. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.