Starting a small business in Korea can be enjoyable and profitable if you get the business on the right track from the start. Too often we see those with “limited funds” (we all have limited funds -even multinationals have limited funds) choosing to forgo having the deals structured by a professional and just downloading a “partnership” agreement off the internet. Do not be what my father likes to call President Obama – a knucklehead.
I have learned from my 13 years working in Korea (Can’t believe I have been here for 13 years), that this choice, normally, ends in either a failed business or a person contacting me with a case that, now, requires our litigation services. I even saw cases end up in the prosecutor’s office. The amount of money that it costs to have a professional draft these agreements, must, be considered part of the cost of doing business. The amount should be no major issue for most. Hey, I recently did a deal where one of the partners exclaimed that your final invoice was less than the cost of his pizza oven. I love being compared to a pizza oven.
While this law firm, typically, assists multinational companies with their needs in Korea, China, Southeast Asia and North America, we also enjoy assisting some of the more entrepreneurial SMEs. However, be prepared for some time with me. We never just slap in front of you a form agreement and have you make some comments on it. This is a waste of time and a sign of, simply, a hack.
Some basics that you lawyer, must, consider with considering your joint venture and articles prior to starting a joint venture in Korea.
Essential Issues to Consider When Drafting a Joint Venture Agreement in Korea (Non-exhaustive)
- Duties, Responsibilities and Expectations of each Partner?;
- Arbitration, Language and Forum for Dispute Resolution?;
- Management Structure?;
- Valuation, Windup, Termination?;
- Remedies for Breach?;
- Due Diligence, Due Diligence, Due Diligence – Did I mention Due Diligence?;
- Limit Powers of the Representative Director?;
- Retain Power to Appoint and Remove the Representative Director?;
- Retain Majority Control or include other Minority Protection Clauses?;
- Hire an Independent Accountant and Utilize a Neutral REAL Statutory Auditor?;
- What are you Getting out of the Joint Venture?;
- What are you Giving Up?;
- What is the Purpose of the Joint Venture?;
- Financing Options?;
- Chushik, Yuhan etc.?; and
- The List Goes On – read a few more articles below and search this blog and, also, take a look at: www.sba.org.
- Listen to your Mother: Minority Shareholders’ Rights in Korea
- Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts
- Korea Joint Ventures: The Bare Essentials
- Resolving Korean Joint Venture/Partnership Disputes without an Attorney – Maybe
- Top 10 Mistakes of Companies Doing Business in Korea
- Entering into a Joint Venture/Partnership in Korea
Sean Hayes may be contacted at: [email protected]
Sean Hayes is co-chair of the Korea Practice Team and Entertainment, Media and New Tech Law 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 assists clients in their contentious, non-contentious and business developments needs in Korea and China.
- Korea Due Diligence for Joint Ventures, Licensing, OEMs and Buying a Korean Company
- Starting a Manufacturing Business in South Korea: Top 14 Things to Know Before you Start a Business in Korea
- Korean Compliance Checklist for your Business in Korea
- Korea Contracts Don’t Forget the Counter-party: Due Diligence before Executing an Agreement in Korea
- English-Speaking Business Lawyers in Seoul, Korea: Corporate Law & Compliance Team at IPG Legal
- Starting a Company in Korea: Establishing a Foreign Capital-Invested Korean Company, Branch or Liaison Office
- Small Business Compliance in Korea: No Not Only for the Big Boys
- Establishing a Company in Korea: New Korean Corporate Forms Available under Revised Korean Code
- Korean Franchisors’ Obligations in Korea to File Annual Report to Korean FTC
- Korean Franchise Law Basics for Franchisors