Amendment to the Korean Foreign Investment Promotion Act 2019 – Investment Incentives in Korea

The Korean Foreign Investment Promotion Act (hereinafter as “FIPA”) is intended to support foreign investment in Korea by providing investment incentives to investors in the Korea market. The Korean National Assembly amended the FIPA this year. Key-facts about the Korean FIPA The Korean FIPA shall “…promote foreign investment in Korea by providing necessary support and benefit and to contribute to the sound development of the nation’s economy.” (FIPA Art. 1). FIPA may benefit foreign investors, including, individual investors, companies established in foreign jurisdictions, local companies owned by foreign companies and, also, international economic cooperative organizations. “Foreign investments” under FIPA Art. 2 “Where a foreigner holds stocks or shares […] of a Korean corporation (including a Korean corporation in the process of establishment; […]) or a company run by a national of the Republic of Korea, […], by any of the following methods in order to establish a continuous economic relationship

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New Provisions regarding the Korean Act on Reporting and Using Specified Financial Transaction Information

The Amendment to the Act on Reporting and Using Specified Financial Transaction Information of Korea (hereinafter as “Amended Financial Transaction Information Act of Korea”) focuses on strengthening Korean legal provisions related to money laundering as well as implementing a “global standard” proposed by the Financial Action Task Force on Money Laundering. The Amended Financial Transaction Information Act of Korea shall enter into force on July 1, 2019. Major provisions of the Korean Act on Financial Transaction Information The purpose of the Act on Reporting and Using Specified Financial Transaction Information is to “…provide for matters concerning reporting on and use of specified financial transaction information necessary to regulate money laundering and financing of terrorism through financial transactions, such as foreign exchange transactions, thereby contributing to preventing crimes and further establishing a sound and transparent financial system.” (Art 1). The major provisions of the prior Act are: Transactions of expected illegal

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Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks

In September 2018 the Korean National Assembly passed the Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks (hereinafter as “Act on Internet-Only Banks”), which is in force since January 2019. The major facial intent of the Act on Internet-Only Banks is to “…encourage innovative enterprises to enter the financial market while laying the legal framework for the convergence of information and communications technologies (ICT) with financial services, and the creation of new economic growth drivers.” One of the main impetus for the Moon Administration related to this Act was to allow individuals and companies that may have a more difficult opportunity to obtain credit to obtain credit. The foregoing is, only, intended as a brief teaser and not anything more than to provide a basic understanding of this Act. Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks 2018 “Internet Banks”

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Material Breach of Korean Contracts Under Korean Law: Primary Obligations vs. Secondary Obligations in Korea Courts

In most Western nations a “material” breach of a contract leads to the non-breaching party not having to perform its obligations under the contract, while allowing the non-breaching party to immediately sue for all damages (or performance).The Restatement (Second) of Contracts 241 notes that the following criteria can be used to determine whether a specific action/inaction constitutes a material breach: “In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer

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7 Musts to Succeed in Business in Korea

We have the unique pleasure to have a bird’s-eye view of numerous clients’ businesses in Korea.  At this stage of our experience in Korea we are, typically, able to determine which companies will, likely, succeed and which companies will, likely, fail.  We are far from perfect, but companies that succeed in Korea, normally, have the following seven things in common: 1.  Comprehensive Understanding of the Korean Market by a Neutral Local Consultant This understanding, normally, comes from one of the few business consultants, in Korea, that are capable of providing a decent market overview with a detailed list of potential targets and contacts within these targets.  We, only, work with a handful of Korean consultants, since most, we find, don’t have the skills necessary to proactively assist client, but still sell market research reports that seemed to be, only, obtained through a Google search. 2.  Great Initial Representative Director for

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So you want to do business in Korea? Listen to my Mother. Korean Joint Venture/Partnership Basics

My wise mother once told me to: look both ways before crossing the street; carry an umbrella to school in the spring; and don’t go out alone at night. The advice can go along way when doing business in Korea or even in most parts of the world. Getting involved in business in Korea is unwise without due diligence (Look both ways before crossing the street), carefully drafted shareholder agreements (carry and umbrella in the spring) and some Korean know-how (don’t go out alone in the dark). Korean statutory law provides less protection to non-controlling shareholders than in Europe, States and in many other parts of the world. This article is not intended to discourage investors. Don’t avoid joint ventures in Korea; just enter them with understanding, care and a Korea-savvy guide. The horror stories about the pitfalls of doing business in Korea can fill a book. However, the same

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Debt Collection Cases in Korea on the Rise: Buyers and Sellers Beware

My firm has noticed a sharp increase in the number of requests for the debt collection services of my team. One of these cases involves an unpaid invoice from a British company to a Korean wholesaler for over USD 700,000. The British company was duped by a small paid invoice which was quickly followed by an unpaid large invoice. Of course, the Korean company (not a company –one guy and a personal bank account) was not capitalized and has few assets. The case shall be handled through a criminal filing. The other matters are for mainly low six-figure debts or claims based on faulty or non-delivered goods. Some of the cases involved nothing more than scams to the less than careful foreign businesses. Others were caused by the squeeze that the liquidity crisis has put on local small businesses. I have written articles on this in the past. Please conduct

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Future of Bitcoin in Korea according to FTC: Korean Cryptocurrency Updates

The head of the Korean Fair Trade Commission has noted to local vernaculars that he does not agree with Justice Minister Park Sang-ki’s comment that “cryptocurrency investment is gambling.”  He further noted that: “cryptocurrency recently emerged as an issue in Korea and other laws do not have the exact legal clauses that relate to closing exchanges.”  Thus, indicating, in part, that the Korean government doesn’t have the specific power to close the Korean cryptocurrency exchanges.  Of course, the FTC Chairman’s opinion does not have any legal binding effect, however, his opinions are widely respected by academics and legal practitioners. Many legal practitioners I have spoke to, in Korea, believe that the government shall not have the power, because of the number of traders in Alt Currencies to ban trading in Alt currencies.  This reality may lead to a settling of this issue via the imposing of capital gains tax on

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Is Bitcoin Banned for Foreigners in Korea? Korean Bitcoin Law Updates

This Law Firm has wrote a few articles on Bitcoin Law in Korea.  This Alt Currency/Bitcoin Law articles may be found at: Court Challenges to Governments Ban on Cryptocurrency in Korea and Will the Korean Government Ban Bitcoin? Other article can be found via searching the Blog.  A Forbes article notes, with one significant caveat, that: “All foreigners, including residents, nonresidents and “kyopo” ethnic Koreans with foreign citizenship, will be banned from trading cryptocurrencies in Korea, the FSC’s foreign media department said by email. Minors are banned after Prime Minister Lee Nak-yeon earlier claim the cryptocurrency craze could lead the youth toward crime.” However, the article, additionally notes that: “However, Kang noted a loophole. In the new system, foreigners and minors can’t possibly make investments as it operates on a bank’s real-name account, but they could potentially use corporate accounts to make additional investments. ‘There’s no limit to that for now. We haven’t

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Korean Cryptocurrency Case Filed to the Korean Constitutional Court: Korean Bitcoin Updates

The author of this blog, formerly worked for the Constitutional Court of Korea and he is excited to see this matter being litigated in Korean courts.  The issue, as I have always noted, is simply if government are willing to protect the freedom of individuals to trade and speculate in asset classes of the choosing of the investor.  While, I am far from sold on Bitcoin (and other Alt Currencies) as a long-term asset class plays – of course any free democracy shall allow its citizens to invest in asset classes the government doesn’t favor.  The key to this issue, seemingly, is just if Alt Currencies shall be considered mere asset classes. As the reader likely knows, various branches of the Korean government have noted that the Korean government shall either ban Bitcoin exchanges in Korea, prohibit banks from linking accounts to exchanges or otherwise prohibit the use of Alt

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Is a Bankruptcy in the U.S. “Effective” on Assets in Korea?: Korean Bankruptcy Law Basics

The following article on the interplay between Korean Bankruptcy Law and foreign bankruptcy laws was motivated by a question from a reader from the Korea Times.  The following is from a column I used to write for the Korea Times.  Please note the present Bankruptcy Law in Korea was amended and the present topic, while interesting, shall not apply to present bankruptcy proceedings.  However, take a read – very interesting matter.  I shall be posting some of my old articles from a prior weekly column over the next couple of weeks, since these articles no longer appear online. Legal Ease Column by Sean Hayes from Sept. of 2003 (Korea Times) Dear Sean, I just received notice that a former customer filed bankruptcy in New York. The bankruptcy court attached his assets in the United States, but the assets didn’t cover the entire debt owed to me. He also has assets

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English-speaking Korean lawyers and International Lawyers at International Law Firm in Korea discussing issues of Korean Law

IPG Legal is a leading client-focused international law firm with offices in Korea that is, often, selected over the ubiquitous Korean Law Firms when success is essential and success depends on nuanced street-smart advice, proactive  and unconflicted representation. Our attorneys are, intentionally. different from the crowd.  From our retired judge partners to our junior associates, we are all trained with an intense focus on client success, lawyer proactivity, and to understand the nexus between your commercial and legal needs. Our attorneys shall never push to you useless memos, non-nuanced legal advice or get you into litigation without an honest assessment of the merits and shortcomings of the matter. We are  – intentionally different from the crowd.  Globally Experienced – Locally Connected.  We are IPG.  Korean Legal Practices Korean Antitrust, Competition & FTC Arbitration, Int’l & Domestic Korean Civil Litigation Korean Criminal Defense Korean Corporate Law & Compliance Korean Employment, Labor &

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Korean Currency Control Laws Revised: Korea Won – Yuan

Yonhap News, a Korean-language wire service, reported today that the South Korean government has revised currency control law in order to allow the direct trade of South Korean Won and Yuan.   The Korean Government is expecting this move will increase trade, while allowing the diversification of foreign currency holdings. Yonhap notes, in part, that: “The [M]inistry [of Strategy & Finance] said South Korea’s Hana Bank and Woori Bank have been designated as the clearing banks to take charge of won-yuan settlements and payments. The Chinese won-yuan exchange market is scheduled to start operating in June in Shanghai, a follow-up to a summit meeting between South Korean President Park Geun-hye and her Chinese counterpart Xi Jinping in October 2015. The direct trade market in Seoul was already opened in December 2014, with its daily turnover reaching an average of $2.26 billion as of end-November last year.” We will be writing,

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Korean Trust Act of 1961 Amended

The 1961 Korea Trust Act has been criticized as being an archaic law that does not reflect generally accepted international trust standards and practices.  The revised Korean trust law was passed to alleviate many of the problems of the old Korean Trust Law.  The new law in Korea will came into effect in July of 2012.  This post is a revised version of a post that was first posted in 2012. The most significant changes to Korea’s Trust Act are listed below. The new Korea Trust Law allows the designation of a settlor as a trustee.  The trustee, however, will be unable to windup the Korean trust and will be required to meet specific formalities when executing the powers as a trustee. The new Trust Law of Korea allows for beneficiary certificates to be issued by the Korean trust. The new Korean Trust Law allows the the trust to issue

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Restructuring of Korean SMEs a Potential Lucrative Business in Korea

Bloomberg has an interesting article on “Zombie” companies in Korea.  Many of these companies have decent cash flow, but because of Korean corporate realities many have been less than capable of controlling costs. The Bloomberg article, in part,  notes: “One of the biggest concerns is so-called “marginal” or “zombie” companies, usually defined in Korea as businesses that haven’t been able to make payments on interest from operating profit for three years. A prolonged period of low interest rates has led to an increase in marginal companies and there is an “urgent” need for restructuring, Bank of Korea Governor Lee Ju Yeol said this month. Financial Services Commission Chairman Yim Jong Yong has warned that unless the problems at these companies are addressed, they will become a burden to the economy. The number of marginal companies jumped to 3,295 last year, from 2,698 in 2009, according to the central bank. They

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Will the Korean Government Kill Bitcoin? The legality of Bitcoin in Korea

Local Korean vernaculars have reported that Bitcoin and other “Alt Coins” are to be investigated by the Bank of Korea, Korea’s Prosecutors Office and other government agencies. It is alleged by some in the Korean government that these crypto-currencies may be nothing more than Ponzi or Pump & Dumb Schemes.  While, others, proclaim these currencies are at the foundation of freedom and they help to fight inflation imposed by central banking authorities, allows for anonymous transactions and low transaction fees. If the Korea government has made up its mind on the future of Bitcoin in Korea we are, likely, to see, among other things, prosecutions, businesses being sanctioned for accepting Bitcoin and the blocking of sites that promote or utilize Bitcoin. Korea has struggled with the acceptance of new technologies that infringe on some of the major vested interests (e.g. Uber) and we suspect that Bitcoin will be no different

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Korea New Exchange (KONEX) Basics

The Korean Exchange (KRX) established, on July 1, 2013, an SME only-listed securities market with the, facial, purpose of providing a new avenue for SMEs in obtaining assets for investments.  A KONEX-listed firm with capabilities to list, at a later date, on the KOSDAQ or KOSPI may, also, benefit from a stream-lined procedure to list on the KOSDAQ or KOSPI.   Korea’s capital markets have been, strongly, criticized for not providing adequate funding sources for small companies.  Most funding for companies either comes from the banks or via modest government grants and loans.  With the banks becoming more conservative in funding ventures, because of the recent Korean banking crisis, the KRX launched the KRX, partially, to assist in resolving this issue.   The listing of a company on the Korea New Exchange (KONEX) is much easier than on the KOSPI or KOSDAQ. However, investing on the exchange may be difficult for

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Fiscal Transparency in International Business: International Business Structures

The September 2015 edition of International Bar Associations “Business Law International” has an interesting article entitled: “Fiscal Transparency – International Business Structures and Issues” The article is useful for, also, those doing business in Korea.  The articles does not, specifically, address in any detail issues in Korea, the article does a great job in explaining issues relevant to those forming partnerships/joint ventures with UK, U.S. and developed European economies. The article notes, in part,  that: “The continued globalization of business generally and the increased burdens imposed by such measures as common reporting have brought into focus the issues arising with transparent entities and how they are regarded internationally.  Most unsatisfactorily is the absence of a consistent position as to whether an entity is transparent or opaque by default.  As the Anson cases demonstrated, the complexity in this area can be considerable.  resolving this may prove difficult and it might be

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Stock Options in Closed Corporations in Korea

For stock options in Korea to be exercisable, thus valid option contracts, the option must be approved, in most cases, at a general shareholders meeting of the issuing Korean company.  If approval of the shareholders is obtained the articles of incorporation, for the option to be valid, should, among other things, note: An intention that a stock option may be granted in specified cases;  The number of shares to be issued or transferred in the case of exercising the stock option;  Qualifications of a person to whom a stock option is to be granted; Exercising period of the stock option; and  An intention that the granting of the stock option may be revoked by a resolution of the board of directors in specified cases. Korea Commercial Act art. 340-3(3)1.  Additionally, the company granting the options should execute an agreement with the individual granting the options and the stock option should,

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Samsung’s Win Against Elliott is Korea’s Loss According to Bloomberg

Mr. William Pesek, a columnist for Bloomberg, wrote an interesting article on the battle between Samsung and Elliott.  With a majority of the local Korean vernacular running stories how the  Samsung merger will increase investments (Samsung Merger to Driver Growth in Pharmaceutical Business), Bloomberg is questioning if this will be the final straw for an increasingly perceived anti-foreign capital destination. The article is a worth a read.   The articles notes, in part, that: “Now that it’s likely to go through, the deal will embolden Korea’s other family conglomerates — known as chaebol — to act even more selfishly than they do already. It’s also sure to perpetuate the so-called “Korea discount,” which depresses stock valuations relative to developed-market peers. That’s the price for the sort of dodgy corporate governance regularly displayed by Samsung, Hyundai and other Korean companies. Corporate Korea needs to understand shareholder skepticism is a normal part

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