This Week’s Korean Legal News Reported by Media Spy agency seeks arrest warrant against leftist lawmaker N.Korea fires hawkish army chief Seoul rejects ILO’s call for gov’t union Senior tax officials banned from dining, golfing with conglomerate executives Korean, U.S. defense chiefs discuss troop control transfer Ssangyong makes major comeback Kia Motors union stages 2nd partial strike Hyundai to Build Car Parts Plant in U.S. Gov’t to cut home acquisition tax rate Seoul call center staff go on strike Most Recent Posts from The Korean Law Blog Korea’s Low Birth Rate: Problem that May be Impossible to Fix Korea Companies Defendants in Anti-Dumping Lawsuits Second to Only China: Check the Verasity of Data Produced by Korean Companies More Damage from Militant Unions & Rising Labor Costs in Korea: GM to Reduce Production in Korea Hyundai Motors on the Fast Track to a 45,000 Employee Strike Business Opportunities in Korea Getting
Continue readingCategory: Korean Banking/Finance
Korea’s Data Privacy and Data Protection Law
Korea’s Personal Information Protection Act has replaced, in whole, the Public Agency Data Protection Act of Korea and, in part, the Act on Promotion of Information and Communications Network Utilization and Information on September of 2011. The new privacy law is one of the strictest laws in the world. Please seek advice prior to engaging in any business where data of customer will be collected. Over the next couple of weeks please check back to this blog. We will be updating the reader on: Basics of the new Korea data protection law; The Data Protection Commission; The Personal Information Dispute Mediation Committees; The Korea Communications Commission; The Korea Internet & Security Agency; also We will provide sample privacy and data collection statements. _______Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have
Continue readingYahoo Failed in Korea because of Cranky Korean Consumers?
Having worked in Korea market entry in one capacity or another for the past 15 years, I can assure you that making it in Korea can be more difficult than in many other countries. One can easily – and often correctly – blame foreign companies for giving the market short shrift when Korea needs to be taken as seriously as, say, Japan and China – the two neighbors that consistently, if not always fairly, outshine Korea. At the same time, there is a complacency among Koreans with that what they see on the peninsula as being probably as good as it gets and there is no real need to change their ways – unless, of course, other Koreans are making changes. While the marketplace is remarkably less xenophobic than thirty years ago, there remains a strong desire to buy Korean. Part of that feeling is based on nationalism, but part
Continue readingKorea’s Near Export Only Growth: Open the Service Sector
According to data from the Bank of Korea, exports accounted for 57% of GDP for the first three quarters of the year. In 1996, it was 27.7%, then hit 44.3% in 1998 with a steady increase ever since. The solution to the problem of Korea placing too much of its eggs in the export basket is to completely open the domestic market to real competition. An article in the Chosun Ilbo best describes the answer to the problem: Most of all, Korea needs a strategy that will allow it to use the service industry opening to its benefit. The Economist wrote in a recent special report on Korea that the country’s manufacturing industry is top-notch but the service sector is still Third World. It accounts for 60 percent of Korea’s GDP (two years ago), but productivity is only 40 percent of the manufacturing industry’s. At this rate, the country
Continue readingTop Ten Mistakes of Companies Doing Business in Korea
Our law firm has been dealing in Korea with foreign clients doing business in Korea of all shapes and sizes. Surprisingly, we see many of the same issues from our multinational clients that we see from our SME clients, thus, we drafted this post. TOP TEN ERRORS OF COMPANIES IN THE KOREA MARKET Lack of market research. Selling in China, Japan, Malyasia, Singapore etc. is vastly different than selling in Korea. Get a good local market research study concluded by a local market research company. No Due Diligence or Poor Due Diligence. Read my posts on this issue. Listen to my Mother: JVs in ASIA; Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts. Register your trademarks. Your international filing is not adequate protection in Korea. Read my post on the issue at: Don’t Just Trust Us: Trademarks in Korea Draft Korea-tailored contracts. Your international joint venture,
Continue readingTop 10 Conglomerates in Korea equals 76% of GDP
Chaebol.com has reported that the Top 10 largest companies in Korea account for over 76% of the Gross Domestic Product of Korea, while the top 30 companies on the Korean Stock Exchange account for over 59% of the value of the market. The statistic is alarming to outsiders, but not surprising to those on the ground in Korea. Samsung: 21.9 % of GDPHyundai/Kia: 12.6% of GDPSK: 11.7%LG: 9% The fear has always been that Korean conglomerates’ abuses in the local Korean market leaves few companies capable of competing, thus, weeding out potentially successful companies. The largest conglomerates are doing the same abroad through dumping and other market manipulative tactics. The Korean government has, facially, tried to protect consumers, subcontractors and competitors, however, the government and even the courts have been reluctant to do anything, but give these companies a light slap on the wrist. A reality that may
Continue readingU.S. Taxation of American Citizens/Permanent Residents Living Abroad
TAXES. Everyone wants to avoid them and only a few people really know how. This goes double for US citizens who earn income in China. This is because the US taxes foreign income as well as income earned within the States. Even worse, the IRS requires any US person with a financial account overseas to register it with the treasury department, as long as such account has held over $10,000USD at some point during the year. This provision was meant to discourage the use of overseas tax shelters, but they equally apply to US people teaching English in China that have managed to save $10,000USD in their Bank of China account. And speaking from personal experience, the process is complicated because it involves both the IRS and the Treasury department. Luckily, the filing can be done online, even if it is not particularly simple. For those earning a salary in
Continue readingStock Options in Korea: Granting and Exercising Stock Options in Closed Corporations in Korea
For stock options in Korea to be exercisable, thus valid options, the option must be approved, in most cases, at a general shareholders meeting of the Korean company. If approval of the shareholders is obtained the articles of incorporation of the Korean company should, inter alia, 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, only, be given to authorized
Continue readingThe Koreans are Coming: Hana Financial to Acquire Majority Share in U.S. Broadway National Bank
Hana Financial has announced that it will purchase 71% of Broadway National Bank’s holding company. Broadway National Bank is a New York-based bank that tailors its services to Korean clients. Hana Financial is one of Korea’s largest retail and investment banks. The main purpose of the acquisition is to expand Hana’s retail operations to the U.S. market.__________Sean Hayes, IPG’s Co-Chair of the Korea Practice Team, may be contacted at: [email protected] (c) Sean Hayes – SJ IPG. All Rights reserved. Do not duplicate any content on this blog without the express written permission of the author. [email protected]
Continue readingKorea and Myanmar Now Not as Far Apart
Good news for Korea and Myanmar. Myanmar is anticipated to be a major investment destination for Korean companies. Korean Air, realizing this trend, has launched the first non-stop flight from Korean to Yangon, Myanmar. The flight will commence in early September of this year. The flight time will, thus, be reduced from 10 hours to 6 hours. If the flight is well subscribed, expect Asiana Air to quickly follow suit. _________ Sean Hayes, IPG’s Co-Chair of the Korea Practice Team, may be contacted at: [email protected] IPG is engaged in projects for Korean and international clients in Myanmar and much of Southeast and East Asia. (c) Sean Hayes – SJ IPG. All Rights reserved. Do not duplicate any content on this blog without the express written permission of the author. [email protected]
Continue readingKorea Merger Remedies by Korea Fair Trade Commission
Earlier this year, Korea’s Fair Trade Commission has announced the amendment of its rules on merger remedies through the Notice on Merger Remedies. The amendment revises the prior Merger Remedies Guidelines. The most relevant changes are listed below. The KFTC will, only, utilize behavioral changes when structural changes are impracticable or may be ineffective. Structural changes, include, prohibition of a merger, divestiture and the transfer of intellectual property rights. The Fair Trade Commission has noted that the preferred choice will be divestiture and a merger injunction will only be ordered when the divestiture is not feasible in the situation. The Korea Fair Trade Commission has noted that the guiding principles of the Merger Remedies is: Effectiveness, Proportionality and Transparency and Enforceability. Arguments from attorneys should be directed at the KFTC ability to meet these guiding principles by proposed actions. The KFTC has increased investigations and has become much more
Continue readingAdditional Mutual Saving & Loan Banks in Korea Operations Suspended by Korean Government
In a sign of more trouble in the second-tier banking market in Korea, four savings banks operations have been temporarily suspended by the Financial Services Service. The banks were ordered to increase capitalization within 45 days or face the risk of being forced to permanently suspend operations or sell their assets. 16 banks were closed last year. These, previous, closings led to prosecutions and a bailout by the Korean government. Savings deposits are backed by an explicit Korean government guarantee on each account at each bank of KRW 50,000,000 (USD 45,000). The banks are presently providing yearly deposit rates in the low 5% range. An investor may receive this protection from as many accounts opened if the accounts are at different banks. This, guarantee, along with many peculiar loans by these banks lead, in part, to this banking crisis in Korea. External factors played a negligible for in the crisis.
Continue readingParticipating and Exchangable Bonds Issuance by Non-listed Companies in Korea
With the recent amendment of the Korean Commercial Code (KCC) and the issuance of the Presidential Decree for the KCC, Korea will now allow, when specific requirements are met, the issuance of bonds including redeemable and derivative bonds under article 469 of the Commercial Code of Korea for listed and non-listed companies. Matters relating to issuance and management may be delegated to a commissioned trustee company. Major shareholders, controlled shareholders and other interested parties are prohibited, by the law, to act as trustees. Korean Commercial Code Revisions Make Capital Reductions in Korea Easier No Court Appraisal Necessary for In-Kind Contributions to Company in Korea Classification of Directors in Korea under the Korean Commercial Code: Inside, Outside and Other Directors in Korea Establishing a Company in Korea: New Corporate Forms Available under Revised Korean Code Squeezing-out Minority Shareholders under Korean Corporate Law Limiting Director Liability under Korean Law: Don’t Drop the
Continue readingSouth Korea to Buy Yuan-Denominated Assets
Heung-sik CHOO, director-general of the Bank of Korea (BOK) stated to Bloomberg that the BOK may purchase RMB-denominated (Chinese yuan) assets. The news may trigger most Asian economies to consider more investments in China-currency denominated assets. At present, the only other developed country that has announced plans to invest in RMB-denominated assets with foreign currency reserves is Japan. The Director General noted that the BOK will begin by only investing in Chinese government bonds. The investment is expected to be modest. The China Daily has reported on this issue today and noted: The BOK obtained a Qualified Foreign Institutional Investor (QFII) license in late December and has gained the approval of its counterpart, the People’s Bank of China, to buy bonds, Choo was quoted by Bloomberg as saying. The National Pension Service, the largest investor in South Korea, recently said that it received approval from China to invest in the
Continue readingKorean Economy Ranked as a Moderately Free Economy by Heritage Foundation
South Korea has ranked a mediocre 69.9 (moderately free) behind major regional allies and behind nearly 30 countries that are “free” or “mostly free.” Korea ranks, rightfully, very low in the categories “freedom from corruption” and “labor freedom.” Korea has an excellent ranking in business freedom and a mediocre ranking in all other major categories. There has been no major change in Korea’s ranking for many years. Regional Rankingrank country overall score change from previous1 Hong Kong 89.9 0.22 Singapore 87.5 0.33 Australia 83.1 0.64 New Zealand 82.1 -0.25 Taiwan 71.9 1.16 Macau 71.8 -1.37 Japan 71.6 -1.28 South Korea 69.9 0.19 Malaysia 66.4 0.110 Thailand 64.9 0.2 The complete report can be found at the Heritage Foundation.__________ [email protected] (c) Sean Hayes – SJ IPG. All Rights reserved. Do not duplicate any content on this blog without the express written permission of the author. [email protected]
Continue readingKorea’s Starting a Company in Korea: Read:Economic Forecast by the European Chamber of Commerce in Korea and SERI
The European Chamber of Commerce in Korea published a great article by Mr. Chang-mok SHIN of the Samsung Economic Research Institute. The article is very useful for companies wishing to establish an business in Korea and have based their feasibility study on less reliable forecasts. SERI is not perfect, but they tend to be neutral and candid. Mr. Shin predicts, in short, that: Korean Growth Rate in 2011 will be 3.6%. This “low growth” rate will be caused by the European debt issues, a slowing economy in Europe, and that the Korean government is unable to further stimulate the economy because of a high (recently increasing) sovereign debt and the inability to consider quantitative easing because of, already, high inflation. Korean Private Growth in Consumption will increase by 2.7 percent and Consume Prices will increase by 3.4 percent from 4.4 percent. This lower than normal consumption growth is caused by
Continue readingKorean Commercial Code Revisions Make Capital Reductions in Korea Easier
The recently amended Korean Commercial Code (KCC) will make it simpler for local and Korean foreign-capital invested companies to make nominal capital reductions. The law will come into effect next year. Previously in the KCC, there was no differentiation between a real capital reduction, in which assets are distributed to shareholders in proportion to their holdings, and a nominal capital reduction (also known as a reduction of capital “without consideration.”) A nominal capital reduction is, obviously, inherently less cumbersome than a real capital reduction. In the case of a nominal capital reduction, the company in Korea could choose to reduce the book value of assets to, in turn, reduce losses shown in financial statements. This tactic was often used in Korea to help a company show more accurate figures when the real value of the loss is significantly less than the book loss. However, even though there is no reduction
Continue readingLone Star Loves the Constitutional Court of Korea
A decision handed down by the Constitutional Court of Korea on April 28, 2011 should give strong pressure to the Korean Financial Supervisory Commission (FSC) to approve Hana Financial Group’s purchase of the 51% stake Lone Star holds in Korea Exchange Bank (KEB). Last month, the Korean Supreme Court reversed and remanded the decision of the Seoul High Court to acquit an executive of the fund of market manipulation charges. The holding motivated the FSC to hold up approving the sale based on, in part, the fact that in Korean law a guilty employee may establish, in some cases, that an employer is vicariously guilty. The employee was accused, in short, of conspiring with government workers and others to deflate the value of the shares of KEB credit card before the merger of the credit card unit with KEB. Under law, the employer may be held criminally accountable for the actions of
Continue readingNoted Islamic Bond Expert on Boneheaded Korean Fundamentalist (Evangelical) Christians
John A. Sandwick, an American Banker created one of the first Sukuk funds. He was recently interviewed by the Korea Times. Mr. Sandwick had some less than kind remarks for these peculiar Christians opposing the Sukuk bill. Mr. Sandwick noted to the Korea Times that: “Sukuk don’t help terrorists. Zakat is a community tax similar to religious taxes paid all over the world. Sukuk are bond-type securities. How can we be speaking about them in the same sentence? Where is the link?” He went on to note that it is “so silly that [I] normally would not answer” because zakat is “completely unrelated to the issuance of sukuk. If governments were to tax these distributions as if they were dividend interest then the entire Sukuk market would be eliminated.” I hope that reason will prevail or these boneheads in Korea will lose a great opportunity and potentially may alienate itself in
Continue readingKorean Islamic Bond Tax Bill May be Doomed – OK only in Korea
Korean evangelical Christian’s vocal opposition to an Islamic bond bill pending in the Korean National Assembly seems to have led to the death of the bill. The bill would have allowed, amongst other things, a tax deduction for those subscribing to Sukuk bonds. According to the Donga Ilbo newspaper: The party reportedly reached a consensus Monday that putting to public debate the so-called sukuk bond bill is difficult after shunning deliberation of the proposal in this month`s extraordinary parliamentary session amid strong Protestant opposition. Sukuk bonds allow parties to conduct financing that complies with Islamic religious restrictions on charging of interest. A Sukuk bond, in short, creates a dividend (rent) interest in the instrument, thus, complying with the Islamic prohibition against the charging of interest. It is unfortunate for Korean companies that the Sukuk bill was blocked by these groups in Korea. The opposition to the bill will have immediate
Continue reading