Korean Merger Control and the Korean FTC

The Monopoly Regulation & Fair Trade Act of Korea (Fair Trade Act of Korea) is the main regulation governing mergers and acquisitions in Korea.  In the majority of cases, reporting and approval is not required for a target company with a yearly turnover of less than KRW 20 billion. The specific jurisdictional thresholds shall be addressed in a followup article.  This article is intended to, simply, provide a list of the main Merger Control issues .  A more substantive article shall follow. The following types of transactions are required to be reported and approved, in most cases, by the Fair Trade Commission of Korea (“KFTC”). Purchase of 15% of the shares of a listed domestic company; Purchase of 20% of the shares of a non-listed company; Establishment of a joint venture or increasing shareholdings to meet the thresholds in 1 or 2 above; Merger with a company; or Purchase of

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Korea’s Improper Solicitation & Graft Act?: Scope of Application

The Scope of Application of the Improper Solicitation and Graft Act of Korea (“Graft Act”) was a hotly contested issue that led to Korean court challenges.  The Constitutional Court of Korea has upheld the Graft Act of Korea.  More details, including a list of articles on the Graft Law of Korea, may be found at: Improper Solicitation & Graft Act of Korea. The Scope of Application is defined in Article 2 & Article 11 of the Bribery Act.  The Act applies to both Korean and foreign nationals.  The Act applies to foreign nationals, only, for prohibited acts within Korea and to Koreans for prohibited acts universe wide. Summary of the Scope of Application of the Graft Act of Korea Article 1(a) Institutions Highest Government Organs (National Assembly, Ordinary Courts, Constitutional Court) Other Government Organs (election commissions, Board of Audit and Inspection, Human Rights Commission) Central Government Administrative Agencies Local Governments

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Korean Compliance Checklist for your Business in Korea

The following Korean Compliance Checklist is intended to provide, only, a basic overview of the necessaries for keeping the law and shareholders off your back.  We, highly, recommend having a compliance audit preformed – if you have not completed a compliance audit of your Korean business in the past or recently.   1.  Do you Have a Registered Company/Business? Operating in Korea is not as simple as just leasing an office.  All businesses whether in the form of a corporation or sole proprietorship in Korea are required to register as business with the tax office and local government offices.  For some businesses the approval of a government agency shall be required.  Other articles on Korean corporate forms may be found at: Establishing a Company in Korea: Under Revised Corporate Code Limited Liability Companies Under the Revised Korean Commercial Code 2.  Do you Have Employment Agreements, Employment Rules, License Agreements, Joint

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Success in Life & Business in Korea by Senior Adviser to IPG

The most important lesson I learned from the Peace Corps was an inner sense of humility.  By my naturally contrarian nature, I have mixed feelings about having once been a Peace Corps volunteer in Korea. For example, I try to focus on being an international business development consultant, but every so often when a newspaper or magazine discovers I served in Korea during the 1970s as a Peace Corps volunteer, too often the reporter wishes to focus on my past rather than what I’m doing 30 or more years later. Frankly speaking, I want to use the reporter as much as the reporter wishes to use me. The reporter often wants a human interest story, and I want some free publicity for my business. Usually, what is printed does nothing for my business. But free publicity is still free publicity, so I play along. But all of this ends up

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Is your Korean Employee a Dispatched Worker and Thus a De Facto “Employee” under the Korean Labor Standards Act?

In 2015, the Korean Supreme Court detailed standards in determining if a Subcontracted Worker in Korea is actually a Dispatched Worker and, thus, a de facto employee of your Korean Company.  The designation has implications for retirement benefits, employment security and the payment of benefits. Dispatched Workers vs. Subcontracted Workers Companies employ, in Korea, often workers via manpower supply companies and via subcontracting agreements.  These employees are not retained directly by the Company, but are retained via a manpower company (“Dispatched Worker”) or a subcontracting agreement (“Subcontracted Worker”). The difference in these two type of relationships lies in the control over the workers – not in the mere nature of the retention according to the Korean Courts.  If the Company has a sufficient degree of control over the worker, in the eyes of the specific Korean court, the worker is deemed a Dispatched Worker and, thus, an employee of the

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Consequences of a Business Transfer in Korea: Employee Transfer?

In Korea, there is no statutory provision for the protection of employees in the event of a business transfer. Therefore, it has been left to the Korean courts to decide whether, and in what circumstances, employee transfer may occur as part of a business transfer.  The following is a basic explanation of the law of business transfer in Korea as it relates to the relationship between an employer and an employee. The Korean courts have generally held that, in the event of a business transfer, unless the employee objects, the employment relationship between the employee and employer (transferor) will automatically transfer to the transferee (without any need for the specific consent of the employee) – inclusive of the terms and conditions of the employment relationship existing at the time of closing of the business transfer, unless otherwise agreed to.  However, while it is a fairly well-established principle, this right to

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Sean Hayes Presentation to Korea Business Forum: The Korean Labour Law v. the Fourth Industrial Revolution

Sean Hayes commented on legal issues related to Korean Labour Law and Korean startups for the Korea Business Forum on October 18, 2018 at the Grand Hyatt Hotel in Seoul, Korea.  The Korean Business Forum is a group of professionals that share insight and their experience on issues related to doing business in Korea. The group is one of the most renowned business groups in Korea. “KBF meets twelve times a year and provides an opportunity for  senior executives to discuss among themselves and with experts specific issues likely to impact their operations and strategies in Korea and North East Asia. The form portrays a local and regional peerspective on today’s business environment in Korea and by combinijng the knowledge of EABC, KABC, outside speakers and AXP analysis’ ideas are presentaed to challenge participants. A stimulating and dynamic environment is provided with authoritative presentations which allow executivees to look beyond

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Enforcing Punitive & Liquidated Damages Awards against Korean Companies via Contracts with Foreign Subsidiaries of Korean Companies

A recent amendment of the Korean Civil Procedure Act added Article 217-2.  The Amendment has codified a holding by the Seoul Central District Court and other Korean courts noting, in part, that Korean Courts may refuse to “recognize foreign damage awards that clearly exceed amounts considered reasonable in Korea in violation of good morals and the social order of Korea” (99 KaHap 14496, S. Cent. Distr. Court, 10/20/2000). The Amendment allows Korean Courts, in Korea, the power to not recognize a damage award that the Korean Court’s perceives as “excessive.”  This standard-less “standard” leaves much wiggle room for Korean Courts. A typical situation is a case where an American importer sues a Korean conglomerate in a U.S. Court and damages are awarded to the U.S. company.  The damages may include liquidated, punitive and non-“actual” damages.  The American importer, then, attempts to enforce the judgment in Korea. There is a simple

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Exit Ban of Foreigners in Korea for Not Paying Taxes, Custom Duties or Violation of Law: Immigration Law Basics

The Korean Immigration Control Act and related acts allows the potential to permanently impose an exit ban on foreigners for nearly all acts that are determined by the Ministry of Justice as “harming the interest, public safety or order in the economy of the Republic of Korea” until the reason for the exit ban ceases to exist. (Immigration Control Act of Korea Article 4(1)5.) The Immigration Control Act of Korea, also, always Korean government agencies to request the imposition of an exit ban on foreigners.  Determination of the Ministry of Justice may be appealed within the Ministry and if turned down – may be appealed to the Administrative Court of Korea. Yes, this post is related to a matter we are presently handling.  The relevant provisions of Korean law includes: Immigration Control Act, Article 4 (Prohibition of Departure) Immigration Control Act, Article 4-2 (Extension of Period of Prohibition of Departure)

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Employment Background Checks in Korea: Not so Different from China

My friends over at the China Law Blog posted an article quoting the Chinese Business Leadership blog that noting that: “We were placing a GM for a Western family owned factory. They are small and troubled.  We found 15 thoroughly qualified candidates for the position. We had candidates tell us they worked at a company 5 years when they only worked. We had candidates tell us they were super valuable,  and the company does not want to let them go. We were able to find out that they were fired a year before while still in probation. As the last of the group of 15 refused to come clean and give us an accurate resume, we shook our heads in dismay. We are excellent at interviews and interview 90 minutes as our goal is to know. Despite that, we were unable to uncover these issues before the background check. We

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Distribution Agreements in Korea: Crawl before you Walk

Prior to going into any relationship with a distributor/agent in Korea, please read my post entitled: Finding a Korean Distributor: The Top 10 Things to Know Before Going to Bed with a Distributor in Korea. Please read that post in combination with this post, prior to engaging a distributor in Korea. We see too many Korean distribution agreements that are mere spun U.S. or European agreements.  Please have your Korean distribution agreement and all agreements you have in Korea drafted by an experienced and proactive attorney that has on-the-ground experience in Korea.  We see too many issues that could have been easily resolved by a carefully drafted agreement and a little due diligence. Issues to consider for your Korean Distribution Agreement: Will your distributor in Korea be your agent?  If the Korean distributor is an agent, generally, you will, only, be paying your agent In Korea a commission and you will be

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Korean Business Culture vs. Western Business Culture Explained by IPG Attorneys

We, often, have clients that proclaim that they can’t understand the way that Koreans do things.  They complain about an inability to reason, keep promises, express opinions and give a straight answer. Koreans have plenty of complaints about Westerners also.  Koreans, often, complain that Westerners concentrate too much on details and not enough on the big picture, care about money more than friendship and focus too much on efficiency. The root of these issues is vastly different cultural realities. Korean Business the Gangnam-Style Way The Lewis Cultural Model does an excellent job of explaining these differences.  The Lewis Cultural Model breaks cultures into three distinct categories: Linear-Active; Multi-Active; and Reactive. Linear-Active Cultures Linear-Active cultures base decisions and actions on logic.  Individuals in these cultures tend to be efficient, schedule oriented, and base decisions on a plan and reason.  These individuals are often criticized for focusing too much on the task at

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Injunctions Against your Former Franchisee for Competing Against your New Franchisee: Korean Franchise Law/Injunction Basics

Under the Fair Franchise Transactions Act of Korea (“Franchise Act”), a franchisee has the right, under Korean Law, to request the renewal of a Korean franchise agreement after ten years of successful operation of a franchise.  The Korean Franchise Act Article 13 (2) stipulates that: “A franchisee’s right to request the renewal of the franchise agreement may be exercised only when the total period of the franchise agreement, including its initial period, does not exceed ten years.” We wrote about termination of a franchise in other articles including: Termination of a Franchise in Korea. Courts in Korea are becoming increasingly apprehensive to enforce injunctions against operating of competing businesses filed by franchisors against franchisees.  The situation, often, occurs where a franchise is terminated and the franchisee operates a like business in the same location as the prior franchise.   Of course, all professionally drafted franchise agreements in Korea will have

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Involuntary Dissolution of a Company in Korea: Shareholder Disputes in Korean Companies

Under Article 520 of the Korean Commercial Act, a minority shareholder, holding at least 10 percent of the total and outstanding shares of a Korean company, may request to the Korean court of competent jurisdiction the dissolution of a company in Korea.  Korean court judges consider this procedure an extraordinary procedure and, only, rule in the affirmative, usually, after all other avenues to resolve the shareholder dispute have failed. However, this procedure is useful, in many disputes, in resolution of the shareholder dispute via litigation or pushing the defaulting shareholder into a settlement. Article 520 of the Commercial Act of Korea (Judgments for Dissolution) “(1) If, in any of the following cases, there exists unavoidable reasons, any shareholder who holds shares representing no less than 10 percent of the total issued and outstanding shares may request a court to dissolve the company; When the company’s business operation continues to be

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Korean Independent Contractor Risks: Korean Labor Standards Act Basics

The Korean Court System has been less reluctant, in recent years, to deem a Korean independent contractor an “employee” under the Labor Standards Act (LSA).  This fact remains true even when an employer establishes that the independent contractor is aware that he/she was contracted as an independent contractor, thus, not a regular employee of the Korean company. Upon the establishment of the status as “employee” in Korea, the individual is entitled to all of the benefits of an employee including, inter alia, severance and employment security, thus, increasing the compliance, tax, payroll and other risks to the foreign-capital invested Korean company. Obligations to Employees under the LSA The obligations to employees under the LSA are extensive and beyond the scope of this short article.  The more significant and obvious are the Korean legal requirement to provide severance benefits and employment security. With regard to severance benefits, a company must pay,

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Korea Licensing Agreements: Licensing of Technology, Trademarks and other IP in Korea

We always advise our clients for every license agreement that there is a very high probability that at the end of the agreement license payment obligations will not be honored by the Korean licensee. The same holds true for our Chinese and Southeast Asian practices. If a Korean licensee is not going to continue the relationship with the foreign licensor, many Korean companies simply choose to forego the obliged payments in favor of not responding to emails, phone calls and mail.  We represent many foreign companies that retain us to collect on overdue payments from the Korean licensees. We are often disappointed at seeing license agreements that are simply form agreements from U.S./European Law firms or agreements drafted by Korean law firms with Korean and foreign attorney hacks. Sorry to call fellow attorneys hacks, but after reading one of the license agreements from one of the “ubiquitous big firms,” the term

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Korea Blockchain Law Society Founded: Korean Crptocurrency Law Updates

The inaugural meeting of the Blockchain Law Society of Korea was held last week.  We wrote on the Korean Law Blog articles on Korean Blockchain/Alt Currency Law and shall be participating in the Blockchain Law Society and updating the reader on issues addressed by the Blockchain Law Society.  You shall find more articles on Blockchain, Alt currenices, Korean Crypto-currency Law and like topics on this blog over the next couple of months. We are looking forward to more lively discussions and hope that the Korean Blockchain Law society shall lead to a comprehensive Korean CryptoCurrency -Blockchain Law that does not lead to destruction of a unique and potentially profitable business opportunity for entrepreneurs in Korea and entrepreneurs that wish to invest in Korea.  We hope that foreign investors are, also, considered in these meetings and in the drafting of these laws.  Foreign investors play a key part in Korean business and locking

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Civil Court Proceedings in Korean Courts: Korean Civil Litigation Basics

The following is a timetable-based outline of Korean Civil Court Proceedings at Korean Courts.  Please note, this is the typical civil court proceedings and exceptions do and, often, exist at Korean civil courts.  Korean civil courts are less procedure focused than U.S., British, German and other Western nations’ courts, thus, allowing more flexibility for judges and the parties. The proceedings at Korean courts of first instance is, typically, completed within one year from the filing the complaint to a district court and appeals to the High Court in Korea (court of second instance), typically, is completed with ten months of filing the appeal to the Korean High Court.  Appeals to the Korean Supreme Court may, sometimes, take multiple years to complete. We have excluded from this list proceedings within the Constitutional Court of Korea, Korean Family Courts, the Korean Administrative Courts, Patent Courts, Small Claims courts and other special courts. 

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Korea’s Improper Solicitation and Graft Act: Kim Young-ran Act

The Improper Solicitation and Graft Act of Korea (“Graft Act”) was enacted on March of 2015 and came into effect in September of 2016.  Korea’s Anti-Corruption and Civil Rights Commission published in English and Korea a decent Handbook to the Graft Act.  The Handbook may be found at: Handbook to Korea’s Graft Act.  All companies doing business in Korea should understand compliance basics and have an understanding of the myriad of compliance rules.  The Graft Act is, only, the tip of the iceberg.  We shall be focusing on Korean compliance basics over the next couple of months on this blog.  The Moon Administration and the Korean FTA have aggressively acted upon alleged malfeasance in Korean companies and this is a time to consider a compliance audit, redrafting of compliance policies and procedures and, potentially, your employment rules. Please check back to the Korean Law Blog.  We shall be writing over the

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USA Today cites The Korean Law Blog and IPG Attorney Sean Hayes on Casino Gambling Law

An article in USA Today on Casino Gambling in Korea cites The Korean Law Blog and the main author of this blog on Casino Gambling in Korea.  The article may be found at:  South Korea wants to build casino industry where all are welcome but Koreans. The article notes, in part, that: “According to the Korea Center on Gambling Problems, which was established by the government in 2012, the prevalence of gambling addiction is two-to-three times higher in Korea than in other major countries. While it’s unclear how those statistics are compiled, the notion that Koreans are uniquely susceptible to gambling addiction is a widespread social theory that informs the laws surrounding the issue.” [ABTM id=1137] (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]

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