While Korean Law does not specifically detail the differences in treatment in law between the non-renewal (expiration) of a distribution agreement versus the termination, in reality, Korean courts are less likely to rule in favor of distributors in cases where a distribution agreement is not renewed. Thus, typically, it is advisable to have a distribution agreement based on a specified term of years. However, even with the expiration of the Korean Distribution Agreement, termination risks exist. In some cases, Korean
Continue readingCategory: Korean Contract Law
Non-Compete Restrictive Covenant in Employment Contracts in Korea
Korean courts have invalidated numerous, non-compete agreements, reduced the amount of time of the non-compete period and/or have reduced liquidated damage amounts for violation of non-compete agreements. Courts typically balance the freedom to work (an ability to work outside the specific field) with the significance of the interest in the employer to enforce the covenant not to compete. For an updated article on this issue from 2023 please see: Non-Compete Clauses in Korean Employment Agreements. The primary factors courts utilize
Continue readingTender Offers in Korea: Conditional Offers under Korea Capital Markets Act
The Korean Capital Market Act and related regulations dictate the basics for tender offers in Korea. The rules in Korea are, simple: 1. If the total number of tendered shares is less than the intended number of shares to be purchased by the tender offeror, the offeror may not purchase any of the shares; and 2. If the total number of tendered shares is more than the number that is intended to be purchased by the tender offeror, the tender
Continue readingStatutory Severance Obligations in Korea after Acquisition of Company in Korea
Korean employers have attempted, in many cases unsuccessfully, through mergers, to reduce the statutory severance obligations of a company through a company acquiring another company with a workforce with large outstanding severance obligations. The acquired company, in most cases, is strapped with debt and an inefficient workforce. Prior to a merger, please check the statutory severance obligations and other liabilities even if the merger is a mere “asset” merger, since Korea is proactive on obligations it feels are owed to
Continue readingA “Tasty” Exclusive Agent Agreement for Artists & Entertainers in Korea: Entertainment Law Basics in Korea
The Fair Trade Commission of Korea (FTC) created a sample standard-form Exclusive Agent Agreement for Entertainment Agreements, in Korea, that was, recently, challenged by the Chinese Band Twin Duo “Tasty.” The Chinese band filed a lawsuit against the Korean entertainment company – SM C&C – in order to invalidate a 7-year exclusive agent agreement – claiming that because of major differences with the Korean entertainment company, the relationship between the parties was frustrated. SM utilized a standard-form agency agreement that
Continue readingStarting a Company in Korea: Establishing a Foreign Capital-Invested Korean Company, Branch or Liaison Office
Korea, for many businesses, is an excellent market to enter. We assist numerous franchisers, tech companies, chemical companies, oil & gas companies, automotive suppliers, defense companies, and basic materials and manufacturing companies on compliance and contentious issues related to their business in Korea. We, also, assist entrepreneurial individuals in establishing and doing business in Korea. To establish a company in Korea, there are, in short, three legal manners for a foreign company or individual to do business in the Korean
Continue readingKorean Distributor Sales Territory or Customer Restrictions in Korea: Korean Distributor law Agreements in Korea
Korea’s Distribution Law is governed, primarily, by the Commercial Code of Korea, Monopoly Regulation and Fair Trade Law of Korea (“FTL”), and the, newly enacted, Fairness in Distributor Transactions Act of Korea. These laws comprise a substantial body of law that is consistently evolving. The main regulatory body enforcing the FTL of Korea is the Fair Trade Commission of Korea (“FTC”). The Fair Trade Laws of Korea, in most cases, creates the most significant risk for suppliers and manufacturers doing
Continue readingLiquidated Damages vs. Penalty Damages: Korean Contract Law Basics
Liquidated Damages v. Penalty Damages in Korea In Korea, liquidated damage clauses in South Korean contracts may be invalidated if the liquidated damage amount is deemed, by a Korean court of law, as “unduly excessive.” (Civil Act Art. 398(2)). Article 398 of the Civil Act may be found below. Korean Liquidated damages law is governed by the Civil Act of Korea and related Korean Law. However, if an agreement, in Korea, notes a “penalty,” the amount of the “penalty is
Continue readingEnforcement of Sales Promotions by Franchisors under Korean Franchise Law
Can an international franchisor force a local Korean franchise to cut the prices of a product via a sales event? This issue was addressed by the Korean Supreme Court in 2003Du7484. In this Supreme Court of Korea case, a franchisor, among other things, mandated via the franchise agreement for a franchisee to hold sales events. The franchise agreement did not specify the specific details of the sales events. The franchisor elected to utilize the clause in the franchise agreement to
Continue readingKorean 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
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