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
Continue readingCategory: Korean Corporate and Compliance
Damages for Material Omissions in Franchise Disclosure Documents in South Korea
In April of 2015, the Supreme Court of Korea ruled that under Article 4; Article (9)(1); and Article 41(1) of the prior version of the Fair Transactions in Franchise Business Act (“Franchise Act”) damages may be obtained, from a franchisor, for all material omissions (Supreme Court 2014 DA 84824,84831, April 9, 2015) within Korean Franchise Disclosure Documents. Monetary damages may be obtained under Article 37(2) of the Franchise Act of Korea and Article 56(1) of the Monopoly Regulation and Fair Trade Act of Korea for “material omissions” within Franchise Disclosure Documents and other document presented to prospective franchisees. The damages may include the cost of build-out, rental, franchise fees and even, in some cases, lost opportunity costs. Additional, in some cases fines may be imposed, franchises can be de-registered and criminal charges may be brought against employees and management. The Fair Trade Commission may, additionally, impose a fine, even if
Continue readingCan you Succeed in Korea without Resorting to Bribery?
Perhaps in a few warped ways, I have a bit of affection for the Foreign Corrupt Practices Act, which bars American companies from bribing officials overseas. From a nostalgic perspective, I recall when this act was made into law while I was at my first “real job” at The Chase Manhattan Bank in Seoul. The immediate reactions around me in the US business community were those of dread. We were certain that we would be put to disadvantage when competing with the locals as well as with other foreign nationalities. It turned out not to be the case. In fact, by and large we discovered the act gave us legitimate cover not to “go local” in conducting unethical and potentially sordid business practices. In time, other Western nations passed similar laws. While this clean business movement has hardly eradicated corruption, it has contributed to reducing unethical business behavior – most
Continue readingKorea 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
Continue readingCivil 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.
Continue readingKorea’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
Continue readingUSA 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]
Continue readingDigital Forensic Reviews at the Korean Fair Trade Commission
The Fair Trade Commission of Korea (“KFTC”) implemented in April 2018 rules governing the review of digital evidence in investigations of businesses at the KFTC. The rules are entitled the Regulations on Collection, Analysis and Management of Digital Evidence (“Digital Forensic Evidence Review Rules”). The rules have changed the manner of executing investigations at the KFTC in cases where the KFTC perceives a need for a detailed forensic audit. As of 2017, the KFTC has engaged in digital investigations via a division named the “Digital Investigation and Analysis Division.” This Division hired technical computer staff that is assisting in investigations. This Digital Investigation and Analysis Division has engaged in aggressive gathering of forensic evidence from companies. The key aspect of the Regulations on Collection, Analysis and Management of Digital Evidence is to put in place procedures for the handling, storage, collection, security, disposal and processing of digital evidence in order to increase
Continue readingEnforcement of Arbitral Awards in Korean Courts: Arbitration Law Basics
After an arbitration panel outside of Korea renders an arbitral award against a Korean company or individual, typically, if the non-prevailing party lacks assets outside of Korea or the prevailing party needs to enjoin acts in Korea, the prevailing party chooses to enforce the arbitration award in Korea. Enforcement is not as easy as just giving arbitral awards to non-prevailing Korean parties. For enforcement of foreign judgments in Korean courts please see: Enforcement of Foreign Judgments in Korean Courts. When enforcing foreign arbitral awards in Korea, Article 37(1) & (2) of the Arbitration Act of Korea comes into play, thus, leading to the need to apply Korean Law to the enforcement of the arbitral awards and utilize a Korean court for enforcement. The good news is that in 2016, the Arbitration Act of Korea was amended to, among other things, allow for a quicker and less cumbersome manner of enforcing
Continue readingKorean FTC Criminal Referral Guidelines: Monopoly & Franchise Korean Law Updates
The Fair Trade Commission of Korea (“Korean FTC” or “KFTC”) amended the Korean FTC’s Criminal Referral Guidelines (“Amended Guidelines”) to motivate more active and aggressive enforcement of Korea’s Franchise, Monopoly and other related laws. We have seen a much more active enforcement of Korean law by the Korean FTC and expect more criminal referrals. The Amended KFTC’s Criminal Referral Guidelines places a very low threshold for referring a case for a criminal prosecution of employees and companies. The Amended Guidelines are effective since April 9, 2018. Prior to the present amendment, the prior Guidelines emphasized on, mainly, making criminal referral against key management and company representatives that were alleged to have taken in part in “high level” violations. The Amended Guidelines places a bulls eye also non-management employees and lowers the threshold for referring a case for prosecution. The Guidelines notes that adjudicating officers shall look, mainly, to: (a) the
Continue readingKorea’s Occupational Safety and Health Act Amendments for 2018 (OSHA Korea Updates)
Because of the perceived need, in Korea, to protect workers’ emotional and physical health in the service sector, the Occupational Safety & Health Act of Korea (“OSHA Korea”) was amended. The major OSHA Korea amendments impose a: Duty on Employers to Protect the Emotional & Physical Health of Employees The OSHA Korea Amendment mandates employers, in the service sector, to protect the emotional and physical health of employees from abusive acts of customers. We do not, yet, have substantial details on the actions needed to be taken by employers to meet these legal obligations. Enforcement actions against employees and an enforcement decree shall shed light on the specifics and we shall update the reader when more is known.We advise that employers in the service sector review policies in place in order for employers to not run afoul of the new OSHA law. It seems like a proactive approach that includes
Continue readingDismissal of Employees in Korea: Supreme Court of Korea Precedent
The Korean Supreme Court ruled, in March of 2018, that a company may terminate employees for one incident of employee gambling. The case stems from the termination of drivers that were caught on one occasion gambling prior to driving buses. The lower courts ruled, in short, that gambling was not a serious enough offense to justify termination since: The act of gambling, only, occurred on one occasion and thus trust between the employee and employer has not broken down; The employees performed their job functions adequately; and The non-termination of employment of the employees would not significantly interfere with the ability of the employer to successful continue its business- if the employees do not engage in these acts in the future. The Supreme Court reversed the decision of the lower court and noted that: Gambling could effect the rest period of the drivers and the job of the drivers requires
Continue readingDuty to Report Product Defects in Korea
Korean law emphasizes the obligations a seller of goods has to a buyer in the event that a good that the seller manufactures, imports, sells, or supplies is defective. The product defect reporting obligations are extensive and not reporting may have significant impact on your business in Korea. This Duty to Report is codified, in part, under Korea’s Framework Act on Consumers and Framework Act on Product Safety. This post is, only, intended as a short introduction to these acts. Additional explanations shall follow in posts over the next few weeks. For a general article on damages for product liability please see: Product Liability Damages in Korea and for a general article on mass torts and class action law suits in Korea please see: Class Actions/Mass Torts in Korea. In short, in some cases, business entities are required to report defects of goods which cause or are likely to cause danger
Continue readingBithump Crypto-Currency Exchange in Korea to Ban Trading in 11 Countries
With the Korean government auditing Korean Alt Currency exchanges and the Korean government looking at the regulation of crypto-currency, a major exchange, in Korea, has banned the trading on the exchange from Iran, Syria, Iraq, Ethiopia, Serbia, Sri Lanka, Trinidad and Tobago, Tunisia, Vanuatu, and Yemen. These aforementioned nations are on the Financial Action Task Force’s Non-Cooperative Countries or Territories black list. This Task Force, an intergovernmental agency, has deemed these countries to not have sufficient legal procedures in place to assist in preventing the laundering of money. The Korean government has raided Korean exchanges and investigated these raided exchanges for violation of Korean law. On of the major worries was the use of Alt Currencies, including, Bitcoin for nefarious reasons including money laundering and the purchase of drugs. No criminal charges were levied against any individual from Bithump, however, charges of embezzlement and fraud were levied against executives from Coinnest
Continue readingDefinition of “Ordinary Wage” in Korea: Korean Employment & Labor Law Basics
The courts of the Republic of Korea, for years, has struggled to find a consistent interpretation of an “Ordinary Wage.” The definition of Ordinary Wage, under Korean Law, was clarified by the Korean Supreme Court in two decisions handed down on December 18, 2013. The calculation of Ordinary Wages is important, since it is utilized to calculate statutory entitlements, and thus has an impact on the aggregate amount of contributions necessary to be paid to employees. For example, according to Article 56 of the Korean Labor Standards Act, an employer must pay 50% of the Ordinary Wage plus the Ordinary Wage for overtime, night and weekend work performed by the employee. Because of the potential for a large unknown future liability, this issue became the most significant issue, in the last few years, among domestic and foreign employers in labor and employment law in Korea. The basic Korean test is
Continue readingCivil Liability of Companies for Actions of Employees Off the Company Property and After Work Hours
Korea imposes, in some cases, liability on companies for actions of employees of companies even when the employee conducts an intentional wrongful act outside the workplace, after the work hours and beyond the duties imposed by the employer. The employer is not relieved of civil liability by a mere limiting the scope of duties of employees, warnings to employees or having comprehensive sexual harassment education programs. A, typical, sexual harassment situation, related to this issue, occurs after a company office party. The manager takes his team out to dinner and drinks. After the dinner and drinks, the inebriated co-worker is asked by the manager to a local motel. The inebriated co-worker alleges, in the morning, that she was incapable of consenting to the sexual advances or that she was pressured either implicitly or explicitly by the manger to have sexual relations with the manager. The courts even when a employer
Continue readingRights of “Non-Registered” Shareholders in Korea
Questions arise, often, in Korean companies if a non-registered shareholder (not placed in the Korean corporate registry), that can prove that the shareholder is the beneficial “owner” of shares of the company, may exercise rights of a owner of the company. The Supreme Court has recently made a running on this issue. Supreme Court 2015Da248342 Decided March 23, 2017 The Supreme Court, in this case, ruled that: “In light of the legal nature of a company whereby its ownership structure constantly changes depending on the issuance and transfer of shares, the purpose of the shareholder registry system under the Commercial Act lies in making it easier for a company to externally distinguish its legal relationship with numerous shareholders based on a cursory and uniform standard, thereby improving efficiency in handling matters related to the exercise of shareholder rights and ensuring legal certainty. Only a person owning a company’s shares and
Continue readingCompany Car Expense Deductions in Korea: Korean Tax Law Updates
Companies, in Korea, sometimes provide senior employees of the company a company car. A tax issue arises concerning the deduction of car expenses and the refunding of VAT. In practice “company cars” are, often, used for the company as well as private use. Thus, Korea has excluded deduction of expenses and exclusion of VAT for some automobiles. Corporate Tax Law formalities require Korean companies and Foreign Capital-Invested Companies, in Korea, to have detailed operation records or sufficient evidence to claim deductions and exclusions. The rules have tightened over the past few years and a proactive and detail-oriented accountant is necessary. For example, if the legal defined size of the company car is less than nine passengers: No VAT refunds are legally allowable (we have fund that some accountants in Korea are not even aware of this reality); Maintenance expenses are not deductible expenses; and Other expenses, including fuel are not
Continue readingTax Liability of Controlling Shareholders in a Korean Company: Tax Law Updates
Under Article 39 of Korea’s Framework Act on National Taxes, unpaid taxes owed to the Korean government are enforceable against certain “ologopolistic” shareholders of respective debtor company’s shareholder. This secondary liability of shareholders is codified within the Framework Act on National Taxation. Article 39 of the Framework Act on National Taxes, specifically, notes that: “Where the property of a corporation is not enough to pay national taxes, additional dues and disposition fees for arrears imposed upon or to be paid by the corporation, any person who falls under any of the following as of the date on which the national tax liability is established shall have the secondary tax liability for the amount of such money shortage: Provided, That in case of an oligopolistic stockholder under subparagraph 2, his/her secondary tax liability shall be limited to the amount calculated by multiplying the amount obtained by dividing the amount of such
Continue readingPrivity of Contract in Franchise Agreements in Korea: Korean Franchise Law Updates
Normally, in Korea, a contract/agreement cannot confer rights nor impose obligations upon a person who is no a party to the contract/agreement. One interesting case, in franchise law, applied this principle to the benefit of the franchisor and the detriment to a supplier. A Supplier delivered food through a Distributor to a Franchisee based on a franchisee requirement iterated in a franchise agreement with a franchisor. The case brings to light, also, the potential liability of franchisors for acts of Korean franchisees. The dispute occurred, of course, since the Supplier was not paid for an outstanding order, since the Franchisee was insolvent. The Franchisor (deep pocket) was not insolvent and, thus, the only available option for collection was via the Franchisor. One caveat is that the Franchisor was paid a commission by the Supplier/Distributor for sales to the Franchisee and as noted above, the Franchisee was mandated to use this specific Supplier. Thus, the
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