Sentences Lower for the Wealthier in Korea – According to Recent Study

The Korea Herald reported on an interesting study regarding sentencing differentials between, inter alia, those that embezzled lower sums of money to those that embezzled greater sums of money.   The study was commissioned by the Supreme Public Prosecutors Office.  I have not taken a look at the study, but will in the near future. The impression by many, in Korea, is that the most noteworthy cases of embezzlement and bribery concerning substantial amounts of money (often presidents, chairman of conglomerates and their family), normally, receive lighter sentences than those that are involved in less noteworthy crimes.  The study seems to substantiate this belief. However, again, I have never read the finding of the study.  The Korea Herald notes, in part, that:  “The courtroom should be the last place where money talks. Many Koreans, however, remain skeptical about whether this saying applies to the local judicial system as they have seen

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Korea’s Competitive Advantage Shrinking: Korea’s Education System to Blame? by Tom Coyner

The U.S. in particular has taken notice of Korea’s academic excellence. Korea’s education system has been held up as a contrary example to what’s not quite right with America. That is, until recently when the Huffington Post, the New York Times, and other American media began publishing accounts by Koreans of the purgatory that had been previously passed off as merely childhood here. One may suppose that the long-term future in terms of international competitiveness looks much more promising for South Korea than the U.S. But further examination suggests that may not be so. The good news for South Korea is over 80% of its young have some kind of college education, with a high school dropout rate being virtually zero. In contrast, the U.S. high school dropout rate is over 25%, with some states exceeding 40%. While Korea has one of the best-educated populations in the world, there are

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Class Action/Mass Tort Actions in Korea

Plaintiffs in Korea, with rare exceptions, are unable to file class action lawsuits in Korean courts.  The, only, two exceptions are under the Securities-Related Class Action Act of Korea (derivative/shareholder suits) and certain limited product liability claims under the Consumer Act of Korea (Suits by designated consumer advocacy groups or organizations). However, because of a recent massive data leak by major Korean-based banks, numerous NGOs, some attorneys and legislators have, again, demanded the implementation of a US-style class action system. Two bills are pending at the National Assembly of Korea entitled The Class Action Act of Korea and Consumer Basic Lawsuit Act of Korea.  The Korean Class Action Act is modeled after Rule 23 of the Federal Rules of Civil Procedure. We don’t see these bills coming to a vote anytime soon or the Korean Court System demanding the implementation of a class action law for consumers, because of Korean

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Korea Contracts Don’t Forget the Counter-party: Due Diligence before Executing an Agreement in Korea

We see numerous matters coming before us from parties in the States or Europe that are importing a product from a Korean company.  Of course, the products are either faulty or never come. We, also, see cases where a Korean company is importing a product and the importing party ends up not being the party that the American or European company thought they were doing business with. Also, often, companies in Korea are broken up into smaller companies.  The manufacturing arm may be one company, the sales arm one company and these companies are wholly owned by a holding company.  Of course, the agreement ends up being with the broke sales arm. Thus, know the counter-party.  Due Diligence is required.  Due Diligence is not checking the firms website or simply matching up the name on the PO with the Wire Instructions.  A wire will, normally, clear even if the name

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National Assembly of Korea Hopeless Gridlock Explained

The Korean National Assembly will, likely, never be able to pass any significant reform measures because of a recent amendment to law. The Diplomat has an good article on the issue.  The article notes, in part, that:  “A recent adjustment to the rules of South Korea’s National Assembly has made passing legislation a herculean effort. The National Assembly Advancement Act requires three-fifths consent from lawmakers before a bill can be put up for a vote during a plenary session. The act was passed in 2012 with the intention of preventing any one political party from riding roughshod over the opposition with a simple majority. It went into effect last year. The act also limits the power of the assembly speaker to bring a bill to a vote. Only under conditions of war, natural disaster, or with an agreement between the ruling and opposition parties can the speaker bring a bill

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Establishing a Company in Korea: New Korean Corporate Forms Available under Revised Korean Code

According to the Ministry of Justice, over 95% of corporations in Korea are formed as a Chushik Hoesa, while the Korean Commercial Code (KCC), at this time, defines four different types of Korean potential business entities.  In order to allow a little more flexibility, two new business forms have been created.  The recent amendment to the Korea Commercial Code, that will be promulgated from April of 2012, introduces two new forms of Korean business entities: Hapja Johap (LLP) Yuhan Chaekim Hoesa  (LLC) We expect that more foreign investors will choose the Hapja Johap and Yuhan Chaekim Hoesa forms and few new market entrants will utilize the Yuhan Hoesa form, because of the added flexibility of the Hapja Johap. Chushik Haesa (Joint Stock Company – Co. Ltd./Corp./Ltd.) Chushik Hoesa is the only corporate entity that is allowed, at the present, to publicly issue shares.  The revision will not change this.  The vast majority of incorporators in Korea chose the

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Witholdings Taxes on Transactions between Korean & Hong Kong Companies

The Republic of Korea and Hong Kong signed a double taxation treaty on July of 2014.  The treaty will come into force, if ratified, by the respective assemblies.  Under Korea Tax Law, the, normal, withholding tax is 22%.  The main purpose of the treaty is to reduce this rate and, also, allow the governments to share information on potential tax evaders.  This double taxation treaty, among other things, includes provisions for: A 15% Withholding Tax on dividends and a 10% Withholding Tax if the company receiving the funds owns a minimum 25% interest in the company remitting the dividends;  A 10% Withholding Tax on most interest and royalties;  A cooperation mechanism to share tax information in order to apprehend Korean tax evaders; and  Taxation on capital gains, only, in the country where the income was earned.  ___Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea

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Derivative/Shareholder Suits in Korea: Corporate Governance in Korea

Much like the United States, Korean law permits shareholders of a company to file a lawsuit against the company’s directors/third parties, on behalf of the company, when directors’/third parties’ wrongful acts result in losses or may later result in losses. In this type of legal action in Korea, known, often, as a derivative suit, the plaintiff-shareholders do not bring a claim as themselves as individuals, but as representatives of the corporation, the entity suffering the harm but which otherwise would be unable to raise a claim. In Korea, Article 403 of the Korean Commercial Code defines the statutory basis for derivative suits. The Code provides that a shareholder, holding at least 1/100 of the total issued and outstanding shares of a company, may sue a director on behalf of the company shareholders. With regard to listed companies, the code permits derivative suits when a shareholder has held not less than

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Korean Intellectual Property Theft Enforcement/Monitoring Program by IPG Legal is now Flat-Fee Billed

Because of an increase in interest from clients in flat-services, we have created a Flat-Fee Billed IP Theft Enforcement & Monitoring Program for our Korea & China offices.  As you know, most lawyers charge based on time even if they are not telling you they are.  We all calculate services based on time.  Thus, we developed this fee scale based, primarily, on the following factors: 1.  Geographical Scope of the IP Monitoring;2.  Number of Cease & Desist Letters Mailed; 3.  If the IP Theft will be Reported to the Prosecution; and4.  If a Civil Suit is Required to be Filed. We are utilizing the same group of retired Korean judges, prosecutors and attorneys for this work, in Korea, thus, the same aggressive and proactive approach is offered.  The, only, difference is you will no longer receive an invoice based on hours docked.  Nothing changes, but the format of the bill. 

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Korean Tourism Infrastructure Improving: Special Act for the Expansion of Tourism Accommodation

The Korean Tourism Organization under the leadership of a German-born non-ethnic Korean is the greatest reason for the increase in the number of tourists in Korea.  The KTO has been transformed from a government black hole into a vibrant organization with a bold vision. One of the most significant issues for tourists visiting Korea, because of the drastic increase in tourism over the past few years, has been the lack of adequate accommodation. Seoul is notorious for having, during peak times of the year, a lack of adequate business class rooms.  The situation is even more dire in many of the more remote areas.  The recent implementation of the Special Act for the Expansion of Tourism Accommodation Facilities is intended to help resolve this issues.  The Act’s most significant benefits includes: Extending the maximum period for a lease of a hotel facility to 30 years from the present five years;

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Executive Compensation Necessary to be Publicly Disclosed in Korea: Korean Commercial Law

Until a recent amendment to the Korean Commercial Code, the compensation of executives in listed companies was not required to be disclosed to shareholders.   Most developed economies require this disclosure. The prior law, only, required the total compensation for all directors to be disclosed to shareholders. The new rule, which comes into effect on November 29, 2013, requires that all registered directors of companies annual compensation be disclosed if the amount of the individual’s annual compensation exceeds KRW 500 million Korean won. The amended Korean Commercial Code, also, requires that companies disclose the criteria for choosing the compensation.  We suspect to see cases filed related to the payment criteria and differentials in payment between certain directors. Some family-controlled companies will, likely, drop some family members from boards. These family members will, likely, be paid as mere company employees and, not, as board members. Thus, circumventing the purpose of the

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Korean Small Business Partnerships/Joint Ventures: Pubs, Distributors, Exporters, Boutiques, Franchises and Basic Manufacturing etc.

Starting a small business in Korea can be enjoyable and profitable if you get the business on the right track from the start.  Too often we see those with “limited funds” (we all have limited funds -even multinationals have limited funds) choosing to forgo having the deals structured by a professional and just downloading a “partnership” agreement off the internet.  Do not be what my father likes to call President Obama – a knucklehead.  I have learned from my 13 years working in Korea (Can’t believe I have been here for 13 years), that this choice, normally, ends in either a failed business or a person contacting me with a case that, now, requires our litigation services.   I even saw cases end up in the prosecutor’s office.  The amount of money that it costs to have a professional draft these agreements, must, be considered part of the cost of

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The Korean War in Full Tom Coyner Color

There has been a great deal of activity commemorating the 60th anniversary of the Korean War armistice, but there has been little review of the events that made up the second half of that war. One may recall the basics: war begins in June 1950, UN responds in July, fighting around the Pusan Perimeter until August, Incheon landing and retaking of Seoul in September, UN forces capture North Korea, Chinese forces push back UN forces from October through December and fighting occurs around the 38th parallel during the first half of 1951. Then details seem to disappear during the two-year stalemate from July 1951, followed by the armistice negotiations with continued fighting until July 1953. In other words, after the Allied Forces retook Seoul a second time in March 1951, there is little mention, other than the casualties and a few battles. So, what really happened during those ensuing two

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Korean Invention Promotion Act: Employee Inventions in Korea

 The Korean Investment Promotion Act (“IPA”) was amended in June of 2013.  The amendments will come into force at the end of January of 2014.  Major Amendments to Korean IPA 1.  Employers will no longer obtain, automatically, a non-exclusive royalty-free license to all inventions by employees.  Employers will, now, have to implement company policies and/or include in employment contracts provisions to grant rights to inventions to employers.  The amendment will not apply to employers deemed by the Act on Small to Medium Enterprises to be SMEs. 2.  Employers will have an easier time establishing that “reasonable” compensation was paid in exchange for an assignment of inventions under the invention compensation policies of the employer.  The amendment, however, maintains the, present, uncertainty by still maintaining abstract guidelines, partially, based on future unknown profits that are, only, realized often years after assignment of the invention. 3.  Employers are required to establish an

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Criminal Convictions Finally Leading to Prison Sentences for Chaebol Leaders

Chey Jae-Won, younger brother of Chey Tae-Won (the former chairman of SK Group that was convicted of embezzling USD 43 million and sentenced to four years in prison earlier this year) just had his acquittal overturned last week by the Seoul High Court.  Jae-Won had, until now, managed to avoid experiencing the same fate as his older brother by convincing the Court that he had little to do with his brother’s fraudulent conversion of SK Group’s assets.  Now, Jae-Won is looking at a 3 1/2 year prison sentence that almost matches his older brother’s 4. Jae-Won’s conviction comes just a week after Koo Cha-Won (former chairman of LIG Group) and his oldest son were themselves slapped with three-year prison sentences for issuing USD 198 million of fraudulent company bonds. It has been a common complaint amongst many Koreans that chaebol leadership is never held to account in the court system. 

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Stock Options in Closed Korean Corporations

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

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Korea Legal News for the Week of September 1, 2013

This Week’s Korean Legal News Reported by Media Park calls for closer macroeconomic coordination during G20 summit Chun Doo-hwan’s family inching closer to paying fine Park invites Italian firms to Gaeseong Prosecution chief denies news report on extramarital child Gov’t to inspect KORAIL Hyosung chairman Cho under tax probe Seoul, Beijing agree on basic guidelines for FTA negotiations Coffee shops add to Pyongyang’s dolce vita Seoul to issue W200 bil. childcare bonds S. Korea places import ban on all fisheries products from Japan’s Fukushima region Most Recent Posts from The Korean Law Blog Renewal Rights/Terms for Commerical Leases in Korea Under Amended Commercial Building Lease Protection Act of Korea  South Korea Begins 7th Round of Negotiations with China on Free Trade Agreement Proposed Amendment to Real State Development Business Act of Korea: Rating of Real Estate Development Projects Korean Visa Rules Still not Strict Enough for Some in the Korean

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Korea Legal News for the Week of August 25, 2013

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

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Korea’s Low Birth Rate: Problem that May be Impossible to Fix

South Koreans take pride in leading the world in many categories. But one distinction is vexing – the lowest birthrate of the world’s most developed economies. The economic and political ramifications are massive.  And yet one wonders if effective countermeasures are even possible. The International Herald Tribune, recently, ran a story about private and government initiatives to encourage marriages and thereby raise South Korea’s birthrate.  For the past three years, for example, South Korea’s Ministry of Health and Welfare has promoted dating parties for its employees with counterparts from corporations. Other corporations have responded favorably to invitations from various government organizations to organize similar events.  Meanwhile, “no internal dating” corporate rules are disappearing as more and more business leaders take seriously birthrate-related problems, such as fewer future workers. While all of this may sound potentially positive, we find Koreans nonetheless being highly selective – no, extraordinarily picky – about whom

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Korea Legal News for the Week of June 9, 2013

This Week’s Korean Legal News Reported by Media S. Korea turns up the heat as foreign automakers make inroads S.Korea’s Samsung Heavy wins $1.3 bln order from Statoil S.Korea shippers join overseas rivals in shunning Iran business GM mulls moving Opel Mokka from Korea to Spain – report S.Korea opens $20 bln credit line for Mexico infrastructure S. Korea to discuss with Myanmar on inking investment guarantee pact South Korean women struggle in workforce Seoul to become bridge between U.S., China through FTAs Korea immune from U.S. military budget cuts: Pentagon official U.S. lawmakers renew call for putting N. Korea on terror list Most Recent Posts from The Korean Law Blog Definition of Copyright in Korea: Ideas vs. Expressions Definition of “Author” under Korean Copyright Act: Entertainment Law Cases in Korea Korea Enforcing Laws: Seoul Police Arrests Union Leader Legal/Compliance Checklist for your Korean Company: Top 7 Things to Do

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