Protecting Brands in Korea Getting Easier?

This week a Seoul Central District Court awarded damages to Chanel for defamation inflicted on Chanel by a room salon that was branded as Chanel Business Club.  The court noted that: “The defendant, by using Chanel’s image for his business which is commonly associated with a negative image, inflicted damage to the brand value of Chanel.”  The defendant never responded to the suit. A room salon is a type of bar where girls entertain men in private rooms by engaging in friendly banter.  Some of the clubs allow girls to leave the bar with the bar patrons.  This trend of allowing damage for damage to the business reputation is welcome, however, the damages awarded are, often, so trivial, that few brands are willing to file suit.  Chanel seems to want to, merely, warn others from using its brand in a nefarious manner. The court awarded damages to Chanel in the

Continue reading

CEO/Chairman of Chaebols Serving Time in Jail in Korea?

Things may be changing in Korea.  The Chairman of Hanwha Group was sentenced by the Seoul Western District Court, today, to a KRW 4 billion fine and four years in jail for misappropriating/embezzling Hanwha Group funds.  Hanwha’s Chairman Seung-youn Kim, a few years back, was convicted of beating a young man with a pipe and threatening the life of other individuals.  The Korean Court System sentenced Kim to no time in jail for that offense and the president, eventually, pardoned Kim with a number of other presidents and chairmen of Korean conglomerates.   Is this a sign that things are changing in Korea?  Will the Seoul High Court uphold the judgment?  Will the President pardon Kim? As we know, many chairman and presidents of companies have been convicted of embezzling company money and have received no time in jail.  It will be interesting to see if this judgement will be

Continue reading

Stock 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 reading

There Goes the Neighborhood: Samsung “Union” Allowed to Protest in Front Of Samsung Headquarters

The Korea Times has reported that the Administrative Court in Seoul has overturned the decision of the Seoul Metropolitan Police Force to disallow a rally in front of Samsung headquarters.  The rally was to honor the memory of a Samsung Electronics employee who died of leukemia.  Samsung has been accused of using chemicals in their manufacturing processes that are harmful to the health of workers.  Some have claimed that these specific chemicals are not being used in other developed nations. Samsung and other large conglomerates are beginning to be treated equally by the government to other companies because of, inter alia, the realization that Samsung and other companies have abused their position to the detriment of the population.  Additionally, politicians are increasingly realizing that Korea future growth will likely come from SMEs and not large family-controlled conglomerates.  The Korea Times quoting Yonhap news reported that: The Seoul Administrative Court accepted

Continue reading

Korea 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 reading

Korea Fair Trade Commission To Investigate European Car Makers

The Korea Times has reported that the Korea Fair Trade Commission is considering investigating BMW, Mercedes Benz, Audi, and Volkswagen for price fixing.  The Korea FTC has aggressively investigated both foreign and domestic companies for allegations of price fixing and other unfair trade practices. The Korea Times article, in part, notes that:   After monitoring the prices of BMW, Mercedes Benz, Audi and Volkswagen vehicles, the country’s most popular imported auto brands in that order, officials at the Fair Trade Commission (FTC) said Wednesday there are reasons to allege that these companies have been involved in profiteering and collusion. FTC didn’t say whether or not it will conduct a probe but on the basis of findings, it reserves the right to do so at its own discretion. The automakers have lowered the prices of their cars by an identical 1.4 percent after the Korea-EU free trade agreement (FTA) went into

Continue reading

Korea 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 reading

Fines by the Korea Fair Trade Commission Increases for Abuse of Market Position and Unfair Trade Practices in Korea

The Fair Trade Commission of Korea has implemented substantial amendments to its guidelines for imposing fines on companies doing business in Korea.  The Amendments were detailed in a document the Fair Trade Commission of Korea calls the “Amendment Notice.”  This Amendment Notice comes into effect on April 1 of 2012. The Amendment Notice will likely increase the fines imposed by the Fair Trade Commission.   Prior to the Amendment Notice violations of the Monopoly Regulation and Fair Trade Act would result in lower fines than that authorized by Korean Monopoly Law.  The change will, likely, substantially increase the fines. INCREASE IN FINES FOR UNFAIR TRADE PRACTICE AND ABUSE OF DOMINANCE IN MARKET The Amendment Notice will likely increase fines for Abuse of a Companies Dominant Market Position in Korea from 2 % to 3% of revenues earned because of the violation.  Additionally,the fine will be increased from 1% to 2% of

Continue reading

Participating 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 reading

No Court Apprasial Necessary in Korea for In-Kind Contribution to Company

The Presidential Decree of the amended Korea Commercial Code notes that an appraisal by the Korean courts is no longer necessary when issuing equity stocks in exchange for an in-kind contribution in a company if: 1.  The amount of the in-kind contribution is less than KRW 50,000,000 and accounts for less than 20% of the entire equity of the company;2.  The value of the in-kind contribution is less than the book value listed in the balance sheet of the issuing company; and3.  Listed securities are contributed at a price equal to or less than the market price. Other posts on the amended Commercial Code of Korea: Korean Commercial Code Revisions Make Capital Reductions in Korea Easier 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

Continue reading

Korea Corporate Governance: One of the Worst in World According to Economist

What is the cause of the Korean discount? An economist article hits the nail right on the head. So what is the source of the “Korea discount”, which means that the KOSPI has a forward price-to-earnings ratio of under ten, below most other Asian stockmarkets (see chart)? There are a few possibilities. The national economic model is still built on exports, often in highly cyclical industries such as shipbuilding. The capital structure of South Korean firms has historically been debt-heavy.In this section But the prime cause of the discount is more likely to be poor corporate governance at the family-run chaebol conglomerates that dominate the economy. Nefarious schemes to pass on control to sons, avoid taxes and exploit company assets for the benefit of family members are widely discussed in private. They are also lambasted abroad: a 2010 survey by CLSA, a broker, placed the country third-from-bottom in Asia on

Continue reading

Korean 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 reading

Maximize Benefits of Korea’s FTAs with U.S. and EU via Legal and Business Consultants in Korea

IPG Legal is happy to announce the formation of the first team of professionals dedicated to providing clients advice and representation on how to maximize the benefits of the KORUS and KOREU FTAs for EU, U.S. and Korean companies. IPG has compiled a team of Korean and international attorneys, senior company executives, patent attorneys, accountants, recruitment professionals, business consultants, custom agents and other professionals to provide services to American and EU companies doing business in Korea under the KOREU and KORUS FTAs.  Since, we are not simply a team of lawyers, we are proud to be the first one-stop shop for all companies wishing to import products into Korea, form strategic relationships with Korean companies and entrepreneurs, retain Korean employees, resolve disputes in Korea and obtain approvals to import and export products from and into Korea. Our extensive research over the last few months of the US and EU FTAs

Continue reading

Acquiring Shares in Closed Korean Corporation in Exchange for Product at Discount: Don’t Forget the Due Diligence in Korea

I just received a phone call from a prospective client with a wonderful product that has been offered a sweetheart deal.  Whenever I hear that someone has received a no risk or sweetheart deal in Korea, a red flag immediately goes up in my head and I immediately request the client to let me do a couple of weeks of due diligence. The, ubiquitous, sweetheart deal is ownership of shares in company in exchange for some benefit from the foreign partner.  Too often, the Korean company is a shell.  The shell is broke with liabilities that far exceed assets.  The shell, however, is paying his management handsomely through a variety of interested transactions and access to the expense account.  In one case I regrettably saw, the company was under investigation of the prosecution. Thus, your sweetheart deal may lead to unexpected liabilities, the deterioration of your brand image, the eyes

Continue reading

Korea Fair Trade Commission to Enforce Mislabeling and Misleading Advertisement Law in Korea: May the Seller Beware

In June of 2011, the Korea Fair Trade Commission (KFTC) has begun to enforce Notification of the Standards on Imposing Penalties on Companies that Act on Fair Labeling and Advertising.  The KFTC is very aggressive in enforcing law.  We suspect to see a few public cases this year concerning mislabeled foreign products A penalty may be imposed only if:  The Act was violated on two or more occasions in a three year period; or Serious harm is realized by customers; or Seller engages in prohibited acts that are intentional or are a clear violation of law (typical vague catchall language). We have run into a few companies over the years that were exporting products from a particular country, but the country of origin of the product was actually a third country.  Check your labeling an insure that your labels reflect the proper quantity, quality, ingredients and country of origin.  __________ [email protected]

Continue reading

Compliance Control Standards in Korea: Amended KCC

I just realized that I have written an article on the new Compliance Officer System in the Korean language, but have not written about the matter in the English language.  Sorry to the handful of the readers of this blog that may be interested in this article. The Korean article appeared in the Korean Language Legal Times.  The new system will come into effect when the amended KCC comes into effect in April of 2012. Compliance Control Standards under Article 542-13 of the amended Korean Commercial Code (KCC) will be only applied to listed companies with capital holdings above a threshold amount. The determination of the threshold amount and the qualification to become a “Compliance Officer,” along with other key aspects of the amended KCC, has been delegated to the President through his power to issue presidential decrees. Thus, this post will be updated when the presidential decree is issued

Continue reading

Mandatory Audit Committee/Statutory Auditor in Amended Korean Code

The Amended Korean Commercial Code (KCC), that comes into effect in April of 2012, will require listed Korean companies with less than KRW 2 trillion in assets to either: Appoint a Statutory Auditor; OR Form a “Mandatory Audit Committee If a Mandatory Audit Committee is formed, a shareholder with more than 3% of the voting shares is prohibited from voting the shares in votes concerning the Mandatory Audit Committee. Prior to this amendment, the “3% Rule,” Mandatory Audit Committee and statutory auditor were, previously, avoidable by listed companies in Korea with less than KRW 2 million in assets through the adoption of a General Audit Committee. The General Audit Committee allowed a shareholder with more than 3% of the voting shares of the company to vote for the appointment of members of the Committee. Because of perceived transparency issues, the exception, available for smaller listed companies under the present KCC

Continue reading

Limited Liability Companies under the Amended Commercial Code of Korea

Yuhan Hoesa is a form of a company in Korea similar to a western Limited Liability Company.  It has only been utilized, to date, by small privately held corporations and some financial companies under the Korean Asset-Backed Security Act, Korean Capital Markets Act or the Financial Investment Services Act. The revised Korean Commercial Code (KCC) allows for the more efficient and effective utilization of the Yuhan corporate entity.  I will be advising the use of this company form for some of my clients.  In the past, few clients would be advised to form a Yuhan Hoesa.  The new Korean Commercial Code is scheduled to be implemented in April 2012.  No benefits from the amended KCC may be availed of prior to the implementation of the amendments.  Major Revisions KCC Respecting Yuhan Hoesa: Unlimited Number of Members.  Prior to the amendments only 50 members was authorized without the express approval of the courts.

Continue reading

Don’t Mess with the Big Boys in Korea: The Google Korea Saga Continues

In the past, raids have been conducted by the National Police Agency concerning alleged violations of Korea’s privacy law stemming from mapping software that is in direct competition with a product from the same parties that filed this present complaint. This time, the Korean Fair Trade Commission (FTC) raided Google headquarters in Seoul. The raid is intended to reveal information that Google is prohibiting or using tactics to delay the use of Korea’s Naver browsers and other browsers on the Android operating system. A complaint by the owners of Naver was filed to the FTC in April alleging, in short, that Google Korea has restricted the ability of smart phone manufacturers from pre-loading search engines onto the Android operating system. According to a Wall Street Journal article, a Google spokesperson is credited with noting that “Android is an open platform, and carriers and OEM partners are free to decide which

Continue reading

Conflict of Interests in Korea: Lawyers as Outside Directors of Listed Korean Companies

The Korea Times published an interesting article that all of us at local law firms in Korea know very well.  Korean listed companies love to hire lawyers as outside directors.  Many of these companies know that these lawyers will make very little noise when it comes to board action or inaction because of the often strong financial relationship between the firm and the company.  Additionally, many of these lawyers are hired by majority shareholder or friends that are company directors.  The Korea Times article notes that: According to the report by Chaebol.com, of the 454 outside directors hired by the top 100 listed companies in the country, 76, or 16.7 percent, are lawyers or advisers for local legal firms . . . The Financial Supervisory Service, meanwhile, said it has no authority to regulate outside directors hired by companies, while the Justice Ministry said it could slap fines on violators for hiring lawyers,

Continue reading