7 Musts to Succeed in Business in Korea

We have the unique pleasure to have a bird’s-eye view of numerous clients’ businesses in Korea.  At this stage of our experience in Korea we are, typically, able to determine which companies will, likely, succeed and which companies will, likely, fail.  We are far from perfect, but companies that succeed in Korea, normally, have the following seven things in common: 1.  Comprehensive Understanding of the Korean Market by a Neutral Local Consultant This understanding, normally, comes from one of the few business consultants, in Korea, that are capable of providing a decent market overview with a detailed list of potential targets and contacts within these targets.  We, only, work with a handful of Korean consultants, since most, we find, don’t have the skills necessary to proactively assist client, but still sell market research reports that seemed to be, only, obtained through a Google search. 2.  Great Initial Representative Director for

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Wills, Trusts, Pre-Nuptial Agreements, Living Wills, and Power of Attorneys in Korea

We receive numerous calls requesting the notarization of wills, living wills, general and specific power of attorneys, prenuptial agreements and other like agreements and documents in Korea. These documents are, often, just pulled from the internet.  Pulling these documents from the internet is not adequate – in most cases. We, sometimes, notarize these agreements for clients, however, in most cases we refer the client to their local embassy in Seoul, since the embassy stamp has a far less chance of not being recognized in a foreign jurisdiction than a Korean notarial stamp.  We, often, also, advise a redraft of the document. This post was not written to tell you not to call me about notarial issues (actually don’t contact me about notarial issues unless your nation does not have an embassy in Korea- contact your embassy), but to be aware that many of the agreements and documents that I have

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Enforcement 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

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Tax 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

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Privity 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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Debt Collection Cases in Korea on the Rise: Buyers and Sellers Beware

My firm has noticed a sharp increase in the number of requests for the debt collection services of my team. One of these cases involves an unpaid invoice from a British company to a Korean wholesaler for over USD 700,000. The British company was duped by a small paid invoice which was quickly followed by an unpaid large invoice. Of course, the Korean company (not a company –one guy and a personal bank account) was not capitalized and has few assets. The case shall be handled through a criminal filing. The other matters are for mainly low six-figure debts or claims based on faulty or non-delivered goods. Some of the cases involved nothing more than scams to the less than careful foreign businesses. Others were caused by the squeeze that the liquidity crisis has put on local small businesses. I have written articles on this in the past. Please conduct

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Korean Commercial Liens versus Korean Civil Liens

Korea, in short, has two major types of liens – Commercial Liens and a Civil Liens.  For example, in a dispute between a contractor and a landowner or developer, a contractor make execute a Commercial Lien or Civil Lien.  A Commercial Lien is governed by the Korean Commercial Code while a Civil Lien is governed by the Korean Civil Code.  I shall for ease, utilize the contractor and landowner (developer) for example purposes only.  For explanation of Korea’s law on attachment please see: Preliminary Attachments in Korea Korean Civil Liens Korean Civil Liens are governed by the Korean Civil Code.  The code mandates that the contractor, to execute the lien, must be in possession of the subject property and the monetary claim must have a nexus to the subject property.  It is interesting to note that the subject property does not need to be owned by the debtor. Korean Commercial

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Provisional Attachments of Assets in Pending Litigation in Korea Courts

A party attempting to collect on a debt or potential liability based on breach of contract or torts in Korea may obtain a Provisional Attachment of an Asset. Another useful tool to expedite proceeding in a Korean civil matter is to Obtain a Payment Order from a Korean Court.  A provisional attachment is considered provisional, since the attachment is executed prior to the final judgement. The, facial, purpose of a provisional attachment is to secure assets necessary for enforcement in cases where a defendant may conceal or dispose of assets. However, a provisional attachment, often, encourages settlement. We advise most creditors attempting to enforce a debt or potential debt against a debtor is to obtain a provisional attachment if the debtor is a company or individual without significant tangible assets.  Companies with significant assets are likely to pay debts after a judgement and, normally, are not significantly harmed by the attachment.   Courts

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English-speaking Korean lawyers and International Lawyers at International Law Firm in Korea discussing issues of Korean Law

IPG Legal is a leading client-focused international law firm with offices in Korea that is, often, selected over the ubiquitous Korean Law Firms when success is essential and success depends on nuanced street-smart advice, proactive  and unconflicted representation. Our attorneys are, intentionally. different from the crowd.  From our retired judge partners to our junior associates, we are all trained with an intense focus on client success, lawyer proactivity, and to understand the nexus between your commercial and legal needs. Our attorneys shall never push to you useless memos, non-nuanced legal advice or get you into litigation without an honest assessment of the merits and shortcomings of the matter. We are  – intentionally different from the crowd.  Globally Experienced – Locally Connected.  We are IPG.  Korean Legal Practices Korean Antitrust, Competition & FTC Arbitration, Int’l & Domestic Korean Civil Litigation Korean Criminal Defense Korean Corporate Law & Compliance Korean Employment, Labor &

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A Franchisor may be Unable to Prosecute a Franchisee for Embezzlement in Korea

Article 355 of Korea’s Criminal Act defines embezzlement as: “a person who, having the custody of another’s property, embezzles or refuses to return the property shall be punished by imprisonment for not more than five years or a fine not exceeding fifteen million won.” In a landmark case in Korea’s Franchise Jurisprudence, the Supreme Court ruled a franchisee may not be held criminally liable for embezzlement for “arbitrary spending of funds” and not paying franchise fees under the franchise agreement, since the Supreme Court deemed that the funds are not funds held, in short, in trust for the franchisor and the franchisor did not maintain a PNL (partnership-like) relationship with the franchisee. Franchisors in Korea, must, carefully monitor the financial situation of franchisees.  Often when franchises fail in Korea, the franchise fees are of the last priority.  Korea has pre-litigation measures that may be utilized to assist in guaranteeing franchise

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Execution/Enforcement of American, European & other Nation Court Judgments in Korean Courts

Question:  I have a final judgment against a Korean individual from a New York state court.  How can I enforce this judgment in Korea against this Korean individual? Korean Central District Court. Answer: A foreign judgment, in Korea, can be executed based on meeting the requirements of the Civil Execution Act of Korea and Civil Procedure Act of Korea.  The relevant provision are Article 26 and Article 27 of the Korean Civil Execution Act and Article 217 of the Korean Civil Act.  If you interested in enforcing a Korean judgment abroad, please view our sister blog at: Enforcing a Foreign Judgment in a New York Courts. The process of recognition and enforcement of a foreign judgment, often, is complicated, because of the need for translations of foreign judgments, the different style of foreign judgments and the, often, lack of familiarity of these foreign enforcement actions by Korean courts. The action

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Will the Korean Government Kill Bitcoin? The legality of Bitcoin in Korea

Local Korean vernaculars have reported that Bitcoin and other “Alt Coins” are to be investigated by the Bank of Korea, Korea’s Prosecutors Office and other government agencies. It is alleged by some in the Korean government that these crypto-currencies may be nothing more than Ponzi or Pump & Dumb Schemes.  While, others, proclaim these currencies are at the foundation of freedom and they help to fight inflation imposed by central banking authorities, allows for anonymous transactions and low transaction fees. If the Korea government has made up its mind on the future of Bitcoin in Korea we are, likely, to see, among other things, prosecutions, businesses being sanctioned for accepting Bitcoin and the blocking of sites that promote or utilize Bitcoin. Korea has struggled with the acceptance of new technologies that infringe on some of the major vested interests (e.g. Uber) and we suspect that Bitcoin will be no different

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Korea New Exchange (KONEX) Basics

The Korean Exchange (KRX) established, on July 1, 2013, an SME only-listed securities market with the, facial, purpose of providing a new avenue for SMEs in obtaining assets for investments.  A KONEX-listed firm with capabilities to list, at a later date, on the KOSDAQ or KOSPI may, also, benefit from a stream-lined procedure to list on the KOSDAQ or KOSPI.   Korea’s capital markets have been, strongly, criticized for not providing adequate funding sources for small companies.  Most funding for companies either comes from the banks or via modest government grants and loans.  With the banks becoming more conservative in funding ventures, because of the recent Korean banking crisis, the KRX launched the KRX, partially, to assist in resolving this issue.   The listing of a company on the Korea New Exchange (KONEX) is much easier than on the KOSPI or KOSDAQ. However, investing on the exchange may be difficult for

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Piercing the Corporate Veil in Korea: Suing Shareholders of a Corporation

It is possible, in some situations, for shareholders to be sued for the acts of a corporation.  The concept is called “piercing the corporate veil.” The Supreme Court of Korea has noted that the corporate veil may be pierced and a shareholder may be sued: “Where a company maintains the external appearance of a juristic person while it merely takes the form of a juristic person and, in substance, it is equivalent to other person’s private enterprise behind the corporate veil or used without justifiable reason in order to circumvent the application of laws against the person behind the corporate veil, the denial of any responsibility of the person behind the corporate veil with respect to an action of the company, based on the ground that such person is a separate entity and the legal effect of such action is attributed only to the company, cannot be permitted. It cannot

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Credit Rating Agencies in Korea: Due Diligence of Your Supplier, Franchisee, Joint Venture Partner & Distributors

Korea has established four credit rating agencies.  The four agencies are: National Information & Credit Evaluation (NICE); Korea Investor Services (KIS); Korea Ratings (KR); and Seoul Credit Rating & Information (SCRI). Some reports provided by these rating agencies are provided in English.  However, many of the English reports are not complete.  Thus, it is advisable to make sure if you have an English version of a report that it is same as the Korean version of the report. Additionally, it is best to have someone with knowledge of the Korean business climate review the reports, since some clues to issues are unique to Korea. Some companies are required to have a credit rating performed by a Korean rating agency.  If a company wishes to issue asset-based securities and unsecured bonds the company, in Korea, will need to apply for a credit rating via one of the Korean credit rating agencies.

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Collecting a Debt in Korea: Payment Orders are your Friends

We receive many emails concerning our collection services and this answer is an answer that I give for most collections matters involving debts with debtors that appear solvent. 1. Obtain a Payment Order & Send a Demand Letter (지급명령) A Payment Order Complaint is filed to the court and this complaint, if accepted by the court, is served on the debtor-defendant.  If the complaint is not answered in 14 days by the defendant the case is finalized and this finalized judgment can be executed.  If you are savvy, speak Korean and have some understanding of law, a payment order can be filed without an attorney.  However, for any substantial debt, of course, hire an attorney.  In many cases it is advisable to ascertain the response of the defendant and put a little fear into the defendant without engaging in a court procedure by sending a Demand Letter.  We find this to

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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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Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of July 21, 2014

Weekly Korean Legal News From International Law Firm – IPG Legal for the Week of July 21, 2014Korean Legal News Reported by the Media on the Week of July 21, 2014 South Korea Plans $40 Billion Stimulus to Tackle Weakening Growth Seoul to push tax on corporate cash reserves U.S. Chamber of Commerce chief urges FTA implemantation Workers in Their 60s Outnumber 20-Somethings Mortgage deregulation raises concerns Most Recent Posts from the Korean Law Blog Debt Collection in Korea: Foreign Creditor vs. Bankrupt Korea Debtor Opportunities in Korea’s Growing Tuning & Performance Modification Industry for Foreign Companies Korean Fugitives on the Run: Getting more Difficult with Change of Law Distribution Agreements in Korea: Crawl before you Walk Is Samsung Doomed? No Innovation Price Trap ___ Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney

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Debt Collection in Korea: Foreign Creditor vs. Bankrupt Korea Debtor

The number of bankruptcy and rehabilitation filings in Korea are on the rise.  The Korean economy may be entering into a recession.  The last creditor to be paid is, typically, the foreign company. We receive emails, on nearly a daily basis, from companies and individuals attempting to collect a commercial debt in Korea. Many of these creditors are not aware that the debtor has filed for bankruptcy or is experiencing financial difficulties.   Please follow this basic advice and take a read of other others we wrote on this topic. Before Engaging in a Relationship with a Korean Company:1. Before engaging in any work or giving a Korea company money – please do a little due diligence.  Many SMEs and even conglomerates (mainly construction companies) are experiencing serious financial difficulties. Do a little due diligence before wasting your time and money.  If you find that the company is experiencing financial

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Garnishing Wages in Korea: Collection of Debts in Korea

I received a call from a friend asking about information concerning collecting on a large personal debt. He loaned money to a “friend” and the friend never made a payment on the loan. Word to the wise, don’t make large loans to friends—-cry poverty instead. In Korea, after a judgment or order to pay by a court, a plaintiff can collect on an unpaid debt through garnishing wages. Garnishing of wages is normally the best way to guarantee the collection of debt when a debtor doesn’t have real or personal property.  Most law firms can perform the service for a modest fee. Amount that May be Garnished in Korea Less than W1.2mil (No wages can be garnished) W1.2mil – W2.4mil (Monthly Wage – W1.2mil) W2.4mil –W6mil (1/2 Monthly Wage) Over W6mil (Half monthly Wage minus W3mil divided by two plus W3mil minus monthly wage) Examples:1. W2,000,000 Monthly Pay (Can garnish

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