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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Attaching Assets in Korea: Security on Movable Property and Receivables in Korea

The Ministry of Justice has recently announced a draft bill concerning the securitization of movables and receivables. The Bill has been pushed for strongly by SMEs. SME’s have complained, since the 1997 Currency Crisis that they are unable to adequately capitalize at market rates. Representatives of the IMF, that I spoke with a few years back, also were very keen on this type of bill. They believed that this Bill will help foster SMEs and new entrant’s potential for innovation and growth. At present, over 92% of securitized lending is through real estate. The reason stems from the lack of a disclosure system for movables and receivables. The Bill intends to address this issue and solve the problem of SME with adequate raw materials, account receivables, intellectual property, and inventory and no real property. Basic Details of the Act on Security on Movable Property and Receivables (the “Bill”): 1. Grantors

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Do you Sell Buggy Whips? Succeeding in a Competitive Korean Market

In many ways, the 19th century continued until the outbreak of World War I. The 20th century ended with the fall of Lehman Brothers.  In confusing times such as these, it is natural for people to draw parallels as a way to understand current events surrounding us. They hope to gain some insight on an uncertain future. Here are some examples: A recent issue of BusinessWeek suggested that America of 2009 may learn from Japan of the 1990s. In Korea, journalists, businesspeople and even some economists refer to the 1997-98 Asian financial crisis as a case study from which they may forecast a future. But America is not Japan. In so many cultural and political ways, such comparisons defy making accurate projections. And the “IMF Crisis” was a regional event. It was relatively isolated from the global economy, compared to the worldwide crisis we face today. Today, several public figures

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KORUS FTA: Impacts on Trade & Investment for Korea and the States (Guest Post by NerdWallet Journalist)

Guest Post by Maxime Rieman of NerdWallet In March 2012, the U.S.-South Korea Free Trade Agreement (KORUS FTA) went into effect after years of bilateral negotiation and months of contentious debates in both nations. After the North American Free Trade Agreement (NAFTA), this is the largest free trade agreement to which the United States has pledged itself. KORUS FTA covers a wide range of investment and trade matters and reduces each nation’s tariffs on the other’s goods by 95% over half a decade. Given the close economic ties between the U.S. and South Korea—the U.S. is South Korea’s third-largest trading partner and South Korea is the seventh-largest trading partner of the United States—, this massive agreement is bound to have a wide gamut of both positive and negative consequences for each nation. FTA Impact on the United States• Reduced costs for American consumersSupporters of KORUS FTA have pointed to the

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10 Top Cities in Asia for FDI in 2012- One Korean City on the List

The Financial Times, yearly,  posts on its Financial Intelligence site a ranking of the top 10 destinations in Asia for Foreign Direct Investment.  One Korean city appears on the list, three Chinese cities and four Australian cities along with the usual characters.   1.   Singapore2.   Melbourne3.   Hong Kong4.   Brisbane5.   Sydney6.   Busan7.   Auckland8.   Perth9.   Guangzhou10. Chengdu ________Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team for an international law firm. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. (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]

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Guide to Winding-Up/Permanetly Closing a Korea-based Company

Any business in Korea that are registered at a corporation must wind-up their company to legally close their business.  Many companies, however, choose to forgo this step thinking that no repercussions will be felt.  This belief is far from the reality.  I know a pending case that has lead to prosecutions, a lawsuit of a related company and a tax audit of an individual shareholder. The following is the procedure to close a company in Korea.  Please note that this is not intended as an exhaustive explanation of the procedure. Step 1First, execute a special resolution to dissolve the Korea-based company at a general shareholder meeting.  The special resolution, in most cases, must be adopted with an affirmative vote of 2/3 of the shareholders present with 1/3 of the shareholders in attendance. Step 2Then, unless the articles of incorporation of the Korean company notes a different procedure, the directors may

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Top Ten Mistakes of Companies Doing Business in Korea

Our law firm has been dealing in Korea with foreign clients doing business in Korea of all shapes and sizes.  Surprisingly, we see many of the same issues from our multinational clients that we see from our SME clients, thus, we drafted this post.   TOP TEN ERRORS OF COMPANIES IN THE KOREA MARKET Lack of market research.  Selling in China, Japan, Malyasia, Singapore etc. is vastly different than selling in Korea.  Get a good local market research study concluded by a local market research company.  No Due Diligence or Poor Due Diligence.  Read my posts on this issue. Listen to my Mother: JVs in ASIA;  Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts. Register your trademarks.  Your international filing is not adequate protection in Korea. Read my post on the issue at: Don’t Just Trust Us: Trademarks in Korea Draft Korea-tailored contracts.  Your international joint venture,

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Finding a Korean Distributor: Top 10 Things to Know Before you Jump into Bed with an Agent in Korea

Too often we deal with clients looking to collect on unpaid invoices to distributors/customers in Korea and resolve IP and other disputes between these distributors/customers because of clients rushing into relationships without vetting out the anticipated distributor or having a very poorly drafted distribution agreement.  Many distributors in Korea are fantastic, while, others are nothing more than order processors -they, simply can’t or don’t want to sell.   Additionally, in these tough economic times, too many companies, in Korea, are struggling to stay afloat.  If your distributor doesn’t know the market, you will find yourself with unpaid invoices from customers and issues with your distributor.   Do yourself a favor and consider the following before engaging a local company to distribute your products. 10 Ten Things to Consider Prior to Doing Business with a Distributor in Korea Has the Korean distributor worked with other foreign companies?  If not, you are dealing

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Korea Due Diligence: Not So Different From China

Steve Dickson wrote a great article entitled China Due Diligence. Not Optional – that I will steal and copy at length. His article appears on the China Law Blog. The blog is a must read for all doing business in China. Most companies are not aware that due diligence is required whenever you do any kind of business with a Chinese company. If you do not already know the Chinese company with which you will be conducting business, you must confirm that the company really does exit and that you are dealing with the actual  company and not an impostor. Substitute Chinese with Korean and we have a good article for this blog. I had a client contact me asking for advice on how to collect a debt of USD 150,000. I first asked the client for the name of the debtor and he gave me the name JH Park.

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Debt Collection in Korea

With the recent economic crisis, my Korean law firm has received a noted increase in the number of calls concerning collecting debts from Korean debtors. The debts have been mainly from small U.S. & British importers. Most of the matters concerned unpaid invoices and commercial loans.   A few of the calls concerned, simply, scams by Korean exporters. A few basics steps can help your company not to be duped by Korean businesses and obtain the money you are owed. Request the Korean company’s business registration number and registered business address.  If they claim not to have a business registration number — run.  Check that the number and address is correct. Make sure the person you are talking to is actually working for the company that you believe you are doing business with. Call the main company number and send an email to the main company email address listed on the company’s website.  If you smell a

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Debtor’s Liability to New Owner after Transfer of Business and Trade Name

A developer recently contacted me concerning a dispute with a supplier of building materials. The developer purchased building materials from a supplier with payment to be forwarded 30-days after receipt of the materials. This is a common practice when a supplier has a long-term relationship with a developer, provides a consistent flow of supplies to a developer, and the developer is solvent. Here comes the problem. The supplier was sold and the business and trade name was transferred to a new owner. The problem arose when the developer paid the old owner, who the manufacturer believed was still the owner of the supplier, for the building materials. The developer paid the old owner at the business office of the supply business without noticing any difference in ownership and without being informed by the old owner of the change of circumstances. As expected, the new owner charged the client for the

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Deceptive Practices Under Korean Commercial Code

This article appeared in the Korea Times on Feb. 15, 2008. Deceptive Practices Under Commercial Code Dear Professor Sean Hayes: I lent my name to an ex-friend so he could open up a bar in Seoul. My friend is a non-Korean and I am Korean. I met this man when I was an exchange student. He thought it would be easier for him to open the business under my name. However, the business failed and now he owes a sizable amount of money to food, spirits, beer and other vendors. A food vendor has already sued me and I expect to be sued by others. My ex-friend is nowhere to be found and it seems that when he knew he was going to go under he ordered a large amount of products from multiple vendors and skipped town. Am I responsible for the debt? What can I do? Potentially Broke

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