FTC of Korea: All Bark and No Bite?

The Korea Times published an article, last week, on Korea’s Fair Trade Commission (FTC) that sheds light on a business and, also, consumer-friendly program offered by the FTC. The FTC has been, strongly, criticized by the main-stream for using the powers of the Commission to fight inflation in Korea in order to appease the Administration and the citizens.  Some of the most liberal, now, are even claiming that the FTC is not going far enough.  The FTC has no friends other than the Administration in near sight. No main-stream antitrust/competition law scholar, international practitioner or Korean lawyer, that I know of, believes that one of purposes of an antitrust enforcement agency is to fight inflation. I have been quoted, in depth, on this issue in articles in the Global Competition Review.   If you are interested in antitrust law, the GCR is a must have journal. Even with this fact

Continue reading

Beware the Grey Market Trap in Korea: Due Diligence, Agreements and Street Smarts

Many of my clients operate, in Korea, through relationships with agents. The local agent, normally, holds an exclusive right to sell the client’s product in Korea. For example, one of my clients sells medical lasers. The company has relationships with agents throughout Asia. The relationships guarantee the agent an exclusive right to sell the lasers in the nation the agent is located in. The agent, also, is responsible for managing technical, warranty and other after-sale matters in the jurisdiction. One Korean company approached my client and noted that they are a Korean company with an office in the Philippines. My client has no agent in the Philippines. The client, thankfully, smelled a rat and called me.  If you hear of a Korean, Chinese or other nationality doing business in a country other than their own country, please smell a rat. After doing a little investigating it became clear that this

Continue reading

KOR-US FTA Passed the Korean National Assembly Today

Great News. The Korea-United States Free Trade Agreement (KOR-US FTA) passed the Korean National Assembly today. The Agreement, previously, was passed by the U.S. Congress. The Agreement will be implemented on January 1, 2012. I will write more on the specifics of the Agreement over the next few [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

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: “Connected Yes, Competitive Maybe.” Korea – Beware of the Dragon to the North.

Sang-Hun CHOE posted a great article in the New York Times quoting IPG’s Senior Commercial Advisor Tom Coyner in an article entitled – Connected Yes, Competitive Maybe. Mr. CHOE emphatically notes that: But being hyper-connected is not the same as being hyper competitive. Connectivity on its own does not bring productivity or happiness. It does not necessarily even bring foreign investment. And for all its positives, Seoul’s connectivity comes with some downsides. For starters, the city is home to the headquarters of global hardware giants like Samsung and LG, but the companies have built their success largely by copying and improving existing products rather than by innovating or moving into new technology frontiers. Korea is still a blue-collar manufacturing country that has failed, to date, as noted by Mr. CHOE to create truly innovative products and move into new technologies.  China, in many cases, is years ahead of Korea in

Continue reading

Selecting The Right Korean Partner by Tom Coyner

Most foreign companies in Korea, for practical reasons, must partner with a local company to market, sell and support their products and services. While once upon a time there were legal requirements to do so, now Korea has a relatively free market in this regard. Nonetheless, unless the foreign company is willing to make a very substantial investment up front, it almost always makes sense to partner. Frankly speaking, finding a Korean partner company can be ridiculously easy. Finding a successful partnership, however, can be surprisingly difficult. That is, many Korean companies are willing to partner for all of the wrong reasons. And this may be said for a like number of foreign firms. Many Korean firms look at partnering with overseas companies as a cheap and easy way to “grow their presence by becoming “international,” or at least more international, via foreign partnerships. Partnering can add to their market

Continue reading

Dealing with Unions in Korea: The Top 14 Do’s and Don’ts

By Tom Coyner Korea, the Land of Perpetual Crisis, is facing yet another crossroads — this time in Korea the focus is on renewed challenges facing manufacturing. The weakening Japanese yen together with the growing strength of Chinese manufacturing, not to mention rising costs of Korean labor, is placing Korea once again as the proverbial shrimp positioned between the two whales. In fact, to a large degree, the real growth of Korean manufacturing is taking place in Korean-owned facilities outside of Korea. While this trend is real, it does not satisfactorily address what needs to be done overall. There are simply not enough Korean jobs in design, marketing and administration. A core of Korea’s economy must continue to be in-country manufacturing as a central economic pillar of the Korean market. I’m writing with the assumption that a disproportionate percentage of readers are expatriates in Korea. Consequently, I am specifically writing

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

Foreign-Capital Invested Companies in Korea Subsidies for Employing New Workers in Seoul, Korea

The Seoul Government has issued the following official notice in order to inform foreign-capital invested companies of a program to partially subsidize the wages of newly hired Korean employees. We have recently advised clients eligible for this program in our quarterly legal update.  We have also advised on the numerous other new tax holiday, incentive, and other programs available to foreign businesses operating in Korea and will be posting some of these updates on this blog over the next couple of weeks.  We think this program is immediately useful for many of the readers of this blog.  Please promptly apply for the benefits and we highly recommend learning more about the numerous other benefits available to foreign-capital invested companies in Korea. The following is the Official Notice issued by the Seoul Government. ___________________________________ Notice No. 2011 – 1289 Seoul Metropolitan Government (SMG), under the Seoul Metropolitan Government Ordinance on Support

Continue reading

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.

Continue reading

Resolving Korean Joint Venture/Partner Disputes without an Attorney — Maybe

Conflicts are inevitable, but not unresolvable. Since the circumstances surrounding Korean JV/partner conflicts can vary greatly and since the personalities of the involved parties play a major role in the confrontation, there may not be any ready-made prescription for the solution. There are however, some general ideas that may help in resolving conflicts in the local business environment. Personal ConsiderationsWestern logic, alone, is not usually sufficient to influence a Korean counterpart. Re-opening or referring to the exact stipulations of a contract is not desirable; it has been said “don’t confuse me with facts.” Such a factual confrontation will only raise the defenses of the local partner and even block any attempt at resolution. Once again, the matter of “kibun” plays a subconscious role in the resolution of conflict. Try to appeal to his emotional common denominator.Control Emotions Showing one’s emotions in a demonstration of anger can only exacerbate the situation;

Continue reading

A monkey on my back (Korea Times by Sean Hayes)

Korea ranks behind many of its developed and less developed Asian neighbors in many major economic freedoms and indices. The major monkeys on the back of the Korean economy, according to some surveys, include restrictive trade policies, a bloated bureaucracy, high tax rates, and over regulation of credit, business, labor and whatever else the bureaucracy thinks it can get its hands on. These indices are a useful guide for businesses considering entering the Korean market, however, they must never be viewed in isolation from other realities. The indices never consider the inherent difficulties in doing business in the developing world. Many of these difficulties are not present or even considered in Korea. One of these difficulties was evident during my recent trip to one of the world’s favorite vacation destinations. I awoke at about 8 a.m. to a fully developed adult monkey sitting on top of the TV feasting on

Continue reading

Korean Joint Ventures: Bare Essential of a JV in Korea

A client, a minority shareholder in a foreign-capital invested company in Korea is involved in litigation with other company shareholders over issues the client had with the majority and other shareholders. The majority shareholder (controls the representative director) has been helping himself to the company profits through liberal expensing and interested transactions with the company and his personal company. The majority shareholder is also threatening to block distributions and is possibly increasing the stickiness of his fingers. Like situations WILL occur in many cases where a JV is not completed through a carefully drafted shareholder agreement and articles of association.  A majority shareholding will not prevent this situation from occurring, because of the nature and power of representative directors. I have said this numerous times, if you don’t want to support my extravagant lifestyle (actually I don’t have an extravagant lifestyle), get an experienced attorney to draft your Korean shareholder agreement and articles

Continue reading