Korean Business Culture vs. Western Business Culture Explained by IPG Attorneys

We, often, have clients that proclaim that they can’t understand the way that Koreans do things.  They complain about an inability to reason, keep promises, express opinions and give a straight answer. Koreans have plenty of complaints about Westerners also.  Koreans, often, complain that Westerners concentrate too much on details and not enough on the big picture, care about money more than friendship and focus too much on efficiency. The root of these issues is vastly different cultural realities. Korean Business the Gangnam-Style Way The Lewis Cultural Model does an excellent job of explaining these differences.  The Lewis Cultural Model breaks cultures into three distinct categories: Linear-Active; Multi-Active; and Reactive. Linear-Active Cultures Linear-Active cultures base decisions and actions on logic.  Individuals in these cultures tend to be efficient, schedule oriented, and base decisions on a plan and reason.  These individuals are often criticized for focusing too much on the task at

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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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Injunctions Against your Former Franchisee for Competing Against your New Franchisee: Korean Franchise Law/Injunction Basics

Under the Fair Franchise Transactions Act of Korea (“Franchise Act”), a franchisee has the right, under Korean Law, to request the renewal of a Korean franchise agreement after ten years of successful operation of a franchise.  The Korean Franchise Act Article 13 (2) stipulates that: “A franchisee’s right to request the renewal of the franchise agreement may be exercised only when the total period of the franchise agreement, including its initial period, does not exceed ten years.” We wrote about termination of a franchise in other articles including: Termination of a Franchise in Korea. Courts in Korea are becoming increasingly apprehensive to enforce injunctions against operating of competing businesses filed by franchisors against franchisees.  The situation, often, occurs where a franchise is terminated and the franchisee operates a like business in the same location as the prior franchise.   Of course, all professionally drafted franchise agreements in Korea will have

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Involuntary Dissolution of a Company in Korea: Shareholder Disputes in Korean Companies

Under Article 520 of the Korean Commercial Act, a minority shareholder, holding at least 10 percent of the total and outstanding shares of a Korean company, may request to the Korean court of competent jurisdiction the dissolution of a company in Korea.  Korean court judges consider this procedure an extraordinary procedure and, only, rule in the affirmative, usually, after all other avenues to resolve the shareholder dispute have failed. However, this procedure is useful, in many disputes, in resolution of the shareholder dispute via litigation or pushing the defaulting shareholder into a settlement. Article 520 of the Commercial Act of Korea (Judgments for Dissolution) “(1) If, in any of the following cases, there exists unavoidable reasons, any shareholder who holds shares representing no less than 10 percent of the total issued and outstanding shares may request a court to dissolve the company; When the company’s business operation continues to be

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Damages for Material Omissions in Franchise Disclosure Documents in South Korea

In April of 2015, the Supreme Court of Korea ruled that under Article 4; Article (9)(1); and Article 41(1) of the prior version of the Fair Transactions in Franchise Business Act (“Franchise Act”) damages may be obtained, from a franchisor, for all material omissions (Supreme Court 2014 DA 84824,84831, April 9, 2015) within Korean Franchise Disclosure Documents. Monetary damages may be obtained under Article 37(2) of the Franchise Act of Korea and Article 56(1) of the Monopoly Regulation and Fair Trade Act of Korea for “material omissions” within Franchise Disclosure Documents and other document presented to prospective franchisees. The damages may include the cost of build-out, rental, franchise fees and even, in some cases, lost opportunity costs.  Additional, in some cases fines may be imposed, franchises can be de-registered and criminal charges may be brought against employees and management. The Fair Trade Commission may, additionally, impose a fine, even if

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Korean Independent Contractor Risks: Korean Labor Standards Act Basics

The Korean Court System has been less reluctant, in recent years, to deem a Korean independent contractor an “employee” under the Labor Standards Act (LSA).  This fact remains true even when an employer establishes that the independent contractor is aware that he/she was contracted as an independent contractor, thus, not a regular employee of the Korean company. Upon the establishment of the status as “employee” in Korea, the individual is entitled to all of the benefits of an employee including, inter alia, severance and employment security, thus, increasing the compliance, tax, payroll and other risks to the foreign-capital invested Korean company. Obligations to Employees under the LSA The obligations to employees under the LSA are extensive and beyond the scope of this short article.  The more significant and obvious are the Korean legal requirement to provide severance benefits and employment security. With regard to severance benefits, a company must pay,

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Korean Feasibility Studies will Save You Money and Headaches in Korea

I have worked in projects in Korea for over a decade and I see too many investors and companies engaging in projects in Korea, without conducting an adequate or even any feasibility study. The feasibility study should be performed by an attorney in Korea with the active participation of a seasoned Korean business consultant. A business consultant, alone, is not enough. Attorneys deal in numerous projects simultaneously and sometimes have a better grasp of the market and pitfalls than business consultants, because of these experiences. Beware, however, some attorneys that only deal with transactional work are, too often, not adequately prepared to give the advice necessary to assist clients. I always work with business consultants, since they often do a great job of complementing my experience. My favorite to work with in good old Tom Coyner. Tom has been in Korea since the 1970s and this old hat has seen

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Can you Succeed in Korea without Resorting to Bribery?

Perhaps in a few warped ways, I have a bit of affection for the Foreign Corrupt Practices Act, which bars American companies from bribing officials overseas. From a nostalgic perspective, I recall when this act was made into law while I was at my first “real job” at The Chase Manhattan Bank in Seoul. The immediate reactions around me in the US business community were those of dread. We were certain that we would be put to disadvantage when competing with the locals as well as with other foreign nationalities. It turned out not to be the case. In fact, by and large we discovered the act gave us legitimate cover not to “go local” in conducting unethical and potentially sordid business practices. In time, other Western nations passed similar laws. While this clean business movement has hardly eradicated corruption, it has contributed to reducing unethical business behavior – most

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Is the Korean Market Open to Foreign Businesses by Tom Coyner

For many years, the Korean market has been synonymous with protectionism in many foreign marketers’ minds.  However, with the advent of a strong middle class and its successful struggle to gain a genuine democracy during the past two decades, many of the trade barriers have fallen. As more foreign products and services have become integrated into the Korean economy, a wider acceptance of foreign corporations has taken place. However, it would be a mistake to say this is a trend.  A number of counter factors remain — some of which are even strengthening.  Foreign companies, especially from the major countries, are regarded with mixed feelings. While high technology and advanced products are admired and coveted, they are at the same time somewhat feared by Korean businessmen who perceive the possibility of having to depend on them.  When using foreign IT products and services, Koreans sometimes feel they themselves are not

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Why are Legal Fees at Korean Law Firms Higher than New York and London: The Good, the Bad and the Ugly

I had a client note that their former Korean law firm was charging them double what they would have been charged in NY for a similar project.  This is not rare and the situation is, often, worse when litigation is involved.  A list of the best Korean law firms in Korea may be found at: 10 Best Law Firms in Korea. The Good: The Hourly Rates in Korea, normally, are Lower than Hong Kong, London, New York, Tokyo and Paris. Increased competition has brought down rates to levels equal to a decade ago. Korea is increasing the number of students that pass the bar exam. More international attorneys (American, British, German and Chinese) have entered the market, thus, increasing competition. More firms with international attorneys in Korean are capable of handling matters for foreigners. Competition is quickly bringing down the cost, however, foreign clients without knowledge of the market are

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Korea Licensing Agreements: Licensing of Technology, Trademarks and other IP in Korea

We always advise our clients for every license agreement that there is a very high probability that at the end of the agreement license payment obligations will not be honored by the Korean licensee. The same holds true for our Chinese and Southeast Asian practices. If a Korean licensee is not going to continue the relationship with the foreign licensor, many Korean companies simply choose to forego the obliged payments in favor of not responding to emails, phone calls and mail.  We represent many foreign companies that retain us to collect on overdue payments from the Korean licensees. We are often disappointed at seeing license agreements that are simply form agreements from U.S./European Law firms or agreements drafted by Korean law firms with Korean and foreign attorney hacks. Sorry to call fellow attorneys hacks, but after reading one of the license agreements from one of the “ubiquitous big firms,” the term

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So you want to do business in Korea? Listen to my Mother. Korean Joint Venture/Partnership Basics

My wise mother once told me to: look both ways before crossing the street; carry an umbrella to school in the spring; and don’t go out alone at night. The advice can go along way when doing business in Korea or even in most parts of the world. Getting involved in business in Korea is unwise without due diligence (Look both ways before crossing the street), carefully drafted shareholder agreements (carry and umbrella in the spring) and some Korean know-how (don’t go out alone in the dark). Korean statutory law provides less protection to non-controlling shareholders than in Europe, States and in many other parts of the world. This article is not intended to discourage investors. Don’t avoid joint ventures in Korea; just enter them with understanding, care and a Korea-savvy guide. The horror stories about the pitfalls of doing business in Korea can fill a book. However, the same

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Happy Chuseok 2018 from IPG

We wish all our clients, friends, family, and all those working with IPG a happy and safe Chuseok.  For our non-Korean friends, Chuseok  is, often, compared to Thanksgiving.  Chuseok is a time for giving thanks to those that we love an appreciate and celebrating with family and friends.   A Warm Thank You from IPG  We would like to give thanks to our clients for placing their trust in us; to our families for dealing with our long work hours; our friends for supporting us and of course our staff – we could never succeed without you.   Our office shall be closed from September 22 to September 26, 2018.  

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Obtaining a Korean Criminal Record Check from Outside of Korea

A Korean Law Firm may obtain for you – your personal Korean criminal record.  In most cases, the law firm is required to obtain a notarized and apostatized power of attorney and a notarized copy of your passport.  A Korean criminal record, normally, takes around a week to obtain. A Korean criminal record is called a Criminal Investigative Record Check (범죄수사경력회보서).  If you are interested in obtaining a confirmation that you have no criminal record or require your criminal record, please send us an email and we can arrange this for you. [ABTM id=1137]

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Korean Wills: Korean Estate Law Basics

Like in most jurisdictions, the recognition of a will by a court of law requires precise formalities.  We advise that most people have a will.  For individuals with wills that shall be governed by Korean Law the formalities are noted below.  We have omitted two forms of wills – a will by audio recording and dictation. These types of wills pose issues of authentication of the decadent and we believe it is not advisable – in most cases. Korean Holographic Wills A Holographic will is a handwritten will.  For a holographic will to be enforceable in Korea the will should meet the following formalities: Written by the decadent Dated Signed Note the decadents name and address Sealed or contain a thumbprint. Additional details on holographic will may be found at: Korean Holographic Wills  Korean Notarized Wills Will is executed before a Korean notary Two witnesses should be present at the notary

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Grounds for Divorce in Korea: Korean Divorce Law Basics

Foreigners may file, in most cases, for divorce in Korea if one party to the divorce resides in Korea or the parties agree to the jurisdiction of the Korean Family Court or local Korean court.  Korean does not restrict those under SOFA, diplomats and non-permanent residents from filing for divorce in Korea. However, if the non-filing party to a divorce wishes to stay married, the filing party must prove that his or her hands are cleaner than the non-filing spouse and must establish adequate grounds for divorce.  The Grounds for Divorce in Korea are noted below.  The family courts, in Korea, have strictly interpreted the grounds for divorce. In most cases of foreigners divorcing, it is advisable to find a proactive Korean Divorce Lawyer. The reality is that few divorce lawyers in Korea are proactive and few are experienced with divorce among foreigners.  The English language capability coupled with experience,

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Korea Blockchain Law Society Founded: Korean Crptocurrency Law Updates

The inaugural meeting of the Blockchain Law Society of Korea was held last week.  We wrote on the Korean Law Blog articles on Korean Blockchain/Alt Currency Law and shall be participating in the Blockchain Law Society and updating the reader on issues addressed by the Blockchain Law Society.  You shall find more articles on Blockchain, Alt currenices, Korean Crypto-currency Law and like topics on this blog over the next couple of months. We are looking forward to more lively discussions and hope that the Korean Blockchain Law society shall lead to a comprehensive Korean CryptoCurrency -Blockchain Law that does not lead to destruction of a unique and potentially profitable business opportunity for entrepreneurs in Korea and entrepreneurs that wish to invest in Korea.  We hope that foreign investors are, also, considered in these meetings and in the drafting of these laws.  Foreign investors play a key part in Korean business and locking

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Confession Prior to Arrest in Korea: Korean Sentencing Law Basics

Some crimes in Korea require the victim’s consent for the prosecutor to indict a victim, the most literal translation of these types of crimes are “Crimes Not Punished Against the Will of the Victim.” Additionally, a “Self Denunciation” (Confession to Korean Investigative Agency Prior to Arrest ) may mitigate punishment (Korean Criminal Act Article 52).  The difference between these types of crimes and the formality in confessing may forego the opportunity to avoid a jail sentence. All good Korean criminal defense lawyers, at a minimum, should be aware of this specific issue, confession formalities and, also, be aware of the need, in many cases, to proactively engage alleged victims. Korean Confessions/Self-Denunciation in Sentencing Law in Korea  Criminal Act of Korea, Article 52 (1) When self-denunciation is made to competent authorities who have the responsibility to investigate the crimes, the punishment may be mitigated or remitted. (2) The preceding paragraph shall apply

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Korean Entrapment Law: Korean Criminal Procedure Law Basics

The use of the Entrapment Defense in Korea depends on if the actions of the police/investigators have “induced” the suspect to commit a crime or merely provided an “opportunity” for the suspect to commit a crime.  The “crime inducing” act by the Korean government is a criminal defense to the alleged consummated crime.  The main job of the court in determining if the crime was induced is to determine the intent of the suspect at the time of the alleged inducing action by the Korean police/investigator. The Korean Supreme Court clarified this entrapment criminal defense rule in a case disposed of in the Fall of 2005. The Supreme Court of Korea acknowledged that entrapment likely occurred in a case that concerned a paid informant and the smuggling of drugs from China to Korea. The informant, according to the defendants, asserted that the importation of the drugs was to assist the government efforts to fight drug

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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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