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Severance Payment Plan & Retirement Pension Plan under Korean Labor Law, and Government’s Proposal to Amend Current Sevrance Payment System

Recently we got a question from a gentleman asking what the exact meaning of the below, an Internet post he’d found:

“It is possible that as of 2011, what was severance pay will be vested in the country’s pension plan. This means that workers (including teachers, etc.) will no longer receive one month’s pay for every year worked at the end of their contract. The legislation is set to discuss/vote on this in 2009.”

He was worrying that he might lose his right of severance payment under Korean law.  But the above article is quite misleading.  The severance payment is the property right of workers.  It can not be vested to anything without workers’ consents.  If the article says the amended law will give the employer or any party but the workers the power to vest the severance payment to country’s pension plan (or whatever) without workers’ consents, it definitely violates Continue reading


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U.S. Private Equity Fund, Lone Star, Sent a Letter to Korean Government Notifying Potential Lawsuit for Damages by KEB Sale Deferment?

Last week, Korean government announced that it would initiate reviewing process for the approval of KEB sale soon.  Interestingly enough, today it was reported also that before the government’s announcement, Lone Star Fund had sent an official letter to Korean government regarding government’s approval issue on the long-waited sale of Korea Exchange Bank(KEB) from Lone Star Fund to HSBC bank.  Lone Star Fund and HSBC had entered into the stock purchase agreement and the deadline of the agreement is coming on the end of this July.  It was reported that Lone Star Fund stated in that problematic letter that if the Korean government kept delaying the approval, the fund would file a lawsuit domestically and internationally against Korean government for the compensation of damages by the sale’s deferment(here is a news article).

Well, someone, especially western people, can say that there would be no problem in sending a letter to the other party noticing potential legal disputes.  However, it is quite unusual in Korean legal culture that a private enterprise warns the government stating otherwise it would sue the government.  Of course, it is legally acceptable and in some cases a statutory right of a private enterprise, to file a lawsuit against the government, but culturally it is not common to take this kind of open and public action to press the government hard in Korea.

By the way, as a matter of law, the fund would be permitted to file a lawsuit to a Korean court, however the chances are that the fund would not win the case.  Under Korean law, in order for the fund to win the case, the fund must prove there have been an unlawful act of Korean government in delaying the approval.  But, the approval itself is a right, not a obligation, of the government provided by the law and there have been lawsuits affecting the validity of the ownership of KEB by the fund, which have made Korean government hold the approval procedures Continue reading


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Lone Star Not Guilty in Stock Price Manipulating Case, Seoul High Court Reversed Lower Court’s Ruling

Today just a few hours ago, the Seoul High Court sentenced partly not guilty to the head of U.S. private equity fund Lone Star’s South Korean operations (Lone Star Advisory Korea).

Last February Seoul Central District Court had sentenced all guilty and had detained Mr. Paul Yoo, the head of Lone Star Advisory Korea, for stock rigging and misappropriation charges. Also the court had ordered Korea Exchange Bank and LSF-KEB Holdings SCA, a Belgium-based unit which holds Lone Star’s stake in KEB, to pay 25 billion won ($26.50 million) each in fines, saying both secured unfair profits as a result of the stock-rigging.

The defendants all had appealed and the Seoul Court today reversed and amended the lower court’s ruling, saying “as the Lone Star Fund did actually discuss a capital decrease in meeting of board of directors, there had been no falsehood in its reporting of possible capital decrease to the public and therefore no stock price manipulating”.

Also the High court found not guilty in Mr. Paul Yoo’s tax evasion charge and also found not guilty in 2 out of 4 misappropriation charges against Mr. Paul Yoo.  Finally the court sentenced  2 and half year of imprisonment to Mr. Paul Yoo, however, suspended the execution for 3 years.  Mr. Paul Yoo Has been released out of prison today by the court’s decree(see the photo). Continue reading


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Shareholders Sue Hyundai Motor Chairman

Shareholders including civic groups led by Solidarity for Economic Reform filed a derivative suit at the Seoul Central District Court on May 28 against Hyundai Motor chairman Chung Mong-koo and vice chairman Kim Dong-jin for the damages of W563.1 billion caused by their embezzlement and breach of fiduciary duty last year.

Before their filing a lawsuit, Chung was convicted in February 2007 of embezzling almost 70 billion won. He was also found guilty of breach of duty by causing losses to the company and affiliates by helping weaker units and selling stock to Continue reading


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Introduction to the Securities-related Class Action Act of South Korea

The Securities-related Class Action Act: Overview

Korea’s Securities-related Class Action Act(hereinafter the “Act”) has been effective from January 1 2005.  Currently the Act covers all companies whose securities are listed on the Korea Stock Exchange or registered with the Korea Securities Dealers Association.

There are four causes of action under the Act: (i) damages for false information in a securities report or prospectus; (ii) damages for false information in business reports and semi-annual and quarterly reports; (iii) damages for insider trading or price manipulation; and (iv) claims against auditors.

Damages are calculated in accordance with the Securities and Exchange Act(SEA) and other existing laws. For example, under the SEA, damages caused by false information are calculated by the acquisition price minus (i) the market price at the closing of the courtroom arguments, or (ii) if disposed of earlier, the disposition price.  If damages are complex to work out, however, courts may use sampling, averaging, statistical or other rational methods.

In certain cases, the burden of proof of the lack of causal connection between the falsity and damages will fall on the defendant.  Damages will then be reduced by the portion that is proven as unrelated to the cause of action.

Class certification requires (i) at least 50 class members, with the total number of their shares constituting 0.01% of all issued and outstanding shares of the company; (ii) commonality of legal or factual issues; (iii) class action being an efficient and suitable means for protection of rights or interests of all members; and (iv) the complaint being properly drafted and not defective. The representative member should be one will the largest stake and capable of fair and proper representation.

The Act also includes provisions on opt-out and preclusion effect on members who did not opt out, Continue reading


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Kookmin Bank Buying out Kazakhstan Bank

Today it was reported that Kookmin Bank would buy a majority stake of Bank Center Credit, the sixth-largest Kazakhstan commercial bank, worth $634 million. The deal is the largest overseas M&A by a Korean financial institution.

Kookmin bank is targeting to become a leading bank not only in Kazakhstan but also in Central Asia, which Continue reading


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A Cosmetics Company Sued IVY, a Korean Famous Female Singer, for Demaging Its Brand Image

A Korean cosmetics Company filed a lawsuit against its model, Ivy, a K-pop female singer, alleging her lies and scandal-plagued private life has damaged its brand images.

The cosmetics company had hired Ivy as its advertisement model last April, but after then, Ivy got a scandal with her ex-boyfriend who allegedly had attempted to blackmail her with a revealing video clip showing him with the K-pop star. Ivy has stopped her career until now and the cosmetics company claims it constitutes a breach of contract under which Ivy is required not to harm the image of the company or its brand with any scandalous or improper behavior. You can read the news article here.

There was a similar case between a top T.V star Choi, Jin-Sil and its advertiser. The company claimed that Continue reading

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