Like many other countries, South Korea has its own merger notification & competition review regimes. This means if your M&A deal involving a Korean company or business meets the merger notification thresholds prescribed in the rules of the Korean competition authority, you need to make a merger filing. And your transaction becomes subject to the authority’s competition review. Thus, it is imperative that the dealmakers should be fully advised on the Korean merger filing rules for the applicability and for any potential risks.
Q) I would like to enquire about a situation of a director working at a Korean subsidiary (corporation) of U.S. company, who has secretly started a similar trade of business while still in employment with his current employer. Having served in a managerial position, he has access to his employer’s full clientele’s information, trade secret and now he started the same business as his employer, directly causing many economic losses to his employer. Is there any way legally to prevent the person from causing further damages?
A) Under Korean law, a director of a corporation bears a fiduciary duty. Thus the directors shall perform their duties in good faith for the interest of the company. Their activities shall not violate the statutes and the articles of incorporation of the company. (more…)
When a foreign incorporated company does a business in Korea, it is very fundamental to determine whether the company is a domestic or a foreign corporation for Korean tax purposes. A major difference in tax liability is that, in principle, a foreign corporation is liable for taxes only on the incomes generated in Korea rather than a worldwide income.
In this regard, the Corporate Tax Ac of Korea(“CTA”) defines a “domestic corporation” as a corporation with its headquarter, main office, or actual business management place located in Korea, and a “foreign corporation” as an organization which has its head office or principal place of business in a foreign country. What makes distinguishing domestic corporation for a foreign corporation under CTA difficult and challenging is the meaning and application of the term of “actual business management place” set forth in CTA. For example, in a case decided by the Supreme Court of South Korea in 2016, a Singapore incorporated company had challenged the Korean tax authority’s decision that its actual business management place was in Korea.
The Singapore company had a wide variety of international business portfolio and among them was a trading foreign issued corporate bonds including a Korean corporate bond. The Korean tax authority decided that the company’s actual business management had taken place in Korea after finding the facts that the company had a liaison office in Korea, one of the directors was residing in Korea and financial documents relating to the Korean business was stored and managed in Korea. And this (more…)
Question) I am an American expat working in South Korea. Originally I was working for a U.S. company incorporated in the state of New York, but 3 years ago I was seconded to the Korean branch of my U.S. company, and have been working for the branch until now. When I was seconded, my new employment contract provided that the New York state law shall apply to my employment relation in Korea. Now, my employment contract is expiring and I would like to know whether I am entitled to the severance pay under the Korean labor law. I know my employment contract and my company’s policy do not provide the right to severance pay. But, as I have been working in Korea for 3 years, I am wondering if the statutory rights of severance pay under the Korean labor law could be given to me.
Answer) The answer is Yes. Expats are entitled to severance pay under the Korean labor laws. (check here as to how the severance pay under Korean law is recognized and operates)
This answer could sound quite surprising considering the fact that the parties had previously agreed (i) the Korean labor should not apply and (ii) the severance pay should not be awarded. How come the Korean labor law intervenes in the parties’ employment relation? The answer lies in the provisions of the Private International Act of Korea which provides the general principles for the choice of law in Korea.
When a legal relation has certain foreign elements, the court must decide which jurisdiction’s law shall apply to interpret that legal relation. In Korea, the Private International Act provides the general rules and principles for the governing laws of the various types of legal relations. Specifically, the Act provides that if the employer and employee agree, the employment contract is governed by the law chosen by the parties. But, this does not mean the parties can freely determine which law and regulations apply to their employment relation. It is true in Korea that the party autonomy is a general principle of governing laws, but party autonomy is subject to limits imposed by the overriding public policy and mandatory rules.
Let’s assume a creditor has a monetary claim against a debtor in Korea but the debtor refuses to pay it. The creditor would proceed to file a lawsuit to get a judgment to collect his claim. Unfortunately, however, the chances are that, knowing the complaint was filed, the debtor would try to conceal or transfer his assets to evade from the liability under judgment. This shows why provisional attachment is highly required to secure the judgment effectively.
Provisional attachment is a judicial measure available to anyone who has a monetary claim to lock down certain assets to keep the debtor from selling or giving them away until the court issues a judgment on the merit. The creditor can, and usually does, seek a provisional remedy before she files a complaint on the merit. So, this is a very powerful weapon for the creditor. For example, as many Korean creditors do, if the creditor succeeds in putting a provisional attachment on the debtor’s bank account, the debtor would not be able to use the money and could face several penalties regarding its banking/financing transactions with the bank. This could heavily deteriorate the ability for a small company to conduct business, which makes the debtor (more…)
It was reported that last month Apple’s South Korean office paid $945 of compensation to one of South Korean iPhone users for the breaching of privacy by the controversial iPhone user location tracking. Here is the detail from Reuters.
By the way, some news media reported that this was a ruling from a Korean district court. I, as a Korean lawyer, think that statement is half right and half wrong. Basically it is true that the court issued a ruling which ordered the Apple Korea to pay $945 to the user. But this was not a formal trial case, but a Request for a Payment Order case. Payment order is a more convenient & simplified legal procedure for claimant to get a judgment from the court compared to a formal lawsuit. Once a request filed, the Korean court does not question the debtor (in this case, the Apple Korea) and issue a Payment Order within 2 or 4 weeks (in certain courts, within a few days). This payment order, a sort of ruling, asks the opposing party to choose whether to admit the claim as written on the request or to make an objection. If no objection has been raised from the opposing party within 2 weeks, then (more…)
It is reported that Mr. Matthew Deakin, the president of the HSBC Korea, said on last Wednesday that HSBC Holdings Plc had no plan to acquire a local Korean bank for now. Last year, HSBC walked away from the deal with the Lone Star, a U.S. private equity fund, which provided HSBC the right to buy 51 percent stake of Korea Exchange Bank due to the global financial crisis and continued legal disputes surrounding the 2003 purchase of the bank by Lone Star Funds. (Here is a related previous post)
Things have changed. The Seoul Central District Court in last November ruled the purchase legal, and as the financial markets are now stabilizing. But Mr. Deakin, at the press conference which took place for the purpose of introducing the bank’s new Emerging Markets Index, said “right now, we have no interest in any acquisition of Korean banks”.
We’ve been asked about a criminal charge against an adultery under Korean criminal law quite often. Foreign employees in Korean should be cautious that adultery is a crime under Korean law. Here is a real example of such a case where a foreign officer committed an adultery and the company(employer)’s legal concern made them ask for some legal consultation to our law firm regarding the adultery law and criminal law process in Korea.
Q) Mr. XX, who is a head director of our company, committed an adultery and was charged by the Korean prosecutor. He has confessed his guilty and the prosecutor demanded one year’s imprisonment for his crime to the court. If the court finalizes that Mr. XX is guilty, does that mean Mr. XX will be imprisonment for one year or lesser?
A) Finding guilty does not always mean Mr. XX will be imprisoned. The Court may SUSPEND the imprisonment for certain years even though Mr. XX is guilty. The Korean Criminal Act provides that a married person who commits adultery shall be punished by imprisonment for not more than two years. However, the Act also provides the execution of the sentence for an adultery can be (more…)
Recently there are so many lawsuits being filed against domestic and foreign banks in Korea with regard to the bank’s irresponsible fund sale. The Korean fund buyers are alleging the losses in the funds which are still on-going were caused by the fund-sellers’ not informing sufficient information on the risk and possibilities of losses when they put the money to the funds.
As a matter of law, Korean court has ruled that the banks have legal duties to inform the customer sufficiently of the structure of the investment such as fund or option transaction and the risk of possible losses when they solicit the customers for investments. If they neglect that obligation, it constitutes a breach of contract and (more…)
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 to 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’ consent. 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 the country’s pension plan (or whatever) without workers’ consents, it definitely violates (more…)