Category: Corporate

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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”.

Here is a related news article.

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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…)

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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…)

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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…)

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Last week, the Korean government announced that it would initiate a reviewing process for the approval of the 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 the Korean government regarding the 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 at 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 the 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 has been an unlawful act of the Korean government in delaying the approval.  But, the approval itself is a right, not an 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 the Korean government hold the approval procedures (more…)

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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 that 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 a meeting of the 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 a 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). (more…)

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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 (more…)

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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, (more…)

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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 (more…)