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EU Grants Adequacy Decision to Korea On March 30, 2021, Chairperson of the Personal Information Protection Commission (the "PIPC") of the Republic of Korea and the Commissioner for Justice of European Commission (the "EC") issued a joint press statement declaring that Korea is an adequate jurisdiction and ensures a similar level of protection to EU for personal data. During the past four years, Korea and EU have been conducting an in-depth review of the relevant laws and regulations, including the Personal Information Protection Act of Korea and duties of the relevant government agencies. Immediately after the joint press statement, the EC will start its decision-making procedure to adopt the adequacy finding in the coming months and plans to adopt the adequacy decision on Korea in the second half of this year. The adoption of an adequacy decision will involve: (i) disclosure of the EC's initial finding (current stage), (ii) an opinion from the European Data Protection Board, (iii) an approval from a committee, composed of the representatives of EU Member States, and (iv) the adoption of the adequacy decision by the EC via resolution. As a result of the adequacy decision, personal data can flow from EU to Korea without any further safeguards, such as standard contractual clauses or binding corporate rules, being necessary. As this adequacy decision relates to the transfer of personal data from EU, any company that directly collects personal data from the EU residents as a data controller still needs to comply with the obligations under the GDPR for its collection of personal data. The adequacy finding will cover both commercial operators and the public sector. However, the transfer of personal credit information supervised by the Financial Supervisory Commission of Korea is excluded from the adequacy decision as the scope of the adequacy decision is limited to those areas regulated by the PIPC. The adequacy decision will be re-examined every four years by the EC, and the decision may be challenged as to the scope of the application. Therefore, organizations operating in the EU and Korea should continue to monitor new developments even after the adoption process has been completed. [Korean version]
2021.04.06

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Amendment to the FSCMA on Private Fund Regulations On March 24, 2021, the National Assembly passed an amendment to the Financial Investment Services and Capital Markets Act (the “FSCMA” and such amendment, “Amendment”) to substantially overhaul the Korean private fund regulations. In particular, the Amendment unifies the existing classification of private collective investment vehicles (or “private funds”) and regulates funds based on the type of investors. The Amendment will take effect six months after its promulgation. 1. Reclassification of Private Funds Unification of private funds and distinction between “institutional private funds” and “general private funds” Under the current FSCMA, private funds are classified into two categories based on the investment objective of the fund: (i) management participation (i.e., private equity funds or "PEFs") and (ii) private funds for qualified investors (i.e., hedge funds for non-management participation), and each classification is separately regulated. In order to serve as a general partner of a PEF, the company is required to register with the regulators as a general partner, and in order to serve as the management company for a private fund/hedge fund, the company is subject to more stringent eligibility requirements and required to be registered as a private asset management company (“Private AMC”). The Amendment removes such classification, and instead, the Amendment distinguishes between “institutional” private funds (which are funds sold to institutional investors) and “general” private funds. The main implication of this change is that existing general partners of PEFs will be permitted to establish and managed institutional private funds, while existing Private AMC will be permitted to establish and manage general private funds. Existing general partners will however need to satisfy certain investment management personnel requirement under the Amendment (which will be set out in the Presidential Decree), but will be given a one-year grace period to satisfy such requirements. As for new market participants, they may apply for registration either to manage institutional private funds or general private funds, the latter being subject to more eligibility and ongoing compliance requirements. Moreover, under the Amendment, existing PEFs shall automatically be deemed as institutional private funds, and existing private funds/hedge funds shall be deemed as general private funds. Increase in the number of private fund investors The current FSCMA and sub-regulations limit the number of actual investors in a private fund to up to 49 investors. However, the Amendment relaxes this limit to up to 100 investors, although the specific method of calculating the number of investors will be set out in the Presidential Decree and the number of non-professional investors (who are in need of greater protection) is still limited to up to 49. In addition, in order to avoid the public offering rules, the number of offerees must be limited depending on the type of investor as follows: General investors: The total number of investors as well as the number of offerees is limited to up to 49. Institutional investors: No limitation for investors as well as offerees. Professional investors that are not institutional investors: Not counted for purposes of determining the number of offerees but are included in the number of investors. The regulations are relaxed from “up to 49” to “up to 100.” Unification of regulations on investment management Currently, different sets of regulations apply to PEFs and non-PEFs (hedge funds) in order to ensure that such funds are managed in compliance with their respective objectives. However, the Amendment removes such distinction and eases the regulations as follows: Type Current Amendment Management participation investment obligations Hedge funds: May not participate in management PEF: Must acquire 10% or more of shares with voting rights or exercise de facto control No such classification. However, if either a general private fund or institutional private fund chooses to invest by way of management participation, they are required to exit the investments within 15 years. Limits on voting rights Hedge funds: Voting rights limited to 10% PEFs: No limit No limit Borrowing Hedge funds: Within 400% of net assets PEFs: Within 10% of net assets for the fund itself, and within 300% of net assets for the special purpose company Within 400% of net assets Loans Hedge funds: Loans are allowed, but personal loans are prohibited PEF: Prohibited Loans are allowed in principle. However, funds investing in loan receivables have restrictions on investor qualifications, and funds are prohibited from lending to individuals or those prescribed by the Presidential Decree. Changes in regulations for institutional private funds Since institutional private funds can only be sold to classified institutional investors, the Amendment eases some of the existing regulations including: Management personnel requirements for registration of general partners: Currently, there is only a minimum personnel requirement to register as a general partner of the PEF. However, the Amendment introduces a qualification requirement by adding “certain investment management experts designated by the Presidential Decree.” Audit by regulatory authorities: The Amendment provides that general partners, in addition to institutional private funds, may be subject to FSC measures or audits by the Financial Supervisory Service (the “FSS”) where “necessary for the stability of the financial market and transaction order.” 2. General Private Fund Regulations Strengthened for Investor Protection There have been a number of high-profile incidents involving certain local private funds which resulted in substantial losses to investors. As a result, the Amendment introduces certain investor protection measures applicable to a general private fund. Private AMCs are required to prepare “key product disclosures” (but not a full offering memorandum) and provide it to potential investors (through the distributors). Distributors are required to verify that the content of the key product disclosure is consistent with the fund documents (i.e., collective investment agreement). Even after the sale of the general private funds, the distributors are required to confirm that the Private AMC’s management thereof conforms to the key product disclosure, and if they do not, the distributors are required to request that the Private AMC rectify its management activities. The reinforcement of the regulations discussed above, along with the introduction of new regulations relating to financial consumer protection, is expected to lead to substantial changes in the business environment of financial companies (such as distributors and trustees). 3. Conclusion The Amendment brings significant changes to the Korean private fund industry as it relates to the overall management and sale of private funds. However, specific details will be finalized in the Presidential Decree and subordinate laws in the coming months. 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2021.03.26

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Representative Director’s Obligation to Prepare a Safety and Health Plan for Approval by the Board of Directors From January 1, 2021, pursuant to Article 14 of the Occupational Safety and Health Act (the “OSHA”), a joint stock company (“jusik hoesa” in Korean) with 500 or more employees or a construction company which ranks within (and including) 1,000 in terms of the construction track record for civil engineering projects per Article 23 of the Framework Act on the Construction Industry must have its representative director prepare a plan regarding safety and health on an annual basis and report the same to the company’s board of directors for approval, and to implement the approved plan in good faith. Given that this duty is imposed on the representative directors of companies, it raises a number of important considerations—including in relation to the newly enacted Serious Accidents Punishment Act (the "SAPA"), which will take effect from January 27, 2022 for businesses with 50 or more employees—and we discuss these considerations and more in the form of Q&A below. 1. Are all businesses subject to Article 14 obligation under the OSHA? No. The obligation regarding a safety and health plan (the “Safety and Health Plan”)—which must be fulfilled every year—falls on the representative director of one of the following types of businesses: A joint stock company with 500 or more employees, or A construction company which ranks within (and including) 1,000 in terms of the construction track record for civil engineering projects. For the avoidance of doubt, companies which do not fall under the above scope do not have to comply with Article 14 of the OSHA (for example, non-construction companies with fewer than 500 employees). 2. What action must be taken by a representative director who is subject to Article 14 obligation? Every year, such representative director must prepare the Safety and Health Plan, submit the plan to the company’s board of directors for approval and implement the approved plan in good faith. Article 13 of the Enforcement Decree under the OSHA prescribes that the following matters be set forth in the Safety and Health Plan, among other things: The management principle regarding safety and health; The composition, personnel, and roles and responsibilities of the company’s safety and health management organization; The budget and facility status related to safety and health; and The activities related to safety and health in the immediately preceding year and the action plan regarding safety and health for the immediately following year. 3. What is the liability exposure for a representative director who fails to comply with Article 14 obligation? If a representative director subject to Article 14 of the OSHA fails to comply with the obligation, he or she may be subject to an administrative fine not exceeding KRW 10 million (approximately USD 9,000 according to the USD-KRW exchange rate at the time of writing). 4. Once the board of director approves the Safety and Health Plan, is there additional obligation on the representative director, who is subject to Article 14 obligation, to oversee the implementation of the Safety and Health Plan? Yes, the representative director must in good faith implement the Safety and Health Plan approved by the board of directors. 5. When is the deadline to obtain the approval of the board of directors regarding a Safety and Health Plan? There is no specific deadline set forth in the OSHA. However, obtaining the board of directors approval as soon as practicable during the first half of each year is recommended for the following reasons: In the administrative guideline jointly published in December 2020 by the Ministry of Employment and Labor (the “MOEL”) and the Korea Occupational Safety and Health Agency (the “KOSHA”) titled a “Guideline on Representative Director’s Establishment of Safety and Health Plan” (the “Guideline”), it is recommended that the representative directors subject to Article 14 obligation prepare the Safety and Health Plan and submit the same to the board of directors for approval during the initial months of each year, so that adequate time can be secured for plan implementation (as well as for improvements, as may be needed) during the remainder of the year. The MOEL has indicated that the labor audits during 2021 will examine the status of compliance regarding Article 14 of the OSHA, where applicable. 6. Could you elaborate on the relationship between Article 14 of the OSHA and the SAPA? To begin with, this new obligation under Article 14 of the OSHA is placed on the representative directors of joint stock companies with 500 or more employees (or construction companies with track record ranking within 1,000). The SAPA, which will take effect on January 27, 2022 for businesses with 50 or more employees, will impose various obligations on the “Responsible Management Personnel,” which is generally understood to refer to the representative directors of Korean companies. [Korean version]
2021.03.23

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Key Provisions and Implications of the Proposed Game Industry Promotion Act Amendment Bill On December 15, 2020, a bill to overhaul the Game Industry Promotion Act (the “Game Industry Act,” and the bill, the “Amendment Bill”) has been proposed by Legislator Sangheon Lee. Please see the attachment for more details on the Amendment Bill. Although the Amendment Bill was proposed on December 15, 2020 by Legislator Lee, the amendment efforts have been led by the Ministry of Culture, Sports and Tourism (the “MCST”). The MCST conducted research and held a forum in February 2020 on major amendments to the Game Industry Act and announced in May 2020 that it plans to amend the Game Industry Act in its entirety as part of the 5-Year Comprehensive Plan for the Promotion of the Game Industry. As the Amendment Bill was referred to the Legislation Review Subcommittee within the Culture, Sports and Tourism Committee of the National Assembly on February 24, 2021, we expect the substantive review process would begin soon. Legislator Lee also announced plans to collect opinions from game users and the industry to ensure that the National Assembly would pass the Amendment Bill. However, as the Culture, Sports and Tourism Committee Staff Report raised various issues regarding main provisions in the Amendment Bill, and the Game Industry Association publicly expressed its objections to the MCST, it would be advisable to closely monitor future developments. [Korean version]
2021.03.22

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Kim & Chang Legal Newsletter (2021 Issue 1) This issue includes: Establishment of Provisions Relating to Exchange of Information in Amended Fair Trade Law and Prosecutor’s Adoption of Criminal Leniency Program for Cartel Cases Recent Trends Following KCC Amendment to Strengthen Minority Shareholder Rights Newly Enacted Serious Accidents Punishment Act, Amended OSHA and MOEL’s Audit Plan for 2021 Increase Responsibility to Prevent Workplace Accidents KFTC Guidelines for Accessing and Copying Data Aim to Protect Both Examinee’s Defense Rights and Data Submitter’s Trade Secret Financial Consumer Protection Act ? Key Takeaways Proposed Amendment to Electronic Financial Transaction Act to Transform the Korean Financial Industry Amendment to FSCMA Strengthening Regulation of Short Selling to Take Effect and Enforcement Decree to FSCMA Pre-Announced 2021 Key Tax Law Amendments Strengthened Penalties for Environmental Offenses Copyright Amendments Proposed to Protect Right of Publicity, Enhance Infringement Damages Labor Law Amendments Regarding Individual Labor Relations for the First Half of 2021 Labor Law Amendments Regarding Collective Labor Relations and Other Employment-Related Issues for the First Half of 2021 Ministry of Employment and Labor Accepts Report on Establishment of National Labor Union of Insurance Solicitors for First Time Special Act on Management and Promotion of Urban Industrial Areas to Take Effect Key Policy Direction in Broadcasting and Communications Sector in 2021 Kim & Chang Legal Newsletter (2021 Issue 1) .content_view .view_area a { text-decoration: none; }
2021.03.25

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Top Ranking in All 9 Practice Areas in Chambers Global 2021

Kim & Chang once again topped the charts in Chambers Global 2021 as the only Korean law firm to rank “Band 1” in all nine practice areas surveyed for Korea.
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Opening of Kim & Chang’s Singapore Office

With the opening of our Singapore office, we now take our successful track record to our clients on a wider regional platform.
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Only Korean Law Firm Ranked Within World’s Top 100 Firms

For the seventh consecutive year, The American Lawyer’s “The Global 200” ranked Kim & Chang among the world’s top 100 law firms.
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