Opening of Indonesia Desk
Kim & Chang has opened its Indonesia Desk in partnership with SSEK, a top-tier Indonesian law firm.
VIEW MOREINSIGHTS
-
Newsletters VIEW MORENewslettersAmendments to the Venture Business Act Allow Multiple Voting Shares The proposed amendments to the Act on Special Measures for the Promotion of Venture Businesses (the “Venture Business Act”) were passed at the plenary session of the National Assembly on April 27, 2023, and will be promulgated and enforced (“Proposed Amendments”). The purpose of the Proposed Amendments is to systematically support the stable management of venture businesses by permitting the issuance of multiple voting shares with multiple voting rights per share to founders who meet the requirements stipulated in the Venture Business Act in order to allow them to cope with the dilution of founders’ shares resulting from the attraction of large-scale investments. The key provisions of the Proposed Amendments are as follows: 1. Issuing Multiple Voting Shares to Founders of Venture Business The Korean Commercial Code (the “KCC”) enshrines the principle of one-voting right per share, and prohibits differentiating the number of voting rights per share except for non-voting shares. The Proposed Amendments introduce an exception to such principle for a venture business that receives an investment above a threshold amount from a non-specially related party if the director, who is also the founder of the business, ends up owning less than 30% of the shares in the venture business as a result of the investment. In that case, the venture business may issue multiple voting shares to the founder by a resolution of the general meeting of shareholders in accordance with the articles of incorporation. The issuance of multiple voting shares requires a resolution of the general meeting of shareholders adopted by an affirmative vote of at least 3/4 of the total number of issued and outstanding voting shares, and up to ten voting rights can be attached to such voting shares as determined by the articles of incorporation. If a venture business has issued multiple voting shares or made any material change to such shares, it must submit a report to the Minister of SMEs and Startups, and keep and disclose the details of the issuance to its head office and branches. 2. Conversion of Multiple Voting Shares Into Common Shares and Restriction on Voting Rights If (i) a founder inherits or transfers multiple voting shares, (ii) loses his/her position as a director, or (iii) three years have passed since the day the venture business was listed, the founder’s multiple voting shares are converted into common shares. In addition, even a founder holding multiple voting shares may exercise only one vote per share when casting a vote to approve or disapprove a change in the terms of multiple voting shares, directors remuneration, reduction of director liability, appointment and dismissal of statutory auditors, capital reduction, or distribution of dividends, as is the case for common shares. The Proposed Amendments are expected to significantly impact future practices such as mergers and acquisitions, equity investments (including pre-IPO investments) and the listing of venture businesses. Moreover, given the active discussions on introducing multiple voting shares as a key means to defend management control of a company in Korea along with the Poison Pill, the Proposed Amendments are of great significance in terms of the reinforcing the overall legal system to protect management control and regulations on governance structure. [Korean Version]2023.05.02
-
Newsletters VIEW MORENewslettersFollow-up Measures to Improve Soundness of IPO Market On December 19, 2022, the Financial Services Commission announced the “Measures to Improve Soundness in IPO Market including Prevention of Fictitious Subscription,” which intends to (i) make institutional investor demand forecasts in IPOs more effective for the assessment of appropriate offering price band, (ii) prevent fictitious oversubscription by institutional investors participating in demand forecast by having IPO underwriters make allocations based on their confirmed capabilities to pay for the subscribed and allocated shares, and (iii) prevent excessive share price fluctuations immediately after IPOs, including through allowing room for more share price movements on the day of the IPO. Based on the above proposed measures, the financial authorities have implemented follow-up measures, such as amending the Business Regulations on Underwriting Securities (the “Underwriting Business Regulations”) and the Best Practices for Lead Managers (the “Best Practices”). On April 5, 2023, the financial authorities announced the “Notice of Proposed Amendment to the Underwriting Business Regulations to Improve Soundness of IPO Market,” and on April 26, 2023, the amendment to the Financial Investment Business Regulations were approved. The key contents are as follows. More Effective Demand Forecasting The Best Practices have been amended to require at least a five business days’ demand forecast period to ensure effective demand forecasting, subject to adjustment if necessary by taking into account the issuer’s funding schedule, market conditions and IPO size. In addition, IPO shares may not be allocated to institutional investors who are deemed to have no or little contribution to the determination of offering price, such as those who did not provide their offer or presented excessively high or low prices during the demand forecasting period. The amendment will take into effect for IPOs for which a registration statement is filed on or after July 1, 2023. Meanwhile, an amendment bill to the Financial Investment Services and Capital Markets Act has been proposed and is currently under review by the National Assembly. The bill proposes to (i) introduce a cornerstone investor system, where preferential allocation of a portion of IPO shares may be made to credible expert institutional investors to hold those shares for agreed holding periods, in order to promote stable share prices after an IPO and (ii) permit the testing-the-waters with institutional investors before the filing of registration statements. Prevention of Fictitious Oversubscription The amendment to the Financial Investment Business Regulations has obliged lead managers to confirm subscribers’ capabilities to pay for subscription prices. The allocation of IPO shares without confirming such capabilities may be deemed as an unsound business activity, and subject to sanctions such as an administrative fine. In addition, the amended Underwriting Business Regulations have established a specific criteria for confirming capability to pay for the subscription price (i.e., (i) to verify the equity capital, in the case of proprietary assets, and the total amount of assets of each entrusted asset group participating in demand forecasting, in the case of entrusted assets, or (ii) to verify such capabilities according to internal regulations/guidelines prepared by the lead manager), and any institution that participates in demand forecasting in excess of its capability to pay the subscription price may be designated as an unfaithful participant of demand forecasting and allocation of IPO shares to such investor may be prohibited. The regulation on confirmation of capabilities to pay for subscription prices will be applicable from the registration statements initially filed on or after July 1, 2023, and the designation of unfaithful participants for forecasts in excess of capabilities to pay will take effect from January 1, 2024, after a grace period. Prevention of Excessive Fluctuations in IPO Share Price In order to prevent multiple individual investors from suffering losses due to a sharp drop in IPO share prices immediately after an IPO, (i) the Best Practices have been amended to permit underwriters to make differential allocations based on different lock-up periods so as to prevent sale of a large volume of IPO shares in a short period of time after the expiration of a single mandatory lock-up period (to take effect on July 1, 2023), and (ii) the Detailed Enforcement Rules of the KOSPI Market Business Regulations have been amended to change the share price trading range on the day of the IPO to 60%~ 400% of the offering price (currently, 63%~260% of the offering price) to promote active trading on the day of the IPO without suspension, thereby providing investors with fair trading opportunities and expediting the discovery of an equilibrium price in the market (to take effect on June 26, 2023). It is expected that the follow-up measures to the “Measures to Improve Soundness in IPO Market including Prevention of Fictitious Subscription” will enable subscription and allocation of IPO shares based on actual demand and payment capabilities and provide for the development of a more effective and fairer IPO market. [Korean Version]2023.05.09
-
Newsletters VIEW MORENewslettersAmendment to External Audit Regulations Takes Effect – Relaxed Requirements for Mandatory Designation of External Auditors The proposed amendment (the “Amendment”) to the Enforcement Decree of the Act on External Audit of Stock Companies (the “External Audit Act”) was resolved and promulgated at a Cabinet meeting that took place on April 24 and takes effect on May 2, 2023. According to the Financial Services Commission (the “FSC”), this amendment to the Enforcement Decree and its subordinate regulations is aimed at (i) promoting legislation designed to support the government’s policy tasks under the “Plan to Reduce Accounting Burden on SMEs” announced by the FSC in October 2022 and (ii) encouraging people to report accounting frauds. The Amendment can be summarized as follows: 1. Reduction of the Scope of Large Unlisted Companies, etc. and the Scope of Businesses Required to Operate an Internal Accounting Control System Under the existing External Audit Act, large unlisted companies are subject to accounting regulations similar to those applicable to listed companies, and in particular, companies that have appointed the same auditor for six fiscal years are required to appoint (on a regular basis) an auditor designated by the Securities and Futures Commission (the “SFC”). Under the Amendment, the minimum amount of total assets of large unlisted companies subject to the above requirements will increase from KRW 100 billion to KRW 500 billion. However, for corporations required to submit business reports and companies belonging to business groups subject to disclosure, the current criteria (total assets of KRW 100 billion or more) will remain unchanged. In addition, the maximum amount of total assets of companies that are not required to maintain an internal accounting management system will increase from less than KRW 100 billion to less than KRW 500 billion. However, the standard under the existing Enforcement Decree (total assets less than KRW 100 billion) will still be applied to stock-listed corporations, domestic companies belonging to corporate groups subject to disclosure, corporations required to submit business reports, and financial companies. The Amendment will apply from the fiscal year beginning on or after January 1, 2023. However, those companies that were required to appoint an auditor designated by the SFC before the Amendment takes effect will need to comply with the existing regulations until the end of the fiscal year to which the above enforcement date belongs. 2. Strengthening of Protection Measures for Those Who Report Misconduct Related to Accounting Information Under the existing Enforcement Decree, the SFC may exempt from sanctions a person who reports misconduct only when he/she meets all of the following: (i) he/she has neither played a leading role in relation to the reported misconduct nor forced other related persons to engage in the misconduct; (ii) the SFC, etc. was not already aware of the misconduct that he/she reported; and (iii) he/she has cooperated until investigations are completed. However, under the Amendment, those who meet at least one of the requirements (i) to (iii) mentioned above may be eligible for exemption. In addition, the Amendment provides a legal basis for anonymous reporting, allowing people to report misconduct to the SFC without disclosing their personal information. The Amendment intends to provide a meaningful reduction of the operational burdens of many SMEs with total assets of at least KRW 100 billion and less than KRW 500 billion, via exemption from the requirements to appoint an auditor designated by the SFC starting this fiscal year, and to maintain an internal accounting management system. As such, it would be advisable for relevant parties to pay close attention to related updates. [Korean Version]2023.04.26
-
Newsletters VIEW MORENewslettersKey Details and Implications of the First Court Decision in a SAPA Case On April 6, 2023, about 14 months after the enforcement of the Serious Accidents Punishment Act (the “SAPA”), the first court decision was rendered in a SAPA case (2022Godan3254, the Goyang Branch of the Uijeongbu District Court) (the “Court Decision”). The Court Decision is significant in various aspects, setting aside the fact that it marks the first SAPA court decision in Korea. The key details and implications of the Court Decision are summarized as follows: Key Details of the Court Decision In this case, a construction company (the “Service-Receiving Party”) contracted a part of the construction works to a contractor (the “Subcontractor”). An employee of the Subcontractor fell from a certain height and into an opening at the site, while working on the opening without wearing a safety harness. The court imposed a prison sentence of 18 months (with a three-year suspension of execution) on the representative director of the Service-Receiving Party for a violation of the SAPA (death by serious industrial accident), and a prison sentence of eight months each (with a two-year suspension of execution) on the site managers of the Service-Receiving Party and the Subcontractor for death by occupational negligence and a violation of the Occupational Safety and Health Act (“OSHA”). The court also imposed a criminal fine of KRW 30 million on the Service-Receiving Party for a violation of the SAPA (death resulting from serious industrial accident) and a violation of the OSHA. The Uijeongbu District Court found that the accident was due to the Service-Receiving Party’s failure to take appropriate safety measures, which resulted from its non-compliance with the obligations to ensure safety and health under the SAPA, including (i) establishment of work procedures to identify and address hazard and risk factors (Article 4, Item 3 of the Enforcement Decree of the SAPA), (ii) establishment of criteria and standards for evaluation safety and health managers, etc. (Article 4, Item 5(b) of the Enforcement Decree of the SAPA), and (iii) establishment of an emergency response manual (Article 4, Item 8 of the Enforcement Decree of the SAPA). The aforementioned three provisions are known to be the most frequently applied provisions by the investigative authorities since the SAPA came into effect. Regarding the grounds for sentencing, the Court Decision identifies the following as the unfavorable sentencing factors: (i) the Service-Receiving Party’s failure to comply with its obligations, despite a considerable social consensus on placing heavier social and financial responsibilities on project owners (service-receiving parties), in addition to the enactment of the SAPA; (ii) the irreversible and serious consequences of the accident which led to the victim’s death, and (iii) a high likelihood that the victim’s death could have been prevented if part of the obligations had been fulfilled. On the other hand, the Court Decision notes the following as the favorable sentencing factors: (i) the fact that placing the entire responsibility on the defendants is too severe because the victim’s death was, in part, attributable to the prevailing practice among construction workers (e.g., arbitrary removal of safety railings), (ii) the fact that the bereaved family does not want punishment for the defendants because both sides reached a settlement, and (iii) the fact that the Service-Receiving Party has announced a detailed plan to establish a safety and health management system as required by the SAPA to prevent the recurrence of similar accidents. Implications of the Court Decision The Court Decision is significant in the following aspects: (1) Among the persons indicted in this case, the representative director of the Service-Receiving Party, due to the application of the SAPA, faced the most severe criminal punishment. Out of the six persons (two individuals from the Service-Receiving Party, two individuals from the Subcontractor, and the two corporate entities) indicted in connection with the fatal accident, the court imposed the most severe sentence on the representative director of the Service-Receiving Party for a SAPA violation (the representative director of the Subcontractor was not indicted because he/she was not subject to the SAPA). While Korean courts have not yet established sentencing guidelines for violations of the SAPA, as long as the rationale underlying the Court Decision is maintained, it is likely that a more severe sentence would be imposed on SAPA violations than on a death by occupational negligence or a violation of the OSHA. (2) Prison sentences were imposed despite a number of favorable sentencing factors. According to the Court Decision in this case, there were extenuating circumstances favorable to the defendants, including that (i) the accident led to the death of only one person and a settlement was reached with the bereaved family, (ii) the victim’s negligence was, in part, attributable to his death, and (iii) the Service-Receiving Party promised to prevent the recurrence of similar accidents. Despite these extenuating circumstances favorable to the defendants, however, the court imposed a prison sentence of 18 months (with a suspension of execution) for a violation of the SAPA. Therefore, it appears that going forward, we cannot rule out the possibility that the courts, in other similar cases, may also impose a sentence that is equal to, or more severe than, the one in this case. (3) The Court Decision is premised on the so-called “multi-level causation” that interconnects a violation of the SAPA obligations to ensure safety and health with compliance with the OSHA obligations to take safety measures under the OSHA. From the perspective of the multi-level causation, when a violation of the obligations to take safety measures under the OSHA is the direct cause of a serious industrial accident, this can be construed as a violation of the SAPA on condition that (i) a violation of the SAPA obligations to ensure safety and health (ii) is proven to be the reason that it was impossible, or only insufficiently possible, to comply with the OSHA obligations to take safety measures, and that (iii) this is acknowledged to be the factor that eventually resulted in the serious industrial accident (see “Key Issues of the Serious Accidents Punishment Act in the Context of Trial Practice,” Judicial Policy Research Institute, December 2022, pg. 117-119). According to the Court Decision, the defendant’s violation of the SAPA led to a failure to take safety measures under the OSHA, thereby causing the accident. This view is in line with the aforesaid perspective. (4) Regarding the interpretation of major provisions of the SAPA, it is necessary to monitor how courts render decisions in other similar cases going forward. The Court Decision mainly addresses those provisions that are frequently applied to SAPA cases. However, the Court Decision is silent as to whether the defendants failed to comply with the obligations under such provisions. This is probably because whether the indicted persons should be deemed as the responsible management personnel (“RMP”) or whether they failed to comply with SAPA obligations was not actively contested by the defendant in this case. Therefore, to have a better understanding of the criteria used by the courts to determine the RMP’s liability under the SAPA, it is necessary to keep an eye on future cases where the scope of the RMP or the RMP’s compliance with SAPA obligations to ensure safety and health are contested. [Korean Version]2023.04.25
-
Newsletters VIEW MORENewslettersAnticipated Plan for Labor Inspection for 2023 (Part 3) In our previous newsletter dated March 17, 2023 (Link), we noted that the Ministry of Employment and Labor (“MOEL”) is expected to focus its labor inspections in 2023 on particular issues, employee groups, and industries and that the government is proactively using labor inspections as a compliance tool. On April 6, 2023, the MOEL announced that it would conduct labor inspections on businesses that are suspected of misusing or abusing the comprehensive wage system or the fixed overtime allowance. 1. Businesses Suspected of Misusing/Abusing Comprehensive Wage System or Fixed Overtime Allowances During the past two months, the MOEL received anonymous reports alleging that certain businesses have misused/abused the comprehensive wage system or fixed overtime allowances. The MOEL then selected 87 businesses for potential labor inspections. The MOEL announced that it would conduct labor inspections on the selected businesses over the next two months. In its announcement, the MOEL cited, among others, “failure to pay overtime allowances without properly recording working hours, failure to pay overtime allowances for working hours in excess of the compensated overtime hours under any fixed overtime allowances, uncompensated overtime work that exceeds the maximum overtime hours (i.e., 12 hours per week), and interference with the use of annual paid leave” as examples of the alleged misuse/abuse, and announced that it will focus on these particular issues in the upcoming labor inspections. Further, the MOEL will conduct surveys and interviews with employers and employees subject to labor inspections to ascertain the status of any misuse/abuse. In addition, the MOEL plans to target certain industries, such as the IT, office management, finance, and broadcasting and telecommunications industries, where claims of misuse/abuse of the comprehensive wage system or fixed overtime allowances are frequently raised. 2. Businesses Suspected of Long Working Hours In addition, between April and June 2023, the MOEL will conduct labor inspections on 300 businesses in 21 industries, such as the manufacturing, IT, financial insurance, storage and warehouse, and telecommunications industries where workers may endure long working hours. The MOEL plans to examine potential misuse/abuse of the comprehensive wage system and/or fixed overtime allowances, while also conducting labor inspections on long working hours. 3. Conclusion Given this labor inspection trend, companies need to ensure their compliance with applicable labor laws, particularly concerning the issues that the MOEL is focused on. [Korean Version]2023.04.21
김·장 홍보
-
-
“Tier 1” in All Practice Areas – Benchmark Litigation AP 2023
In the 2023 edition of Benchmark Litigation Asia-Pacific, Kim & Chang once again received “Tier 1” rankings across all ten practice areas. Additionally, 44 of our attorneys were named “Litigation Stars” and “Future Stars” in their respective practice areas.
VIEW MORE -
“National Law Firm” – IFLR Asia-Pacific Awards 2023
Kim & Chang was recognized as the “National Law Firm of the Year: South Korea” at the IFLR Asia-Pacific Awards 2023. Kim & Chang has been named as the leading law firm in Korea, having received this recognition 21 times since 2002, and has established its reputation as an innovative law firm.
VIEW MORE