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Update Regarding Obligation to Secure Safety and Health Under Serious Accidents Punishment Act We provide below an update concerning the Serious Accidents Punishment Act (the “SAPA”) and the Enforcement Decree promulgated thereunder (the “SAPA-ED”). What is the SAPA? Enacted in January 2021, the SAPA imposes criminal penalties on the responsible management personnel (the “RMP”) of a business whose failure to secure safety and health in violation of the requirements of the SAPA causes serious industrial accidents or serious public accidents, as the case may be. The effective date of the SAPA is January 27, 2022 for a business with 50 or more employees. The SAPA delegates to the SAPA-ED, per the Korean statutory scheme, to elaborate relevant requirements pertaining to the RMP’s obligation to secure safety and health. Specifically, the SAPA stipulates that the details on the “measures related to establishment of safety and health management system and its implementation” and the “managerial measures necessary to fulfill obligations under safety and health-related laws” shall be set forth in the SAPA-ED. Passing of the SAPA-ED On September 28, 2021, the Cabinet reviewed and approved the proposed version of the SAPA-ED, which is scheduled to take effect from January 27, 2022. With respect to “measures related to establishment of safety and health management system and its implementation” and “managerial measures necessary to fulfill obligations under safety and health-related laws,” the SAPA-ED stipulates various action items. Please refer to the Appendix hereto for further details. In addition, the SAPA-ED sets forth 24 types of “occupational illnesses”—13 types of acute poisoning and 11 types of illnesses related to syndromes or high risk works—in connection with “persons contracting occupational illness” referenced in Article 2, Item 2 (c) of the SAPA as a type of serious industrial accident, and the scope of public facilities (multi-use facility, establishment, workplace and other facilities) in detail in connection with serious public accidents. Please refer to the Appendix hereto for further details. After January 27, 2022—for businesses with 50 or more employees—upon the occurrence of a “serious industrial accident” or a “serious public accident”, as the case may be—whether criminal penalty would be imposed for a violation of the SAPA would be determined by examining whether the RMP fulfilled his or her obligation to secure safety and health as prescribed by the SAPA and the SAPA-ED. As such, it would be prudent for businesses to become familiar with the RMP’s obligation to secure safety and health as enumerated in both the SAPA and the SAPA-ED and take measures to fulfill applicable requirements.
2021.10.06

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Fractional Trading of Domestic Stocks In 2019, the Financial Services Commission (the “FSC”) allowed the trading of a fraction of a stock that is less than one whole share with respect to foreign stocks as part of its introduction of innovative financial services. As for domestic stocks, it has been understood that such fractional trading of domestic stocks was impossible due to the principle of indivisibility of shares under the Korean Commercial Act. However, on September 13, 2021, the FSC, the Korea Securities Depository (the “KSD”) and the Korea Financial Investment Association issued a press release announcing a plan to allow fractional trading of domestically listed stocks (link). Please see below for the key details of the plan. 1. Fractional Trading of Domestic Stocks According to the press release, fractional trading of domestic stocks will occur as follows: a securities company acting as the broker for fractional trading would collect fractional trading orders from individual investors (thereby forming orders for whole shares) and submit bid prices to the Korea Exchange (KRX); the securities company would entrust whole shares with the KSD (as a custodian), which in turn would issue beneficiary certificates representing the fraction of shares entrusted by the securities company; and once orders are executed and payments are made, beneficiary certificates would be provided to investors. 2. Exercise of Shareholders’ Rights by Investors in Fraction of Shares As for shareholders’ rights, investors in fraction of shares will be guaranteed economic benefits such as the right to cash and stock dividends in proportion to the beneficiary certificates provided to them by the KSD. However, exercise of voting rights is not permitted for investors in fraction of shares and the KSD will exercise voting rights for entrusted shares on their behalf (Article 112 (1) of the Financial Investment Services and Capital Market Act (the “FSCMA”) to be applied). Moreover, investors in fraction of shares having beneficiary certificates for multiple fractional shares and holding one or more whole shares in aggregate may have their fractional shares converted into whole shares and exercise their voting rights pursuant to the terms agreed with the securities company. 3. Implementation Period According to the FSC, fractional trading is scheduled for designation and implementation as an innovative financial service sometime during the third quarter of next year, without any immediate changes made to the FSCMA. In the longer run, however, the relevant provisions of the FSCMA are expected to undergo amendment to allow more permanent implementation. Once fractional trading of domestic shares is permitted, the proportion of shares held by minority shareholders will increase along with the increase in the amount of investments by small / individual investors. Accordingly, the KSD’s exercise of voting rights representing such shareholders will be more important. Therefore, it would be advisable for companies to prepare appropriate responses with respect to areas such as investor relations. It might be possible for various policy development efforts to be made in order to improve and guarantee the rights of investors in fraction of shares, such as officially adopting the fractional share regime in the area of corporate and securities regulations as with Japan’s trading unit shares system. [Korean version]
2021.10.14

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KFTC Issues Advance Notice on Proposed Amendments to Several Review Guidelines On October 1, 2021, the Korea Fair Trade Commission (the "KFTC") issued an advance notice on a set of proposed amendments to the (i) Review Guidelines for Abuse of Dominance ("Dominance Guidelines”), (ii) Review Guidelines for Unfair Trade Practices (“Unfair Trade Practices Guidelines”), (iii) Review Guidelines for Resale Price Maintenance (“RPM Guidelines”), and (iv) Guidelines on the Provision of Monetary Reward for Reporting Violation of the Monopoly Regulation and Fair Trade Law. The 20-day administrative notice period ends on October 21, 2021. The proposed amendments contain changes necessary to implement the comprehensive amendments to the Monopoly Regulation and Fair Trade Law (the "FTL") and its Enforcement Decree scheduled to take effect on December 30, 2021. Key details of the proposed amendments, which will take effect at the same time as the amended FTL on December 30, are as follows. Guidelines Amendments Review Guidelines for Abuse of Dominance Clarify regulations against discriminatory conduct to include self-preferencing Specify regulations against anti-competitive conduct by vertically-integrated companies Review Guidelines for Unfair Trade Practices Expand scope of protected technical data (by removing the "significant effort" requirement) Review Guidelines for Resale Price Maintenance Eliminate distinction between minimum and maximum resale price maintenance schemes Unify criteria for assessing legality of resale price maintenance Guidelines for Provision of Monetary Reward for Reporting FTL Violations Introduce electronic notification system for monetary rewards Establish legal ground for carrying over obligation for payment of monetary rewards to the next budgetary cycle Common amendments: Changes to the numbering of the relevant provisions, etc., based on the amended FTL and its Enforcement Decree Of the above amendments, we detail the background and implications of the proposed amendments to the review guidelines for abuse of dominance, unfair trade practices, and resale price maintenance below. Dominance Guidelines Currently, the Dominance Guidelines regulates "the offering of unreasonable terms in light of normal trade practice, or unfair discrimination in pricing or transaction terms" by a market dominant player as one type of unfair business interference proscribed under the FTL (as defined pursuant to Article 5 (1) 3 of the FTL) [Article IV. 3. D. (2) of the Review Guidelines for Abuse of Dominance]. In the proposed amendment, "unfair discrimination in pricing or transaction terms" is now separately listed as a type of conduct of unfair business interference, which the guidelines further defines as "unfair discrimination in pricing or transaction terms vis-à-vis the dominant entity itself or another transacting party." Through this amendment, the KFTC has made clear that the so-called practice of self-preferencing, which has recently emerged as a major issue, may constitute unfair business interference. Further, the proposed amendment reflects a Supreme Court decision regarding the criteria for assessing the anti-competitive effects of price increases and output decreases.1 In the decision, the Supreme Court held that for a vertically-integrated entity (i.e., one that is active in both upstream and downstream markets), even if prices had dropped due to the entity's actions, such actions may be deemed to be anti-competitive and thus in violation of the FTL if there is potential for a price increase as competitors become excluded from the market in the mid- to long-term. However, as the above case has been remanded to the Seoul High Court, it will be necessary to wait for the Seoul High Court's decision for an actual precedent on how to balance the short-term consumer welfare gains against mid- to long-term anti-competitive effects, and how to sanction such conduct. The proposed amendment also further specifies the criteria for assessing anti-competitive conduct regarding foreclosure effect, by adding examples that are in line with Supreme Court Ruling 2013Du14726, January 31, 2019. Unfair Trade Practices Guidelines Under the FTL, unfair use of another business’s technical data is classified as a type of unfair business interference. The current Unfair Trade Practices Guideline defines the scope of technical data protected against unfair use to mean "matters concerning production method, sales method or marketing that is protected under relevant legislation, such as the Patent Act, or that was kept confidential through significant effort." The proposed amendment eliminates the "significant effort" requirement from the definition, thereby expanding the scope of protected technical data. This would allow the technical data of smaller companies, which are relatively ill-equipped to manage the confidentiality of their data, to be eligible for protection against unfair use as long as they kept the data confidential, regardless of whether there had been a "significant effort." This brings the guidelines in line with the Unfair Competition Prevention and Trade Secret Protection Act, Act on Support for Protection of Technologies of SMEs, and Fairness in Subcontracting Transactions Act. This means that going forward, unlike the past where unfair use of another business’s technical data has mostly been limited to subcontracting transactions, it is expected to become a greater issue in all types of business transactions, requiring businesses to exercise greater caution in their business activities. RPM Guidelines Currently, under Article 29 (1) of the FTL, RPM schemes are, in principle, prohibited unless an RPM scheme is a maximum RPM that is based on a justifiable reason. Despite this statutory provision, the Supreme Court has previously ruled that maintenance of the minimum RPM schemes can also be permitted if there is a justifiable basis for the scheme.2 Now that the FTL has been amended to reflect this Supreme Court ruling eliminating the distinction between maximum and minimum RPM, the RPM Guidelines have been amended to remove this distinction and instead permit RPM schemes on an exceptional basis when there is a justifiable reason for doing so. [Korean version] 1 Supreme Court Ruling 2018Du37700, June 30, 2021 2 Supreme Court Ruling 2009Du9543, November 25, 2010 .content_view .view_area ul li:before { top: 13px; }
2021.10.06

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Kim & Chang Legal Newsletter (2021 Issue 3) This issue includes: Legal, Regulatory and Policy Updates on Online Platforms and Content Provision Businesses Update on HR/Labor Law Amendments Notable Proposed Tax Law Amendments of 2021 KFTC Announces Proposed Amendment to the Enforcement Decree to the FTL Amendment to Fairness in Franchise Transactions Act FSC Designates D-SIBs and D-SIFIs for 2022 FSC Announces Proposed Amendments to the FSCMA Restructuring Private Fund Regulations Proposed Amendment to Ease Regulations on Non-Face-to-Face Solicitation of Insurance KCGS Amends ESG Best Practice Guideline Amendment to Environmental Tech and Industry Support Act Patent Act, Trademark Act and Design Protection Act Amended to Expedite IPTAB Administrative Trials Key Amendments to Customs Act Included in 2021 Proposed Tax Law Amendments Notification on Registration and Management of Purchasing Agents Enacted and Implemented Key Changes in Proposed Amendment to Buy American Rule and Their Impact on Korean Companies Recent Court Decisions on Whether Incentives Are Considered Wages Promulgation of Act on Win-Win and Revitalization of Regional Commercial Zone Kim & Chang Legal Newsletter (2021 Issue 3) .content_view .view_area a { text-decoration: none; } .content_view .view_area ul li:before { top: 11px; }
2021.09.29

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Recent Lower Court Decisions on Performance Bonuses Recently, a series of lower court decisions have affirmed that a performance bonus based on the company’s performance results (revenues, profits, etc.) constitutes the employee’s wage for purposes of calculating his/her statutory severance payment. In this regard, the Supreme Court of Korea opined back in 2013 that a performance bonus should not be deemed “wages” on the basis that a company’s performance cannot be directly attributed to an individual’s performance or provision of work under an employment relationship (Supreme Court Decision 2012Da48077, April 11, 2013). In 2018, however, the Supreme Court overturned such decision in a case where employees at a government-owned corporation received their performance bonus based on performance assessments conducted by the Minister of Economy and Finance. Based on this 2018 Supreme Court decision, many employees in the private sector filed similar claims arguing that their performance bonus should be included in their average wage for statutory severance payment calculation purposes. Following the foregoing Supreme Court decisions, the lower courts have taken varying positions on this issue. In cases where the criteria for payment of a performance bonus was not clearly established, the lower courts held that a performance bonus does not constitute average wage (please see the list below) because (i) there must be pre-established criteria for the payment of wage, and (ii) the performance bonus is not solely determined by an employee’s work and thus cannot be considered to be a payment in return for the employee’s work. Case #1 (semiconductor industry): Suwon District Court Decision 2020Na55510, February 4, 2021 Case #2 (electronics industry): Seoul Southern District Court Decision 2020Na26085, June 17, 2021 Case #3 (electronics industry): Seoul Southern District Court Decision 2020Na72056, August 20, 2021 However, the Seoul High Court, Seoul Central District Court, and other labor courts held that a performance bonus does constitute average wage (please see the list below) based on the following reasons: (i) even with the discretion to determine the criteria for a performance bonus, employers are still obliged to provide a performance bonus if it has been paid on a regular basis for a substantial period of time or there is an established policy/regulation for payment of the performance bonus, and (ii) the employee’s work has a direct and substantial impact on the company’s overall performance and in that regard, the performance bonus is a reward for such efforts by the employees. Case #4 (insurance industry): Seoul Central District Court Decision 2019Gahap538253, April 15, 2021 Case #5 (electronics industry): Seoul Central District Court Decision 2019Gahap542535, June 17, 2021 Case #6 (glass industry): Seoul High Court Decision 2020Na2012736, June 30, 2021 Similar to the issue of what is to be included in an employee’s ordinary wage that was ultimately resolved by the Supreme Court’s en banc decision in 2013, we expect the Supreme Court to also resolve the conflicting lower court decisions on performance bonuses including the Case #2 where the lower courts rendered conflicting decisions even under the same facts. We expect the Supreme Court’s decision on performance bonuses to have a greater impact since the ordinary wage issue primarily concerned companies in the manufacturing industry whereas performance bonuses concern employees across various industries. It would be prudent for employers to closely monitor any developments on this issue as inclusion of a performance bonus in an employee’s average wage will likely have a significant impact, especially to those employers who have not included performance bonuses in the calculation of average wage. Specifically, we believe that employers under the following circumstances should carefully review their current practice in light of the recent lower court decisions: (i) where a performance bonus has been paid over a long period of time or there are established policies on the criteria and/or payment method for the performance bonus, (ii) where the performance bonus is paid on a regular basis without exception, and (iii) where the performance bonus reflects a substantial portion of the compensation provided to employees and the amount of the performance bonus paid to each employee is the same or similar. [Korean version] .content_view .view_area ul li:before { top: 13px; }
2021.09.17

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김·장 홍보

South Korea Firm of the Year at Euromoney Asia Women in Business Law Awards

Kim & Chang was honored as “South Korea Firm of the Year” at the Euromoney Asia Women in Business Law Awards 2021. The awards also recognized two of our female attorneys, Sungjean Seo and Tae-Yeon Nam, as “Commercial Arbitration Lawyer of the Year” and “Transfer Pricing Lawyer of the Year.”
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Ranked “Tier 1” in All Seven Areas in IFLR1000

Kim & Chang once again received the highest ranking “Tier 1” in all areas surveyed for Korea in the 2022 edition of IFLR1000.
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93 Professionals Named National Leaders in WWL: Korea 2021

In the 2021 edition of Who’s Who Legal: Korea, 93 attorneys, patent attorneys and certified public accountants from Kim & Chang were named “National Leaders.”
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