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Kim & Chang Legal Newsletter (2025 Issue 1) This is a quaterly update of legal developments in Korea from Kim & Chang. This issue includes: MOEL Issues Revised Labor-Management Guidance on Ordinary Wage in Response to Supreme Court’s En Banc Decisions KFTC Announces Key Initiatives for 2025 Plans to Revamp IPO and Delisting Systems FSS’s 2025 Audit Operation Plan ? Key Issues and Implications Recent Regulatory Trends in Corporate Governance Restructuring Transactions Discussions on Introduction of Directors’ Duty to Protect All Shareholders’ Interests and Acting President’s Veto of Proposed Amendment to Korean Commercial Code Recent Developments and Trends in Greenwashing Financial Authorities’ Policy Trends for Virtual Assets Amendment to Industrial Technology Protection Act and Fifth Comprehensive Plan for Prevention of Divulgence and Protection of Industrial Technology Key Agenda Items of Sixth Insurance Reform Conference Key Contents and Implications of Amended 2025 SIAC Arbitration Rules Key Amendments to Customs Act and Act on Special Cases of the Customs Act for the Implementation of Free Trade Agreements in 2025 Abusive Patent Lawsuits Expressly Added to KFTC Guidelines as Example of Unfair Solicitation Recent Amendments to Patent Act, Utility Model Act, Trademark Act, and Design Protection Act Key Provisions of Best Practices for Completion Guarantee Land Trusts Designed to Reinforce Real Estate PF System 2025 Key Amendments to Tax Law and Presidential Decree Enactment of AI Basic Act and Launch of Lower Statute Alignment Bureau To view the newsletter, please click on the link below. Kim & Chang Legal Newsletter (2025 Issue 1) .content_view .view_area a { color: #2c3e50; text-decoration: none; }
2025.05.14

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KFTC Announces Amendment to Guidelines on the Operation and Evaluation of Fair Trade Voluntary Compliance Programs (“CP”) On April 23, 2025, the Korea Fair Trade Commission (“KFTC”) announced an Amendment to the “Guidelines on the Operation and Evaluation of Fair Trade Voluntary Compliance Program (CP)” (“CP Guidelines”). This announcement follows the KFTC’s introduction of the fair trade voluntary compliance program (“CP”) in June 2024 and a public commenting process held in March 2025. Under this program, companies can voluntarily comply with fair trade regulations in exchange for incentives, such as reduced administrative fines. The Amendment includes several key changes: (i) a new system to designate companies with outstanding CP evaluation results, (ii) changes to how fair trade law violations affect companies’ CP ratings, and (iii) a process for the CP rating process to move forward (subject to possible downgrading) notwithstanding the pendency of formal inquiries against the relevant companies. We summarize below some key details of the Amendment for your further reference. 1. Key Details of the Amendment (1) Elimination of Incentives (Rating Adjustment and Ex Officio Investigation Exemption) (Articles 13 and 20) The Amendment simplifies the CP outstanding company rating system by reducing the current six-tier system to a three-tier* system (AAA, AA, A), without raising the baseline for each rating. The Amendment also removes the ex officio investigation exemption for companies with an “A” rating, which was previously available to those with AAA, AA, and A ratings. There will be a grace period for benefits associated with the “A” rating until 2026. * The existing ratings (AAA, AA, A, B, C, D) will be restructured into three ratings: (AAA (Outstanding), AA (Excellent), A (Relatively Excellent)). (2) Fair Trade Law Violations to Result in Point Deductions instead of Lower Ratings (Article 14) The Amendment changes the penalty structure for CP evaluation applicants who violate the Fair Trade Law and receive administrative fines or penalties. Instead of automatically downgrading a company’s rating by up to two tiers, the KFTC will now deduct points (five evaluation points) for such violations. Furthermore, companies applying for CP evaluation for the first time will not face point deductions, even if they have committed Fair Trade Law violations. (3) Removal of the Option to Withhold CP Rating or Reject CP Rating (Articles 9, 15, and 18) Previously, the KFTC had the authority to withhold or reject CP ratings for companies under formal investigation. The Amendment now allows for CP evaluations to continue during formal inquiries, as long as no formal charges have been confirmed. However, the KFTC retains the ability to lower a company’s CP rating or deny its designation as an outstanding CP company, if a potential violation of the Fair Trade Law is deemed significantly harmful to the integrity of the CP system. (4) Updated Evaluation Criteria and Procedures (Article 14) To reduce the burden of on-site evaluations for companies, the Amendment introduces a streamlined three-step evaluation process: First, there will be a document-based review (which includes the potential awarding of extra points), followed by a face-to-face evaluation. The KFTC will only proceed to the third step (on-site evaluation) for companies rated AA or higher, or if an on-site evaluation is deemed necessary. (5) Criteria for Awarding Extra Points (Attached Table 2.5) The Amendment establishes provisions for awarding up to 1.5 extra points to companies rated “excellent” (AA) or higher based on their performance in fulfilling obligations related to subcontracting, distribution, agency, and franchise agreements. Extra points can also be awarded based on the company’s dispute intake process and its dispute settlement performance. 2. Implications The Amendment introduces significant changes to the CP evaluation framework by (i) limiting the KFTC’s authority to withhold or reject CP ratings, (ii) optimizing the evaluation process through a sequential approach to face-to-face and on-site evaluations, and (iii) replacing automatic rating downgrades with point reductions for Fair Trade Law violations. These adjustments, made in response to stakeholder feedback, aim to correct previous deficiencies in CP evaluations and reduce the burden on participating companies. Notably, the KFTC has chosen to maintain the current baselines for AA and higher ratings while eliminating the B and lower rating categories and removing incentives that were previously associated with the A rating. This strategic shift underscores the KFTC’s intent to reserve the designation of “outstanding CP company” solely for entities rated AAA, AA, and A, thereby enhancing the credibility and effectiveness of the CP system. This approach reflects the KFTC’s commitment to the robust activation and continuous improvement of the CP framework through comprehensive evaluations, promoting a culture of compliance with fair trade regulations. As a result, it will be important for companies carefully consider proactively strengthening their internal control mechanisms, reinforcing their commitment to compliance with fair trade laws, and maintaining vigilant oversight of CP-related issues. [Korean Version]
2025.04.28

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AI Issues and Implications in H1, 2025 1. Content Regulation and Copyright Comprehensive Plan to Reform the Copyright System in the AI Era The Ministry of Culture, Sports and Tourism revealed a comprehensive plan to reform the copyright system based on the latest developments in AI. Specifically, it released the “Culture Korea 2035” initiative and the “Key Initiative Plan for 2025,” outlining its plan to amend the Copyright Act to include an exemption provision for text and data mining, an obligation to label AI outputs, and an obligation to publicly disclose AI training data, among others. Alongside these long-term initiatives and legal/systematic improvements planned, the Ministry is expected to accelerate reforms with the launch of the “2025 AI-Copyright System Improvement Council.” 2. Privacy Policy and Legislative Trends Related to the Personal Information Regulatory Framework in the AI Era The Personal Information Protection Commission announced “Revolutionizing the Personal Information Regulatory Framework for the AI Era” as a key initiative in its 2025 policy agenda. To this end, the PIPC plans to expand the legal bases for processing personal information for AI-related purposes and to interpret and apply the Personal Information Protection Act (the “PIPA”) more reasonably and flexibly in consideration of the unique characteristics of AI. In parallel, several amendments to the PIPA have recently been proposed in the National Assembly to address the growing demand for data to support AI development. 3. Antitrust and Competiton Navigating Competition Law and the Evolving Regulatory Landscape of AI and Data With the advancement of AI services, data has become increasingly important as a critical input in the AI ecosystem. This increasing importance of data has raised global concerns among major competition authorities regarding potential anticompetitive practices involving data, such as data monopolies, competitor foreclosure, and self-preferencing. In Korea, the Korea Fair Trade Commission (the “KFTC”) is responding by planning a market survey and policy report on the AI data sector this year, building on previous studies on the cloud and AI sectors. The KFTC intends to actively examine competition and consumer issues at the intersection of AI and data, and to strengthen enforcement efforts where necessary. Meanwhile, the increased competitive value of data has surfaced complexities, notably conflicts between competition law and the Personal Information Protection Act, and uncertainties in the division of responsibilities between competition and data protection agencies. The KFTC is reportedly seeking to align the objectives of the legal frameworks and foster greater collaboration among the relevant agencies. 4. Labor, Employment and ESG Discrimination and Fairness Challenges in AI-Driven Human Resources (“HR”) and Labor Management The use of AI in the field of labor and employment is contributing to significant enhancement in work efficiency, but at the cost of increased risk of discrimination due to tendencies inherent in algorithms. Many leading jurisdictions, including the EU and the United Kingdom, are preparing regulatory regimes to ensure fairness when AI is used. Korea has undertaken similar measures, including promulgation or amendment of various statutes, including the Act on the Development of Artificial Intelligence and Establishment of Trust (the “AI Basic Act”), the PIPA and the Fair Hiring Procedure Act. Against this backdrop, businesses seeking to use AI in their labor and employment matters should manage relevant legal risk factors by taking measures, including regular algorithm audits and performance testing, as well as paying attention to the related debates and trends concerning fairness of AI systems. 5.
Governance and Risk Management EU AI Act: Emerging Trends and Regulatory Developments The European Commission has published a set of guidelines concerning the EU AI Act, which are expected to inform and influence the forthcoming AI Basic Act of Korea. As such, it is imperative to conduct a thorough examination of these guidelines, in particular, such areas as detailed definition of AI systems, the enumeration of prohibited AI practices, and the recommended best practices for general-purpose AI. A proactive review and understanding of these aspects will be crucial to maintaining readiness as we anticipate the enactment of the AI Basic Act. 6.
Foundation Models and Platforms Regulatory Trends and Safeguards for AI Security A Chinese AI startup recently sparked significant global interest with its costeffective and high performing AI product, but also revealed vulnerabilities in AI security. This facilitated the shaping of regulatory frameworks through passage of laws and publication of guidelines in the EU and Korea directed to security of risk management models throughout the AI lifecycle. Such legal and policy developments on AI security underscore its importance, in par with that of its performance, especially in today’s world where the means for attacking the unique vulnerabilities of AI systems have evolved from those that targeted conventional software. This highlights the need for dedicated technical and managerial safeguards. [Korean Version] [Related Newsletter] AI Issues and Implications in Q4, 2024 [Related Newsletter] AI Issues and Implications in Q3, 2024 [Related Newsletter] AI Issues and Implications in Q2, 2024 [Related Newsletter] AI Issues and Implications in Q1, 2024
2025.04.24

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Seoul Bankruptcy Court Introduces “Pre-ARS” and “Hybrid Restructuring” On April 16, 2025, the Seoul Bankruptcy Court held a press briefing to announce improvements in corporate rehabilitation systems by introducing “pre-autonomous restructuring support (pre-ARS)” and “hybrid restructuring.” Following a pilot period starting next month, these changes will be implemented. The key details are set out below. 1. Key Details of Pre-ARS Pre-ARS is a preventive restructuring system that allows companies experiencing or anticipating financial difficulties to restructure their debts or negotiate restructuring terms with major creditors through court mediation under the Judicial Conciliation of Civil Disputes Act before applying for formal rehabilitation proceedings. Since 2018, the Seoul Bankruptcy Court has been using the autonomous restructuring support (“ARS”) program as a preliminary restructuring system. However, because the ARS program requires filing for rehabilitation proceedings, companies have been hesitant to use it due to the social stigma, known as the “stigma effect,” associated with such filings. The pre-ARS system has been introduced to address this issue. It enables debtors to negotiate the timing and method of restructuring with stakeholders before the formal conditions for rehabilitation proceedings, set forth in the Debtor Rehabilitation and Bankruptcy Act, arise. If a company needs to negotiate debt restructuring or reorganization with major creditors, it can submit a simple application to the Seoul Bankruptcy Court for pre-ARS debt restructuring. Under the guidance of a conciliation panel, the company can conduct private negotiations concerning restructuring in accordance with the procedures prescribed in the Civil Conciliation Act. Depending on how negotiations progress, the company may include additional creditors or appoint experts such as law firms or accounting firms for detailed negotiation advice. If the debtor company and its creditors reach agreement on debt restructuring, they may execute an agreement and withdraw the pre-ARS application. If they fail to reach an agreement, the debtor company may proceed with (i) filing for formal rehabilitation proceedings, (ii) applying for workout proceedings under the Corporate Restructuring Promotion Act, or (iii) applying for hybrid restructuring (as described below), and, following any of the foregoing, withdraw the pre-ARS application. 2. Key Details of Hybrid Restructuring Hybrid restructuring is a combination of workout proceedings under the Corporate Restructuring Promotion Act and rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act where the two proceedings proceed in parallel. The Seoul Bankruptcy Court has implemented this approach to leverage the benefits of both systems, offering a solution to the situation where companies previously faced a mutually exclusive choice between workout or rehabilitation proceedings. Accordingly, if a debtor files for the commencement of rehabilitation proceedings along with a workout application, the Seoul Bankruptcy Court will support the restructuring by (i) issuing (a) a comprehensive stay order for the debtor’s operation of normal business without being threatened with compulsory enforcement and (b) wide-ranging approvals for the debtor to maintain continuity of business, and by (ii) deciding to suspend the commencement of rehabilitation proceedings for several months through the ARS program in order to allow negotiations on workout proceedings. Under hybrid restructuring, the debtor is able to operate its business normally and negotiate restructuring with its financial creditors, free from the threat of compulsory enforcement by commercial creditors. If an agreement is executed to implement a corporate improvement plan in workout, the debtor may withdraw its application for commencement of rehabilitation proceedings. If a corporate improvement plan is not resolved or an agreement is not executed to implement the corporate improvement plan, the debtor may carry out restructuring through the commencement of rehabilitation proceedings. 3. Significance of Newly Introduced Pre-ARS and Hybrid Restructuring The introduction of pre-ARS and hybrid restructuring by the Seoul Bankruptcy Court represents a significant opportunity for companies facing current financial challenges or anticipating future crises. These mechanisms enable timely and proactive corporate restructuring efforts. More importantly, the Seoul Bankruptcy Court’s introduction of the new systems will make possible (i) private restructuring under the court’s mediation prior to filing for the commencement of rehabilitation proceedings, and (ii) parallel operation of workout and rehabilitation proceedings, neither of which was previously an option. Individual companies now are afforded a wider range of choices in deciding on corporate restructuring measures appropriate for their own unique situations. [Korean Version]
2025.04.23

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Additional Measures for Short Sale Breaches In its continued efforts to fine-tune details of the Korean short sale regime that came into force with the lifting of the short sale ban on March 31, 2025, the Financial Services Commission (the “FSC”) recently announced proposed amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (the “FSCMA”). Together with the amendment to relevant provisions in the FSCMA which was previously announced in September 2024 (Link), the amended Enforcement Decree will become effective as from April 23, 2025 and provides certain details regarding the non-pecuniary sanctions outlined in the amended FSCMA for certain unfair trading activities including short sale breaches, as further described below. 1. Restriction on Trading of Financial Investment Products Under the amended FSCMA and its Enforcement Decree, the FSC may prohibit a person who has engaged in naked short sale or certain prescribed unfair trading activities (i.e., leakage or use of material non-public information related to listed derivatives; insider trading; market manipulation; fraudulent unfair trading; market disruption; and acquisition of securities through public offering in breach of the prohibition imposed on short sellers) (the “Restricted Person”) from trading financial investment products for that person’s account for up to five years. In case a Restricted Person violates the FSC’s trading restriction order(s), the FSC may impose an administrative fine of up to KRW 100 million and also additional civil penalties for failure to comply with the FSC’s trading restriction order(s). 2. Restriction on Appointment as an Executive The FSC may also prohibit a Restricted Person who is an individual from being appointed or serving as an executive of a listed Korean company or a Korean financial company (i.e., bank, securities company, insurance company, and mutual savings bank), for up to five years. In case a listed company or a financial institution appoints a Restricted Person as an executive or fails to dismiss an executive who becomes a Restricted Person, in each case in violation of the FSC’s prohibition order(s), the FSC may formally request the dismissal of the concerned individual to the relevant company and/or impose an administrative fine of up to KRW 100 million for failure to comply with the FSC’s prohibition order(s). 3. Suspension of Trading Accounts In case there are justifiable grounds and a need to temporarily cease certain financial transactions, the FSC may instruct financial companies to suspend all or some of the trading account(s) suspected of being utilized for naked short sale or certain prescribed unfair trading activities described above for a period of up to one year. A financial company which fails to comply with the FSC’s suspension order(s) may be subject to an administrative fine of up to KRW 100 million. With the recent lifting of the short sale ban in Korea and implementation of new rules and systems, it may take some time for market participants to familiarize themselves with new regulatory landscape and requirements, including the operation of newly the introduced Naked Short-Selling Detection System. During such transition period, it may be necessary to actively reach out to the Korean financial regulators and the Korea Exchange for clarification of key issues that are critical to the implementation of the requisite systems and procedures to continue short sale activities in compliance with the Korean short sale rules.
2025.04.21

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“Tier 1” in All Ten Practice Areas

In the 2025 edition of Benchmark Litigation Asia-Pacific, a guide that recognizes leading litigation law firms and lawyers in the Asia-Pacific region, Kim & Chang once again received “Tier 1” (top tier) rankings across all ten practice areas surveyed.
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“Jurisdictional Firm of the Year: South Korea”

Kim & Chang was awarded the “Jurisdictional Firm of the Year: South Korea” recognition at the IFLR Asia-Pacific Awards 2025. This award is given to one law firm in each jurisdiction that has engaged in the most innovative cross-border transactions in the Asia-Pacific region.
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Ranked “Band 1” in All Nine Areas, 41 “Leading Individuals” Recognized

In the 2025 edition of Chambers Global, Kim & Chang was once again the only Korean law firm ranked “Band 1” in all nine practice areas that were surveyed for Korea. In the individual categories, 41 of our attorneys and patent attorneys were recognized as “Leading Individuals.”
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