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The Personal Information Protection Commission’s Announcement of Guidelines for Protection of Personal Information of Children and Adolescents On July 22, 2022, the Personal Information Protection Commission (the “PIPC”) announced the Guidelines for Protection of Personal Information of Children and Adolescents (the “Guidelines”). The Guidelines are a part of the follow-up measures to the Basic Plan for Protection of Children and Adolescents’ Personal Information, which the authorities published on July 11, 2022, and are a guidebook for data controllers that process children and adolescents’ personal information for their self-review. The Guidelines focus on the protection of personal information of children and adolescents online. The Guidelines (i) set forth the principles for protecting personal information of children and adolescents and (ii) provide detailed legal obligations and recommendations for best practice based on the age of children and adolescents whose personal information is collected by the relevant data controllers. In addition, the Guidelines explain the role of not only data controllers, but also manufacturers and others who develop and manufacture toys, devices, apps, and services that are widely used by children and adolescents, as well as providing relevant information for parents and guardians. The key contents of the Guidelines are as follows. 1. Principles for Protecting Personal Information of Children and Adolescents The Guidelines set forth the following principles for protecting children and adolescents: (i) Respect the right to self-determination of personal information; (ii) Consider the best interests of children and adolescents; (iii) Provide active support to exercise the rights; (iv) Strengthen children and adolescents’ capabilities by ensuring transparency; and (v) Take protective measures in view of the characteristics of each age group. 2. Matters to be Observed at Each Stage of Personal Information Processing 1) Planning / Design Stage ? Service planning based on the design principles focused on personal information protection The Guidelines explain that it is advisable to apply a design focused on personal information protection to those services that collect and use personal information of children and adolescents from the planning and design stage and throughout the personal information processing process to analyze potential risk factors and take preventive measures. Specifically, the Guidelines recommend that (i) in case of services that are expected to be actually used by children and adolescents, data controllers should check their age by, for instance, having them enter their date of birth or check the statement that they are over the age of 14; (ii) data controllers should set the basic personal information protection settings to “high”; (iii) data controllers should refrain from designing services that require children and adolescents to provide their personal information to data controllers or third parties in return for cash or game items; (iv) the location tracking option should be deactivated by default, and when collecting location information from children and adolescents, they should be clearly made aware that the location tracking function is on; and (v) data controllers should implement reasonable measures so that children under the age of 14 would not use such services by falsely stating their age. 2) Collection Stage ? Consent from legal guardian is required to collect personal information of a child under the age of 14 Under the Personal Information Protection Act (“PIPA”), in order to process the personal information of a child under the age of 14, an online service provider needs to obtain consent of their legal guardian. Online service providers need to use forms and language which are clear and easy to understand when informing children under 14 about matters related to personal information processing (Article 39-3, Paragraph (5) of the PIPA). In addition to the above legal requirement, the Guidelines encourage online service providers to use clear and easy language when informing teenagers over the age of 14 about providing their personal information, for instance by having a separate privacy policy for children and adolescents in addition to a privacy policy for adults. The Guidelines also explain that if online service providers intend to combine children and adolescents’ behavioral data with their unique identification information for targeted advertising, it is mandatory to clearly notify them and obtain their consent. Even if consent has been obtained, it is desirable to minimize customized advertising targeted at children under the age of 14. Also, even if users are not identified, if the data controller is aware that the user is under the age of 14 or provides a service whose users are mainly children, behavioral data should not be collected or used for the purpose of providing targeted advertising. The data controller is also advised against providing targeted advertising to children who the data controller knows to be under the age of 14. Furthermore, the Guidelines advise against using any nudge technology that adversely affects the protection of children and adolescents’ personal information, for example by inducing children and adolescents to provide excessive amount of unnecessary personal information or to lower the level of their privacy protection settings. 3) Use and Transfer Stage ? Safe use and retention of personal information collected from children and adolescents Under the Guidelines, if services are provided to children and adolescents in the form of a conversation with AI speakers, chat bots or speaking dolls in text or voice, service providers must not unfairly collect personal information of children and adolescents and must ensure that inappropriate information is not provided to children and adolescents. In addition, the Guidelines also recommend that if children and adolescents are provided with profiling-based services that use personal information, appropriate security measures should be in place so that children and adolescents would not be exposed to any harmful influence. If it is difficult to have such measures in place, then it is desirable not to provide profiling-based services. 4) Storage / Destruction Stage ? Clear and easy guidance / notice on personal information Pursuant to the PIPA, a data controller must store and manage personal information in a secure manner (Article 29 of the PIPA) and destroy personal information without delay when it is no longer needed (Article 21 of the PIPA). Furthermore, the Guidelines provide that the information of a legal guardian collected to provide consent to the processing of personal information of children under the age of 14 must be destroyed after verifying the consent. However, if it is deemed necessary to provide information that can prove the legal guardian’s consent in order to respond to customer queries or for other purpose, the data controller may retain the minimum information on the legal guardian necessary to verify their consent (e.g., consent form, e-mail, or voice recording) until the personal information is no longer required due to the child’s cancellation of membership or otherwise. Please note that if the legal guardian refuses to give their consent or if they have not provided consent for five days, the data controller needs to destroy their personal information (Article 13 of the Standard Guidelines on Personal Information Protection). 5) Guarantee of Rights ? Actively support the exercise of rights, such as the right to correct or delete personal information The Guidelines explain that a child aged 14 or older may request to access, correct, delete, or suspend processing of their personal information. As for a child who is under 14 years of age, their legal guardian may request to exercise the child’s rights on their behalf. The Guidelines also state that the data controller should guide and support the legal guardians of children under 14, as well as teenagers who are 14 or older, so that they may exercise their rights relating to personal information. In addition, the Guidelines explain that data controllers should provide appropriate means and methods to ensure that children, adolescents and their legal guardian can easily understand and exercise their rights related to personal information protection. The Guidelines also recommend that if children and adolescents have requested to restrict access to their posts (including comments), photos, videos or other similar posts or to exclude them from search results, data controllers or search engine service providers should take measures to comply with such request. For example, the Guidelines recommend that if there is a request from children under the age of 18 or their legal guardian, data controllers and search engine service providers should provide a function to allow them to remove images of the minor from search results. 3. Miscellaneous The Guidelines require not only data controllers, but also manufacturers of children’s toys and developers of apps and services of which children and adolescents are the main users, to take various measures to protect children and adolescents’ personal information by applying the principle of personal information-oriented design. The Guidelines also provide guidance on the roles of guardians and teachers based on the characteristics of each age group of children and adolescents. [Korean version]
2022.07.26

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Carryover of Income Deductions for Excess Dividends of Funds/REITs/PFV and Extension of Sunset Date for Income Deductions for PFV On July 21, 2022, the Ministry of Economy and Finance announced its 2022 Tax Reform Plan (the “Tax Reform”). Notably from the real estate investment aspect, the Tax Reform includes plans for improving the dividend-paid-deductions (“DPD”) for corporate-type funds (REFs), REITs and PFV. They are, (i) to allow carryover of excess dividends paid by REFs/REITs/PFV to the following tax year for corporate income deduction purposes, and (ii) to extend the sunset date of DPD for PFV. 1. Carryover of excess dividends paid by corporate-type funds/REITs/PFV, etc. DPD applies to certain special purpose entities such as corporate-type funds (excluding PEFs), REITs (excluding self-managed REITs), and PFV set forth in the Corporate Income Tax Law (Subparagraphs of Article 51-2(1)) and the Special Tax Treatment Control Law (Article 104(31)). In the past, even if dividends are paid in excess of taxable income for the relevant fiscal year, the excess dividends (i.e., the difference when the dividends paid are greater than the income for the relevant fiscal year) were unrecognized for income deduction purposes and extinguished without carryover. The Tax Reform allows the excess dividends to be carried over and deducted from the income generated in the following fiscal year to lower the taxpayer’s taxable income base. Specifically, under the Tax Reform, the excess dividends can be carried over and deducted from the income generated in the following fiscal year(s) for up to five years, and such carried over excess dividends must be deducted from the income first ahead of the dividend paid in each fiscal year. 2. Extension of subset date of DPD for PFV The regulations governing PFV transferred from the Corporate Income Tax Law to the Special Tax Treatment Control Law at the end of 2020. As the result, a sunset regulation was newly enacted to cease the DPD-based income deduction after December 31, 2022 which created great uncertainty for PFVs undertaking development projects whose completion dates fell outside the sunset date. Tax Reform proposes to extend the sunset date for the DPD for additional three years until December 31, 2025. It has been known that the Ministry was considering extending the sunset date for additional two years, but the actual Tax Reform announced included three-year extension plan. The proposed Tax Reform will undergo the pre-legislative announcement period from July 22, 2022 until August 8, 2022. Thereafter, the Tax Reform will undergo deliberation within the Ministry during August and is expected to be submitted to the regular session of the National Assembly before September 2, 2022. [Korean version]
2022.07.22

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FSC’s Policy Seminar on Shareholder Protection Measures Relating to Listing of Split-off Subsidiaries and Capital Markets Policy Tasks Direction On July 14, 2022, the Financial Service Commission (the "FSC") held a policy seminar on certain shareholder protection measures to apply upon the listing of split-off subsidiaries. The seminar also unveiled specific policy tasks that FSC intends to pursue. This follows the FSC’s earlier policy seminar on June 17, 2022 which covered certain capital markets policy tasks relating to shareholder protection measures focusing on enhanced investor protection measures in the stock market. Strengthened disclosure requirements: It will become mandatory to disclose corporate restructuring and shareholder protection plans as part of a listing plan when pursuing a vertical spin-off of a subsidiary. - This purports to furnish sufficient information to shareholders to enable them to make informed decisions at the general meeting of shareholders when approving the spin-off, etc. Listing review: When a vertically split-off subsidiary is listed within five years of incorporation, restrictions will be imposed on the listing if, in light of the totality of the circumstances, the parent company is found to have failed to have sufficiently communicated with its general shareholders. - Examples of insufficient efforts to implement shareholder protection measures include (i) failure to publicly disclose a shareholder protection policy, (ii) failure to properly implement a publicly disclosed shareholder protection policy, and (iii) failure to fairly assess and address concerns raised by general shareholders. Appraisal rights to demand share repurchase: Shareholders who are opposed to the spin-off but whose voices are excluded from the decision-making will be given a right to demand the purchase of their shares. Preferential allocation of new shares: The FSC will weigh the pros and cons and practical consequences and decide, in consultation with other competent ministries (the Ministry of Justice), whether to require preferential allocation of new shares to shareholders of the parent company of a vertically split-off subsidiary. - Issues the FSC will consider include (i) identifying the parent company shareholders who are entitled to protection, (ii) compatibility with the Commercial Code’s principle governing the allocation of new shares, and (iii) the heightened volatility of a parent company’s share price prior to the listing of a subsidiary. Based on feedback that it received during its policy seminars, and upon conferring with the Ministry of Justice and other relevant authorities, the FSC plans to announce a policy improvement plan by the third quarter of this year. As explained in our March 18 newsletter (link), during the election, the President pledged to protect minority shareholders of a parent company when a subsidiary is listed following a vertical spin-off (this was replicated in the transition committee’s policy handbook). At the July 14 policy seminar, the FSC appears to have set specific deadlines for the examination and implementation of such pledge. For your information, on March 23, 2022, Congressman Lee Yong Woo proposed a partial amendment to the Financial Investment Services and Capital Markets Act introducing a requirement that at least 1/2 of the shares issued in the listing of a split-off company be allocated to minority shareholders of the existing company on a preferential basis (Article 165-6 of the bill). As many as 110 publicly traded companies have reportedly undergone a spin-off since 2020. The FSC’s new policy may affect businesses contemplating a vertical spin-off of a key business unit as well as businesses that have already undergone a vertical spin-off and are getting ready for listing. Going further, the new policy may also apply to subsidiaries formed in a manner similar to a vertical spin-off in substance (e.g., in-kind contribution or business transfer). As such, the new policy could have a significant impact on all stakeholders in the listing of a subsidiary, including businesses, shareholders and investors. Particular attention should be paid to further developments and implications of the contemplated policy changes when structuring and planning capital raising through a spin-off or listing of business units. [Korean version]
2022.07.20

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Recent Supreme Court Decision regarding a Layoff (Urgent Business Necessity Requirement) We would like to bring your attention to an important decision regarding layoffs recently rendered by the Supreme Court. On June 9, 2022, the Supreme Court overturned a decision by the High Court (which had ruled that a layoff implemented by a company engaged in the steel pipe manufacturing business was unfair because it did not meet the “urgent business necessity” requirement under the law), and remanded the case back to the High Court (Supreme Court Decision 2017Du71604, June 9, 2022). In its decision, the Supreme Court opined as follows: “An urgent business necessity is not only limited to a situation where a company avoids insolvency, but also includes circumstances where a reduction in personnel is required in advance to cope with a possible crisis in the future. However, such personnel reduction should be acknowledged to be reasonable from an objective point of view.” As to the company in question, the Supreme Court ruled that the ‘urgent business necessity’ requirement was in fact met in light of the following reasons: (i) the industry itself under which the company was doing business had suffered severe difficulties such as a drop in international crude oil prices and a slump in the US energy industry; (ii) the accounting firm that studied the status of the company's business conditions suggested that the company “faced a liquidity crisis”; (iii) the company recorded even lower revenue than expected as pointed out by the accounting firm; and (iv) the size of the company’s short-term loans significantly increased and the company's assets were put on sale. In addition, the Supreme Court ruled that (i) as part of its efforts to avoid layoffs, the company implemented the layoff process after a series of restructuring measures, including a voluntary retirement program, and thus, the layoffs may be justified even if the number of employees to be laid off is relatively small as a result of the company’s efforts to avoid layoffs, and (ii) the “urgent business necessity” requirement may not be deemed to have been met only when there are continuous accumulated deficits. Interestingly, the first instance court (i.e., District Court) in the above case found that the layoff implemented by the company was justifiable. In particular, with respect to the legal requirement to demonstrate that the company made “efforts to avoid layoffs”, it is noteworthy that the first instance court applied a more relaxed standard to determine the legitimacy of the layoff, citing the legal principle of the existing Supreme Court precedent that “the method and degree of efforts to avoid a layoff are not definitive and fixed, but depends on the degree of the employer’s managerial crisis, the managerial reason for the layoff, the content and size of the business, and the number of employees by position.” For your reference, the Korean courts have tended to apply strict standards when determining the requirements for layoffs. Recently, however, the National Labor Relations Commission seems to broadly determine the scope of justifiable layoffs, as layoffs implemented by some companies in the airlines and hotel business were found justified. For workplaces where layoff cases are pending or are expected to take place due to an urgent business crisis, it is advisable to carefully review the criteria for determining the “urgent business necessity” requirement proposed by the above Supreme Court decision and prepare in advance for legal disputes, etc. related to layoffs. [Korean version]
2022.06.24

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Kim & Chang Legal Newsletter (2022 Issue 2) This is a quaterly update of legal developments in Korea from Kim & Chang. This issue includes: New Administration’s National Agenda on Fair Trade and Implications Big Blur: Competition with Big Tech Causing Banks to Launch New Businesses, and New Administration’s Regulatory Response New Administration’s Corporate Law and Governance Policy and the Impact Thereof on Businesses Key Issues and Implications of the New Administration’s Environment Policies New Administration’s National Agenda on Insurance Industry and the Financial Authorities’ 2022 Business Plan New Administration’s National Agenda on ICT and Fintech Industries Regulatory and Legislative Trends Regarding Restructurings of Listed Companies Seven Compliance Check Items Due by June 30, 2022 Under the Enforcement Decree of the SAPA Guidelines on EU’s Directive on Mandatory Human Rights and Environmental Due Diligence FSC Announces Plans to Improve Cloud Computing Regulations and Network Separation Requirements FSC Publishes Guideline on Securities Business Dealing with Fractional Investment Korean Supreme Court Lowers Standard for Inventiveness for New Crystalline Form Inventions Amendments to the ICSID Arbitration Rules Labor Relations Commission’s Remedial Procedures for Gender Discrimination in Employment and Sexual Harassment in the Workplace To view the newsletter, please click the link below. Kim & Chang Legal Newsletter (2022 Issue 2) .content_view .view_area a { color: #2c3e50; text-decoration: none; }
2022.06.28

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