Produced in partnership with Paul S. Rhee of Yoon & Yang LLC

Wonhyung Kim, Youngmin Kim, Edward S Lee of Yoon & Yang

Commercial Registration System

Korea operates a commercial registration system whereby basic information on companies, such as the company’s business purposes, trade name, total number of authorised shares, par value per share, and location of head office, is registered and publicly disclosed. The Supreme Court comprehensively manages a nationwide commercial registry through a central computerised system so that the general public may obtain the commercial registry records of registered companies online at any time, as well as at court registry offices during business hours.

Bribery And Corruption

The Criminal Code and the Act on Aggravated Punishment of Specific Crimes (AAPSC) primarily regulate domestic bribery in Korea. The Criminal Code prohibits public officials from taking, demanding, or promising to accept any bribe, which includes not only money, but also meals, travel, sexual favours, entertainment, and other forms of payment. The AAPSC applies to acts of bribery involving payment of KRW 30m or more, and the statute prescribes aggravated punishment according to the amount involved. Under the AAPSC, any person who promises, delivers, or manifests intent to deliver a bribe may also be punished.

The Act on Combating Bribery of Foreign Public Officials in International Commercial Transactions (the Foreign Anti-Bribery Act) primarily regulates bribery of foreign officials. Any person who violates the Foreign Anti-Bribery Act may be subject to imprisonment or a fine. A company whose representative, employee or agent has violated the Foreign Anti-Bribery Act while engaging in business for the company may be punished jointly with such representative, employee or agent, unless the company exercised reasonable care to prevent such violation. If a company maintains a legal compliance programme for its employees, it could be viewed as evidence of reasonable care and may be raised as a defense or mitigating factor for potential sanctions.

Merger Control

A foreign company’s acquisition of a Korean company may require the filing of a business combination report with the Korea Fair Trade Commission (KFTC). The Monopoly Regulation and Fair Trade Act (MRFTA), in order to prevent business combinations that could result in a monopoly or monopolistic concentration of economic power, requires the filing of a business combination report with the KFTC if a company with assets or turnover of KRW 200bn or more plans to engage in the acquisition of shares, merger, business transfer or other business combination with another company with assets or turnover of KRW 20bn or more. However, if a Korean company will perform a business combination with a foreign company and thereby bears the reporting obligation, the foreign company bears the reporting obligation only if its turnover in Korea is KRW 20bn or more.

If the KFTC, upon the filing of a business combination report, finds that the contemplated business combination may be anti-competitive, it may impose appropriate corrective measures to remedy anti-competitiveness.

Securities Regulation

The Financial Investment Services and Capital Markets Act (FISCMA) is the primary law on securities regulation. The FISCMA contains a comprehensive set of regulations on the licensing of financial investment businesses and regulations for the protection of investors.
The FISCMA has adopted a system of licensure for investment brokerages, collective investment business and trusts, and a registration system for discretionary investment management businesses and investment advisory businesses. The FSC performs ongoing supervision of the soundness of licensed or registered financial institutions (relating to control structure, financial and managerial health), and supervision of sales activities (relating to investment recommendations, investment advertising and prevention of conflict of interests).

If the total amount of securities to be subscribed or sold is a certain amount or more, the issuer is required to submit and obtain clearance of a registration statement for such securities with the FSC before offering for subscription or selling such securities. At the time of filing this report, the issuer has to submit an offering memorandum.

Publicly-listed companies and other companies that meet certain criteria owe certain disclosure duties to their investors:

• duty to periodically disclose business performance over a certain period and financial condition (periodic disclosure duty)
• duty to disclose without delay each occurrence of the company’s material management related information which arise from time to time (continuous disclosure duty)
• duty to disclose material information through the securities market before providing material information to any particular person (fair disclosure duty; applies only to publicly listed companies)

If a company fails to properly perform such disclosure duties, it may be designated as an ‘unfaithful disclosure corporation’ or incur sanctions, such as suspension of trading (only for publicly-listed companies), or other criminal or administrative sanctions.

In addition, the FISCMA prohibits unfair trade practices, such as price manipulation, insider trading and short-swing trading, and for violation of such prohibition, not only civil and criminal liability, but also administrative sanctions, such as an order for disposition of shares or restriction on exercise of voting rights, may be imposed.

Data Protection

The Personal Information Protection Act (PIPA) primarily regulates personal data protection. Under the PIPA, persons who handle personal information may collect personal information only with the consent of the subject person or in certain limited cases, such as when it is required by law. Sensitive information, such as political opinions, health record, information on sexual preference or criminal record, or unique identifying information, such as resident registration number or passport number, may be collected only with the consent of the subject person, which must be given separately from the consent for collection of ordinary personal information.

Personal information may be used only within the scope of the purpose for which the information has been collected, and if the personal information handler wants to provide the personal information to a third party, the personal information handler must notify the subject person of the purpose of the third party’s use of personal information, the items of personal information to be provided to the third party, the period of use and holding of personal information by the third party, and the fact that the subject person has the right to refuse to provide consent, and must obtain a separate consent for the provision of personal information to the third party

This article was supplied by Lexis Practical Guidance.

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