AMERICAN CHAMBER OF COMMERCE IN KOREA
SMALL & MEDIUM SIZE ENTERPRISES COMMITTEE MEETING
Dear AMCHAM Members,
Entrepreneurs often lack an HR professional in the early years of a business to help keep them out of legal limbo when it comes to employment law. Furthermore, as the employee number grows in the young company, new labor requirements automatically apply – often without the entrepreneur’s noticing the change. To give us an up-to-date, practical understanding of labor laws that have immediate relevancy for small- and medium-sized companies, two partners from J & S Law will give a presentation.
Retired Korean Judge Jin-Gyeong CHEONG, Ph.D., Labor & Employment Law and NY Attorney Sean HAYES, the only non-Korean to work for the Korean court system, will give a presentation on the definition of and the obligations owed to employees under Korean Labor Standards Act.
The presentation is a must for those that enjoy a lively dialogue and/or have or intend to have more than five employees in their organization. Judge Cheong and Sean will be available for questions. Both individuals are known to be very candid and energetic. We are sure that their presentation will not only be enlightening, but will entertain.
Judge CHEONG heads up the labor practice team at J & S Law Firm and Sean heads up the International Practice Group at J & S Law Firm.
Best regards,
AMCHAM Small & Medium Size Enterprises (SME) Committee Co-Chairs
Tom Coyner / Steve McKinney / Tony Michell
INFORMATION
Date: Wednesday, June 8th, 2011
Time: 7:30am - 9:30am
7:30am - 8:00am: Registration / Networking
8:00am - 9:30am: Breakfast / Presentation / Q&A
Venue: Grand Ambassador Seoul, Doraji Room (4th Fl.)
Cost: KRW 36,000 for Members (Inclusive of Breakfast)
KRW 46,000 for Non-Members (Inclusive of Breakfast)
SPEAKERS
Jin-Gyeong Cheong (Bio Attached)
Partner/Team Leader, Seoul Office (Korean Attorney-at-Law)
J & S Law Firm
Sean Hayes (Bio Attached)
Partner/Team Leader, Seoul Office (NY Attorney-at-Law),
J & S Law Firm
TOPIC
“Definition of Employee under Korean Labor Standards Act (Rep. Directors, Directors, Executives and Rank-in-File) and Obligations to Employees under the Act (Severance, Employment Security)”
REGISTRATION
Please contact AMCHAM Office no later than
June 3, 2011. 02) 6201-2200
amchamrsvp@amchamkorea.org
_____
SeanHayes@ipglegal.com
May 31, 2011
May 29, 2011
Listen to My Mother: JVs in Asia
The following article was written for the Korean language Legal Times.
My mother often told me, when I was much younger, to look both ways before crossing the street, carry an umbrella in the spring, and don’t go out alone in the dark. The advice can go along way for Korean companies doing business outside Korea.
As we all know, Korea companies lament over the fact that it is near impossible for Korean companies, with the exception of the most savvy and cash flush mega-conglomerates, to enter the Chinese, Indian and Southeast Asian markets without local partners if they intend to attempt to penetrate the local markets.
The common cry of Korean companies is to avoid JVs at all costs. In reality the issue is not the avoidance of JVs, but the procedure in choosing and dealing with JV partners. I have seen many Korean, American and European companies succeeded in India, China and Southeast Asia because of the active assistance of local JV partners.
Don’t let your clients attempt a venture alone without at least exploring the possibility of a local partner and normally success will come and the difficulties will be overcome by following my mother’s simple advice.
1. LOOK BOTH WAYS BEFORE CROSSING THE STREET.
Due Diligence, Due Diligence and More Due Diligence. Korean companies, attorneys and business advisors are notorious, throughout Asia, for jumping into roads without looking both ways. Often the situation is caused by an overemphasis on trust, an over respect for Quangxi, and by the greatest quality that most Korean’s hold – perpetual optimism.
The situation has caused criminal prosecutions for some, business failures for many and headaches for most.
Before your company or your client engages in any business, advise your company or client strongly to go through a full due diligence. I often find that Korean companies, often, fear that this will upset the anticipated partner. If this upsets the partner, you have the wrong partner.
All professional potential local partners should welcome due diligence, since it is a clear sign that the local partner is dealing with a true professional.
For example, when I work with American clients in Southeast Asia, all anticipated partners that have done business with Westerners expect that the anticipated Western partner will do a lengthy due diligence and the better potential local partners are even prepared for the sure deligence prior to the first face-to-face meeting.
One of the better-known companies in Vietnam, with JVs with companies from around the world, has an employee with the specific task of satisfying the due diligence needs of foreign companies.
However, my Korean clients, invariably, believe that they have already built “trust” and may lose this trust through the due diligence. All good businesspersons should care, primarily, about building respect and seeing if they can learn through the due diligence to respect the partner.
The mutual respect will lead, naturally, to a lasting trust.
Trust based on drinks, entertainment and casual encounters is either naïve or fleeting.
Additionally, if the due diligence leads to lack of respect by your company or client for the counter-party you have found either the wrong partner or our involved with a company or client that does not understand and will, likely, never understand the value of international partnerships and the uniqueness of international business. Both are clear signs of a non-justifiable risk.
2. CARRY AN UMBRELLA IN THE SPRING
Protect your company or client from the rain through a carefully drafted shareholder, O & M, non-disclosure/non-circumvention, technology transfer and license agreements and the like with liquidated damages, arbitration, and restrictive covenant clauses. I too often see Korean attorneys and Koreans with American law licenses simply using form agreements.
I have seen numerous shareholder agreements from one of the largest Korean law firms that contain so many logical and grammatical errors that the agreement is laughable - at best. In addition, this form agreement excludes many clauses that provide added protection for clients that should immediately come to the mind of any experienced lawyer doing business abroad.
Also, you must have a deep knowledge of local law, customs and practices. In India, for example, many critical company decisions must be made through a super majority. Thus, a client with a majority shareholding may still be subjected to shareholder relationship issues.
3. DON’T GO OUT ALONE IN THE DARK
Your company and client must have a lawyer or an experienced consultant familiar with the local market on retainer. The person should not simply be one of the many ubiquitous Korean consultants with local language skills. Often these individuals have vested interests that prevent them from being trusted advisor. Sometimes, these individuals have nothing more than local language skills and a good smile.
One such person, I met, had a wonderful resume, a list of contacts that made him look like the Who’s Who of Vietnamese business and a warm and welcoming smile. In reality, he was nothing more than a fraud. I talked with one of the individuals that he claimed to be his “HuBae” and the man just commented that he met him once and now has been plagued with numerous uninvited visits, requests for meetings with his clients and unwanted calls.
If someone has a list of friends, a good smile and an entourage of young Korean girls that can speak the local language – he probably is a fraud.
Hire a local law firm that works alongside international attorneys and for your good, skip most of the ubiquitous Korean law firms in favor of local firms with international lawyers.
If you company and clients follow my mother’s advice to look both ways before crossing the street, carry an umbrella in the spring, and don’t go out alone in the dark – they will be well on their way to a successful relationship in China, India or Southeast Asia.
Find this post in Korean here
_____
SeanHayes@ipglegal.com
My mother often told me, when I was much younger, to look both ways before crossing the street, carry an umbrella in the spring, and don’t go out alone in the dark. The advice can go along way for Korean companies doing business outside Korea.
As we all know, Korea companies lament over the fact that it is near impossible for Korean companies, with the exception of the most savvy and cash flush mega-conglomerates, to enter the Chinese, Indian and Southeast Asian markets without local partners if they intend to attempt to penetrate the local markets.
The common cry of Korean companies is to avoid JVs at all costs. In reality the issue is not the avoidance of JVs, but the procedure in choosing and dealing with JV partners. I have seen many Korean, American and European companies succeeded in India, China and Southeast Asia because of the active assistance of local JV partners.
Don’t let your clients attempt a venture alone without at least exploring the possibility of a local partner and normally success will come and the difficulties will be overcome by following my mother’s simple advice.
1. LOOK BOTH WAYS BEFORE CROSSING THE STREET.
Due Diligence, Due Diligence and More Due Diligence. Korean companies, attorneys and business advisors are notorious, throughout Asia, for jumping into roads without looking both ways. Often the situation is caused by an overemphasis on trust, an over respect for Quangxi, and by the greatest quality that most Korean’s hold – perpetual optimism.
The situation has caused criminal prosecutions for some, business failures for many and headaches for most.
Before your company or your client engages in any business, advise your company or client strongly to go through a full due diligence. I often find that Korean companies, often, fear that this will upset the anticipated partner. If this upsets the partner, you have the wrong partner.
All professional potential local partners should welcome due diligence, since it is a clear sign that the local partner is dealing with a true professional.
For example, when I work with American clients in Southeast Asia, all anticipated partners that have done business with Westerners expect that the anticipated Western partner will do a lengthy due diligence and the better potential local partners are even prepared for the sure deligence prior to the first face-to-face meeting.
One of the better-known companies in Vietnam, with JVs with companies from around the world, has an employee with the specific task of satisfying the due diligence needs of foreign companies.
However, my Korean clients, invariably, believe that they have already built “trust” and may lose this trust through the due diligence. All good businesspersons should care, primarily, about building respect and seeing if they can learn through the due diligence to respect the partner.
The mutual respect will lead, naturally, to a lasting trust.
Trust based on drinks, entertainment and casual encounters is either naïve or fleeting.
Additionally, if the due diligence leads to lack of respect by your company or client for the counter-party you have found either the wrong partner or our involved with a company or client that does not understand and will, likely, never understand the value of international partnerships and the uniqueness of international business. Both are clear signs of a non-justifiable risk.
2. CARRY AN UMBRELLA IN THE SPRING
Protect your company or client from the rain through a carefully drafted shareholder, O & M, non-disclosure/non-circumvention, technology transfer and license agreements and the like with liquidated damages, arbitration, and restrictive covenant clauses. I too often see Korean attorneys and Koreans with American law licenses simply using form agreements.
I have seen numerous shareholder agreements from one of the largest Korean law firms that contain so many logical and grammatical errors that the agreement is laughable - at best. In addition, this form agreement excludes many clauses that provide added protection for clients that should immediately come to the mind of any experienced lawyer doing business abroad.
Also, you must have a deep knowledge of local law, customs and practices. In India, for example, many critical company decisions must be made through a super majority. Thus, a client with a majority shareholding may still be subjected to shareholder relationship issues.
3. DON’T GO OUT ALONE IN THE DARK
Your company and client must have a lawyer or an experienced consultant familiar with the local market on retainer. The person should not simply be one of the many ubiquitous Korean consultants with local language skills. Often these individuals have vested interests that prevent them from being trusted advisor. Sometimes, these individuals have nothing more than local language skills and a good smile.
One such person, I met, had a wonderful resume, a list of contacts that made him look like the Who’s Who of Vietnamese business and a warm and welcoming smile. In reality, he was nothing more than a fraud. I talked with one of the individuals that he claimed to be his “HuBae” and the man just commented that he met him once and now has been plagued with numerous uninvited visits, requests for meetings with his clients and unwanted calls.
If someone has a list of friends, a good smile and an entourage of young Korean girls that can speak the local language – he probably is a fraud.
Hire a local law firm that works alongside international attorneys and for your good, skip most of the ubiquitous Korean law firms in favor of local firms with international lawyers.
If you company and clients follow my mother’s advice to look both ways before crossing the street, carry an umbrella in the spring, and don’t go out alone in the dark – they will be well on their way to a successful relationship in China, India or Southeast Asia.
Find this post in Korean here
_____
SeanHayes@ipglegal.com
Korean Multiple Labor Union Law to Be Implemented in July of 2011.
The Trade Union and Labor Relations Adjustment Act was amended to allow multiple union in the same Korean workplace. The Act will become effective from July 1, 2011.
One of the key purposes for the new law was to diminish management disputes. The thought is that the more radical of unions now may be moderated by the new less radical unions.
Recent disputes have helped to tarnished Korea’s reputation abroad. In fact, according to the Joongang Daily, “Labor demonstrations have been one factor that makes foreign companies reluctant to invest in Korea since it raises uncertainties about the investment environment.”
Many of IPG Legal clients mention this as a key risk of doing business in Korea and one of the reasons that they, often, choose not to locate their Asian headquarters in Korea.
In a nutshell, the new law allows more than one labor union in any given company. Since multiple unions will be allowed in companies, the law requires, for efficiency purposes, that a bargaining representative union “BRU” be selected among the unions in each company to engage in the primary act collective bargaining with the respective company. The selection of a BRU depends upon the number of members of each union. Typically the largest union will be selected, but in some circumstances a coalition of unions can form a majority. The Labor Relations Commission has the power to, in some cases, decide issues relating to the selection of BRU and to resolve labor disputes.
The changes will have immediate effects that will change the landscape of the Korean labor market for domestic and foreign firms. If a firm is currently operating in Korea or has plans to locate a business in Korea, downsize, draft labor rules, terminate an employee, or structure a retirement system it is strongly advised to consult with an attorney experienced in Korean HR compliance and consulting issues
_____
SeanHayes@ipglegal.com
One of the key purposes for the new law was to diminish management disputes. The thought is that the more radical of unions now may be moderated by the new less radical unions.
Recent disputes have helped to tarnished Korea’s reputation abroad. In fact, according to the Joongang Daily, “Labor demonstrations have been one factor that makes foreign companies reluctant to invest in Korea since it raises uncertainties about the investment environment.”
Many of IPG Legal clients mention this as a key risk of doing business in Korea and one of the reasons that they, often, choose not to locate their Asian headquarters in Korea.
In a nutshell, the new law allows more than one labor union in any given company. Since multiple unions will be allowed in companies, the law requires, for efficiency purposes, that a bargaining representative union “BRU” be selected among the unions in each company to engage in the primary act collective bargaining with the respective company. The selection of a BRU depends upon the number of members of each union. Typically the largest union will be selected, but in some circumstances a coalition of unions can form a majority. The Labor Relations Commission has the power to, in some cases, decide issues relating to the selection of BRU and to resolve labor disputes.
The changes will have immediate effects that will change the landscape of the Korean labor market for domestic and foreign firms. If a firm is currently operating in Korea or has plans to locate a business in Korea, downsize, draft labor rules, terminate an employee, or structure a retirement system it is strongly advised to consult with an attorney experienced in Korean HR compliance and consulting issues
_____
SeanHayes@ipglegal.com
May 26, 2011
Korean FTC Fines Korean Refiners for Collusion
In a possible reaction to Korea’s rising inflation, the Korea Fair Trade Commission (KFTC) fined the four major Korean refiners a total of KRW 434.8 billion (USD 442 million) for preventing competition through collusion.
The KFTC noted that: “In their meeting in March of 2000, officials of the four refiners agreed to respect the rights of former exclusive oil suppliers to gas stations and refrained from supplying their products to even gas stations with ties with a particular brand in the past.”
The KFTC claims that this alleged collusive act, led to consumers being forced to pay increased margins to suppliers even when prices of a barrel of the unrefined product decreases in the international markets.
Korea government is attempting to do anything to reign in on inflation seemingly in every manner with the exception of raising interest rates and the suppliers of fuel, food products, autos and other top consumables are, thus, the target of the present administration.
The tactic will likely force Korean conglomerates to lower margins temporarily.
The answer to the problem, however, is not simply for the Korean government to engage in these types of aggressive measures, but to lessen the burden on SME Korean businesses and foreign business and decrease the benefits to the big Korean players that are increasingly involved in more and more business lines and more abuse tactics to suppliers.
The refiners, from recent Korean news reports, seem to be set to appeal the decision. In Korean Antitrust cases, the Seoul High Court is often less aggressive than the KFTC.
_____
SeanHayes@ipglegal.com
The KFTC noted that: “In their meeting in March of 2000, officials of the four refiners agreed to respect the rights of former exclusive oil suppliers to gas stations and refrained from supplying their products to even gas stations with ties with a particular brand in the past.”
The KFTC claims that this alleged collusive act, led to consumers being forced to pay increased margins to suppliers even when prices of a barrel of the unrefined product decreases in the international markets.
Korea government is attempting to do anything to reign in on inflation seemingly in every manner with the exception of raising interest rates and the suppliers of fuel, food products, autos and other top consumables are, thus, the target of the present administration.
The tactic will likely force Korean conglomerates to lower margins temporarily.
The answer to the problem, however, is not simply for the Korean government to engage in these types of aggressive measures, but to lessen the burden on SME Korean businesses and foreign business and decrease the benefits to the big Korean players that are increasingly involved in more and more business lines and more abuse tactics to suppliers.
The refiners, from recent Korean news reports, seem to be set to appeal the decision. In Korean Antitrust cases, the Seoul High Court is often less aggressive than the KFTC.
_____
SeanHayes@ipglegal.com
May 10, 2011
Failed Korean Corporate Compliance and the Role of Attorneys in Korea
The following article appeared in the Korea Times on May 6, 2011.
The National Assembly of Korea, recently, voted in favor of a bill that requires listed companies with large market capitalizations to establish independent compliance support offices. Business organizations strongly opposed the bill.
The details of the system are not yet known, since many key aspects of the bill have been delegated to the president through an enforcement ordinance.
The surface purpose of the bill is to improve companies compliance with Korean law, thus, upgrading the image of Korean companies domestically and abroad. Some scholars have noted that transparency and other corporate governance issues, within Korean companies, have led to the “Korea discount” and that the discount may be overcome with more active compliance departments.
Additionally, fear has spread that an Enron-type scandal may hit Korea in the future and that the implementation of this system may contribute to lessening the risk. An Enron-type scandal, in Korea, may have a more far-reaching affect, since the scandal may contribute to a market-wide sell-off by foreign shareholders.
The greatest risk, according to many foreigners, is the accuracy of corporate information and transparency and a large local scandal could lead to a spreading of fear and a collapse of the markets.
The effectiveness of implementation of the system has good support in the financial service sector in Korea. The structure of the bill is based on the successful implementation of a like compliance system for financial institutions.
After the 1997-98 Asian currency crisis, the International Monetary Fund (IMF) and others pushed for the implementation of the system to financial institutions in order to avoid the potential need for another IMF bailout. Many have considered the implementation of the system a success that may have contributed to Korean financial institutions survival during the recent financial crisis.
Critics, however, have noted that the purpose of the bill is, in reality, to accommodate attorneys who have recently found it difficult to secure decent employment. Of course, this is one of the motivations for the bill and as noted is not the only.
Many of the details will be in the pudding ― the presidential enforcement ordinance. For example, we are not yet certain, how the independence of the compliance support officer will be guaranteed, what the qualification will be to qualify as a compliance support officer, the effectiveness of the system on the respective company, and how the relationship between the officer and the in-house legal team will affect the effectiveness of the system.
These issues will be resolved in the near future, since the bill is set to be promulgated in April 2012.
The matter seems to be more of an issue of “who shall hang the bell on the cat’s neck.” If lawyers are not going to bring to light corporate compliance issues and shareholders are unable or unwilling, who will be able to correct these Korean corporate realities?
It seems rational to consider that those with legal training working in more broad areas of society will increase the capabilities of organizations to comply with law, thus, moving Korea closer to a most developed nation status.
Therefore, the system seems to have little chance of creating any downsides with a large potential for upsides. The opposition of the companies is on the surface based only on expense, but seems to be based on much more. Companies of the size needed to trigger the law will never see or feel their burden in their large corporate budgets. The expense will likely be less than the expense of the bonus of any C level employee.
Thus, the issue seems to be more about corporations not wanting another “mother-in-law” meddling around in their corporate moat protected castles.
_____
SeanHayes@ipglegal.com
The National Assembly of Korea, recently, voted in favor of a bill that requires listed companies with large market capitalizations to establish independent compliance support offices. Business organizations strongly opposed the bill.
The details of the system are not yet known, since many key aspects of the bill have been delegated to the president through an enforcement ordinance.
The surface purpose of the bill is to improve companies compliance with Korean law, thus, upgrading the image of Korean companies domestically and abroad. Some scholars have noted that transparency and other corporate governance issues, within Korean companies, have led to the “Korea discount” and that the discount may be overcome with more active compliance departments.
Additionally, fear has spread that an Enron-type scandal may hit Korea in the future and that the implementation of this system may contribute to lessening the risk. An Enron-type scandal, in Korea, may have a more far-reaching affect, since the scandal may contribute to a market-wide sell-off by foreign shareholders.
The greatest risk, according to many foreigners, is the accuracy of corporate information and transparency and a large local scandal could lead to a spreading of fear and a collapse of the markets.
The effectiveness of implementation of the system has good support in the financial service sector in Korea. The structure of the bill is based on the successful implementation of a like compliance system for financial institutions.
After the 1997-98 Asian currency crisis, the International Monetary Fund (IMF) and others pushed for the implementation of the system to financial institutions in order to avoid the potential need for another IMF bailout. Many have considered the implementation of the system a success that may have contributed to Korean financial institutions survival during the recent financial crisis.
Critics, however, have noted that the purpose of the bill is, in reality, to accommodate attorneys who have recently found it difficult to secure decent employment. Of course, this is one of the motivations for the bill and as noted is not the only.
Many of the details will be in the pudding ― the presidential enforcement ordinance. For example, we are not yet certain, how the independence of the compliance support officer will be guaranteed, what the qualification will be to qualify as a compliance support officer, the effectiveness of the system on the respective company, and how the relationship between the officer and the in-house legal team will affect the effectiveness of the system.
These issues will be resolved in the near future, since the bill is set to be promulgated in April 2012.
The matter seems to be more of an issue of “who shall hang the bell on the cat’s neck.” If lawyers are not going to bring to light corporate compliance issues and shareholders are unable or unwilling, who will be able to correct these Korean corporate realities?
It seems rational to consider that those with legal training working in more broad areas of society will increase the capabilities of organizations to comply with law, thus, moving Korea closer to a most developed nation status.
Therefore, the system seems to have little chance of creating any downsides with a large potential for upsides. The opposition of the companies is on the surface based only on expense, but seems to be based on much more. Companies of the size needed to trigger the law will never see or feel their burden in their large corporate budgets. The expense will likely be less than the expense of the bonus of any C level employee.
Thus, the issue seems to be more about corporations not wanting another “mother-in-law” meddling around in their corporate moat protected castles.
_____
SeanHayes@ipglegal.com
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