SOUTH KOREA Law and Practice Contributed by: Hongki Kim, Hwijin (HJ) Choi, Kee Won Shin and Jennifer Yein Kwon, Bae, Kim & Lee LLC
• providing false or exaggerated information (ie, offering information that is inconsistent with the facts or presented in an overstated manner); and • providing deceptive information (ie, withholding or downplaying material facts that would significantly affect the conclusion or continuation of a franchise agreement). Cooling-Off/Waiting Period The franchisor may not (i) enter into a franchise agree - ment with the prospective franchisee or (ii) receive any franchise fees until 14 days have elapsed from the date on which the franchise disclosure document is provided. This waiting period may be shortened to seven days where the prospective franchisee has obtained legal advice from an attorney-at-law or cer - tified franchise transaction consultant with respect to the franchise disclosure document. Amendments to Disclosure Documents and Reporting Requirements If there are changes to the key matters listed in Annex 1-2 of the Enforcement Decree of the Franchise Act, the franchisor is required to file a “registration” of the amended franchise disclosure document within the prescribed period. For minor changes identified in the same annex, the franchisor is required instead to sub - mit a “report” of such changes. 2.2 Consequences of a Failure to Disclose Non-compliance with disclosure obligations under the Franchise Act may give rise to administrative fines, statutory rights of termination and refund for fran - chisees, and criminal sanctions. • Administrative fines: Failure to register amend - ments to the disclosure document or to provide disclosure may result in a negligence fine of up to KRW10 million (Article 43 (6)1, 2). Failure to report minor changes may result in a negligence fine of up to KRW3 million (Article 43 (7)1). • Franchise remedies: If a franchise agreement is executed without the franchisor having provided a duly registered franchise disclosure document, the franchisee may terminate the franchise agreement and demand a refund of all franchise fees within four months from the date of execution of the fran - chise agreement (Article 10 (1)1).
• Criminal sanctions: A franchisor that fails to comply with an obligation to provide disclosure documents may be subject to criminal sanctions, including imprisonment of up to two years or a fine of up to KRW50 million (Article 41 (3)2). 2.3 Franchise Disclosure Exemptions Unlike certain jurisdictions that provide exemptions from disclosure obligations, no such exemptions are available under Korean franchise law. 2.4 Franchise Disclosure Language/ Translation Requirements Although the Franchise Act does not explicitly man - date translation, in practice the franchise disclosure document must be prepared and provided in Korean, as the KFTC requires the document to be registered in Korean. Franchisors are required to register the franchise dis - closure document with the KFTC (with the registration process delegated to the Korea Fair Trade Mediation Agency; KOFAIR), or with the competent metropolitan or provincial government authority. 3.2 Franchise Registration Process Concerning the franchise registration process, see 2.1 Mandatory Disclosure . 3.3 Consequences of a Failure to Register Regarding the consequences of failing to obtain the registration, see 2.2 Consequences of a Failure to Disclos e. 3. Franchise Registration 3.1 Mandatory Registration
4. Other Requirements 4.1 Past-Profitability Requirements
A franchisor may not execute a franchise agreement without first registering its disclosure document with the KFTC or the competent metropolitan/provincial government authority, and providing the registered disclosure document to the prospective franchisee.
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