SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Sung Min Kim, Allen Hyungi Ryu and Joon Sung Hong, Lee & Ko
(a) a more flexible management structure is permitted (no minimum number of directors required, no board of directors required, no maximum term of directors applicable, etc); and (b) it is generally subject to less stringent public disclosure requirements. • Disadvantages: (a) public offering of shares is not permitted; (b) issuance of debentures is not permitted; and (c) the corporate laws (and cases) around a yuhan hoesa are not as well established as for a chusik hoesa . 2.2 Strategic Drivers for JV Structuring The primary drivers for choosing the form of a JVC are: • whether the public offering of shares is contem - plated; • funding options (eg, whether issuance of deben - tures will be necessary); and • flexibility in management structures. Both chusik hoesa and yuhan hoesa are treated as separate legal entities subject to corporate income tax under South Korean tax law. Accordingly, there is no significant difference in the basic corporate tax framework applicable to the two types of entities. 3. JV Regulation 3.1 Legal Framework and Regulatory Bodies The primary source of law relating to corporate gov - ernance is the Korean Commercial Code (KCC), which applies to both listed and unlisted companies. For listed companies, additional regulations are con - templated in the Financial Investment Services and Capital Markets Act (“Capital Markets Act”) and relate to (among other things): • public disclosures; • the establishment of audit committees and election
It is mandatory for listed companies to comply with listing rules, including the Rules on Issuance of Secu - rities and Disclosure (which are derived from the Capi - tal Markets Act) as well as with the applicable listing rules of the Korea Exchange, including: • the Korea Composite Stock Price Index (KOSPI) Market Listing Rules; • the Korean Securities Dealers Automated Quota - tions (KOSDAQ) Market Listing Rules; • the KOSPI Market Disclosure Rules; and • the KOSDAQ Market Disclosure Rules. The Monopoly Regulation and Fair Trade Act (MRFTA) regulates: • business combination reports; • certain intra-group transactions such as cross- shareholding and provision of guarantees; • separation of commerce and financial business; and • conduct of qualifying/large holding companies. The Foreign Investment Promotion Act (FIPA) and For - eign Exchange Transactions Act (FETA) apply to any foreign direct investment or overseas direct invest - ment satisfying certain conditions. The primary regulators pursuant to the main statutory provisions described in the foregoing are: • the Ministry of Justice (under the KCC); • the Financial Services Commission (under the Capital Markets Act); • the Korea Exchange (under the Rules on Issuance of Securities and Disclosure and applicable listing rules of the Korea Exchange); • the Korea Fair Trade Commission (KFTC – under the MRFTA); • the Ministry of Finance or the Bank of Korea (under the FETA); and • the Ministry of Trade, Industry and Energy (MOTIE – under the FIPA). 3.2 Anti-Money Laundering Compliance The following AML regulations apply in South Korea.
of outside directors; • insider trading; and • prohibition of unfair trade practices.
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