SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Sung Min Kim, Allen Hyungi Ryu and Joon Sung Hong, Lee & Ko
6.5 Other Documentation In addition to the JV agreement, a wide array of docu - ments may be required in connection with a JV trans - action. For typical manufacturing JVs, agreements for provid - ing the necessary resources for manufacturing activi - ties of the JV (such as a licence agreement, techni - cal assistance agreement, supply agreement and secondment agreement) are executed in addition to the JV agreement. IP licence/assignment agreements are often entered into between one or more of the JV partners and the JV, particularly when IPs of either or both JV partners are necessary or desirable for the purpose of the JV. Trade mark licence agreements are also common, as it is often the case that the JV will use the trade mark of either or both of the JV partners as part of its own trade mark or in connection with its business operations. Transactions involving the transfer of key employees may also involve employment agreements. For JVs other than manufacturing JVs (financial, IT platform, entertainment, etc), more industry-specific agreements are typically considered. For non-man - ufacturing JVs, no particular agreement is generally required in South Korea. 6.6 Rights and Obligations of JV Partners Rights and Obligations of the Joint Venture Parties Key rights • board composition (appointment of directors and statutory auditors); • financial reporting; • distribution of earnings through dividends; • right of first refusal/offer; and • tag-along rights. Key obligations
Distribution of earnings Typically, JV agreements explicitly provide that the adoption and amendment of a dividend policy require the board’s approval, and earnings of the JV company are distributed to the JV partners based on the divi - dend policy. Dividends must be paid within the limits of distribut - able profits as defined under the KCC. Distributable profits are calculated as the net assets of the com - pany, minus the capital, legal reserves, earned surplus reserves, and unrealised gains. Dividend payment requires approval of the financial statements at the annual general meeting of shareholders. If the finan - cial statements are approved by the board of directors (in cases set forth in the articles of incorporation), pay - ment of dividend requires the board resolution. An interim dividend refers to a distribution of a por - tion of profits to shareholders during the fiscal year. Unlike year-end dividends, which are resolved at the general meeting of shareholders, interim dividends are approved by resolution of the board of directors, and are only permitted if the articles of incorporation explicitly authorise such distributions. Debts and Obligations of the Joint Venture A chusik hoesa is a separate legal entity independent from its shareholders, and as a general rule, share - holders are not personally liable for the company’s debts or obligations. A shareholder is only obliged to contribute to the company up to the amount of the shares that the shareholder has subscribed to, and bears no further personal liability. Of course, if a share - holder separately agrees to guarantee the company’s obligations, a shareholder may be held liable under such guarantee agreement. That said, the Korean Supreme Court recognises the doctrine of piercing the corporate veil, and has held the controlling individual personally liable and dis - regarded a company’s separate legal personality in exceptional cases where the company, in substance, is nothing more than a sole proprietorship of the indi - vidual behind the corporate entity, or where the cor - porate form is abusively used as a device to evade legal obligations.
• capital contribution; • transfer restriction; • non-compete; • non-solicitation; and • confidentiality.
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