SOUTH KOREA LAW AND PRACTICE Contributed by: Tehyok Daniel Yi, Gun Kim, Kyu Hyun Kim, Sun Hee Kim, Yong Whan Choi, Yong Min Lee, Jung Woo Lee and Hyeon Jeong, Yulchon LLC
1. Legal System and Regulatory Framework 1.1 Legal System based on the following separation of powers: • the legislative branch, the National Assembly, which enacts statutes; • the executive branch, led by the President and government agencies, which enforces laws; and • the judicial branch, which includes the Supreme Court as the highest appellate body and various lower courts. Additionally, the Constitutional Court independently conducts constitutional reviews and oversees impeachment cases. South Korea operates under a civil law system, where laws are codified in statutes. The legal framework is This structure ensures a well-defined regulatory envi - ronment for businesses operating within South Korea. 1.2 Regulatory Framework for FDI Foreign direct investment (FDI) in South Korea is sub - ject to regulatory oversight primarily through reporting obligations under the Foreign Investment Promotion Act (FIPA), overseen by the Ministry of Trade, Indus - try, and Energy (MOTIE), and the Foreign Exchange Transaction Act (FETA), administered by the Ministry of Economy and Finance. Under the FIPA, foreign investment in Korean com - panies is generally permitted, except where it may impact national security, public health, public order, environmental protection or contravene Korean laws. The Industrial Technology Protection Act (ITPA) fur - ther restricts foreign acquisitions involving certain technologies designated as national core technolo - gies. Specifically, if a foreign investor seeks to acquire 50% or more of the shares or effective control of a Korean company or its business holding a national core technology, prior approval or reporting to the MOTIE is required. Specific industries, including defence and finance, are subject to additional scrutiny and sector-specific regulations.
2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate Overview and FDI Outlook South Korea’s M&A market experienced a slowdown in the first half of 2025 against the backdrop of global uncertainties, including the Trump administration’s unpredictable tariff policies and ongoing geopolitical tensions. However, as tariff negotiations show signs of resolution and demand for business reorganisation grows, market sentiment is gradually becoming more favourable toward M&A activity. The majority of large- scale transactions continue to stem from conglomer - ates selling off non-core affiliates as part of restructur - ing efforts, along with private equity firms seeking exit opportunities. On the regulatory front, 2025 marked a period of sig - nificant change following a shift in government and sweeping amendments to the Korean Commercial Code (KCC). The reforms, which had been under dis - cussion since 2024, introduced a series of minority shareholder-friendly measures, including codifying directors’ duty of loyalty to shareholders, implement - ing electronic general shareholders’ meetings, and expanding the separate election of audit committee members. Notably, expanding the duty of loyalty to all shareholders beyond the company itself repre - sents a paradigm shift in Korean corporate govern - ance. While this move is widely welcomed as a step toward enhancing shareholder protection and capi - tal market transparency, it has also raised concerns among corporations about increased legal risks and potential constraints on managerial decision-making. In addition, the government is actively pursuing fur - ther reforms, including the mandatory cancellation of treasury shares, mandatory tender offer requirements, and restrictions on dual listings. This growing regula - tory complexity and associated legal uncertainty may temporarily dampen deal-making sentiment in the Korean M&A market. A particularly high-profile controversy in 2025 involved MBK Partners, Asia’s largest PE firm, which acquired the major retail chain Homeplus through a leveraged buyout. The company’s abrupt filing for rehabilitation
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