SOUTH KOREA Law and Practice Contributed by: Ie Hwan Yoo, Hang Jin Chang and Da Eun Jung, Kim & Chang
Pledge (Jil-kwon) A pledge is created by the parties entering into a pledge agreement. The pledge requires the col- lateral provider to surrender possession of the collateral to the secured party, but permits the debtor to retain title to the collateral, with cer- tain exceptions. If specifically agreed between the secured party and the collateral provider, the secured party may be able to resort to a private sale or direct acquisition of title to the collateral in addition to the judicial foreclosure. A pledge is typically created over intellectual property rights, monetary claims (such as a claim over an amount on deposit in bank deposit accounts), shares and bonds. Shares Under the Act on Electronic Registration of Stocks, Bonds, etc of Korea, all listed compa- nies are required to issue their shares in elec- tronic form instead of physical share certificates. The issuer will need to register all of its shares with an electronic registration institution (the Korea Securities Depository (KSD)), and the shareholders will have their own share custody account opened at their respective account management company (which shall be a bank, securities company or other licensed financial institution authorised under the aforementioned Act). Non-listed companies may choose to reg- ister their shares electronically or keep them in physical form. For shares represented by physical share cer- tificates, a pledge is created and perfected by the delivery of the relevant share certificates, on which the name of the pledgee is endorsed by the pledgor, to the pledgee. To perfect the pledge against the company issuing the shares, the name and address of the pledgee must be registered with the shareholders′ registry of the company.
registry (the actual secured amount can vary over time due to the accrual of interest or otherwise). The actual secured amount of a kun-mortgage, therefore, does not need to be provided when the kun-mortgage is recorded with the court reg- istry, as long as the maximum secured amount is stipulated. For the registration process, the mortgagor would typically prepare and submit a mortgage application form with the mortgage agreement entered into between the mortgagor and the mortgagee. Depending on the workload of the court registry office, it could take between three and five business days after submitting the mort- gage registration application for the relevant court registry office to complete the mortgage registration. Once the kun-mortgage is regis- tered, no periodic filing is required to maintain the perfection of the mortgage over time. Title Transfer by Way of Security (Yangdo Dambo) Unlike a mortgage, yangdo dambo is not a statu- tory security interest, but rather is a contractual security arrangement that the Korean courts have come to recognise over time. Security interest over receivables, monetary claims and certain movable assets (such as inventory) are generally granted in the form of yangdo dambo. Yangdo dambo is particularly useful when the collateral (eg, inventory) cannot be physically delivered to the secured party. Under Korean law, while a pledge over the collateral requires physical delivery of the property, yangdo dam- bo is valid even in cases where the transferred property (the collateral) remains with its transfer- or (the security provider), provided the transferor acknowledges that it is holding the property on behalf of the transferee (the secured party).
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