Starting a small business in Korea can be enjoyable and profitable if you get the business on the right track from the start. Too often we see those with “limited funds” (we all have limited funds -even multinationals have limited funds) choosing to forgo having the deals structured by a professional and just downloading a “partnership” agreement off the internet. Avoid the headaches and the costs in the future and structure all right from the start.
I have learned from my two decades working in Korea (Can’t believe I worked in Korea for over two decades), that this choice, normally, ends in either a failed business or a person contacting me with a case that, now, requires our litigation services. I even saw cases end up in the Prosecutor’s Office. The amount of money that it costs to have a professional draft these agreements, must, be considered part of the cost of doing business. The amount should be no major issue for most. Hey, I recently did a deal where one of the partners exclaimed that your final invoice was less than the cost of his pizza oven. I love being compared to a pizza oven.
While this law firm (IPG Legal), typically, assists multinational companies with their needs in Korea, China, Southeast Asia and North America, we also enjoy assisting some of the more entrepreneurial and proactive SMEs. However, be prepared for some time with me. We never just slap in front of you a form agreement and have you make some comments on it. This is a waste of time and a sign of, simply, a hack.
Some basics that you lawyer, must, consider with considering your joint venture and articles of incorporation prior to starting a joint venture in Korea.
Essential Issues to Consider When Drafting a Joint Venture Agreement in Korea (Non-exhaustive)
- Duties, Responsibilities and Expectations of each Partner?;
- Arbitration, Language and Forum for Dispute Resolution?;
- Management Structure?;
- Valuation, Windup, Termination?;
- Remedies for Breach?;
- Due Diligence, Due Diligence, Due Diligence – Did I mention Due Diligence?;
- Limit Powers of the Representative Director?;
- Retain Power to Appoint and Remove the Representative Director?;
- Retain Majority Control or include other Minority Protection Clauses?;
- Hire an Independent Accountant and Utilize a Neutral REAL Statutory Auditor?;
- What are you Getting out of the Joint Venture?;
- What are you Giving Up?;
- What is the Purpose of the Joint Venture?;
- Financing Options?;
- Chushik, Yuhan etc.?; and
- The List Goes On – read a few more articles below and search this blog and, also, take a look at: www.sba.org.
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Sean Hayes may be contacted at: [email protected].
Sean Hayes is co-chair of the Korea Practice Team and Entertainment, Media and New Tech Law Team at IPG Legal.
He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He assists clients in their contentious, non-contentious and business developments needs in Korea and China.
