NewsletterA Quarterly Update of Legal Developments in Korea | Winter 2009

CONTENTS[Corporate]The Ministry of Justice Announces Poison Pill Legislation.2Limited Introduction of Hedge Funds ............................. 2

[Litigation]Liability of Asset Management Companies and Commissioned Companies for Breach of Duty in Fund Management ................................................................ 3

[Antitrust & Competition]Korea Fair Trade Commission’s 2010 Business Plan..........4KFTC Disapproves Lotte Hotel’s Acquisition of Paradise Group’s Duty Free Shops.......... .......................................5Seoul High Court Rules that NHN has No Market Dominance Over UCC Video Sharing Providers............... 5Korean Court Rejects Claims Against Microsoft Once Again.6

[Securities]Proposed Amendments to the Trust Act..........................6Bill on Electronic Registration of Short-term Bonds..........7

[Banking]Amendment to the Enforcement Decree of the Financial Holding Companies Act..................................................8

[Insurance]Amendment of the Presidential Decree of the Insurance Business Law .................................................................92010 Roadmap of the Financial Services Commission in Relation to the Insurance Industry ................................10

[Labor & Employment]Insurance Company Branch Managers’ Employee Status. 10Dismissal Notice to Employees via E-mail........................11

[Real Estate]Increased Opportunities for Private Enterprises to Participate in Public Development Projects.....................12Relaxed Criteria for Establishment of Real Estate Developers .12

[Tax]Amendment of Rule to Prevent the Avoidance of the Tripled Registration Tax through the Acquisition of a Dormant Company .......................................................13Recent Court Decision on Entertainment and Sales Related Incidental Expenses.........................................................13

[Intellectual Property]Internet Open Market Operators’ Obligations to Prevent Trade of Counterfeits.....................................................14Court Decision Granting Preliminary Injunction Against Trade Secret Infringement for Unlimited Time Period .....15

[Broadcasting & Telecommunication]Easing Restrictions on IPTV Program Providers ..................16

[Environment]Inclusion of Greenhouse Gases in Environmental Impact Assessments .................................................................16

[Customs & Int'l Trade]Korea-India CEPA Takes Effect as of January 1, 2010......17

Selected Representations National Oilwell Varco Acquires a Korean Marine Equipment Manufacturer

VOGO Fund Acquires BC Card

MagnaChip Semiconductor Successfully Emerges from Voluntary Chapter 11 Restructuring

Temasek’s Subsidiary Invests in Seoul Semiconductor and Seoul Optodevice

Successful Regulatory Clearance on Merger of LG Telecom, LG Dacom and LG Powercom

Sale of Pacific Tower by Mirae Asset Maps REF

Hanjin Shipping’s Financing by Issuance of US$200 Million ABS Bonds

KCC Decision for KT Worth KRW 20 Billion Annually

Firm News Top ranking in Korea and Asia, mergermarket 2009 M&A League Tables of Legal Advisers Ranked first in Asia Pacific… in the Bloomberg 2009 Asia Pacific Legal Advisory M&A Rankings Top-tier law firm in all areas in Asia Pacific Legal 500 (2009/2010 Edition) Recognized as a leader in all major practice areas in IFLR 1000 (2010 edition)

On December 1, 2009, the Ministry of Justice announced

amendments to the Commercial Code setting forth

proposed legislation on poison pills. A poison pill is a

defensive tactic used by companies to protect management

rights in the event of a hostile takeover. It typically works

by granting existing shareholders the right to increase

their holdings by purchasing newly issued securities at a

below-market price. Despite repeated requests from Korean

conglomerates to allow poison pills as a management rights

protection device, the introduction of poison pill legislation

had been delayed due to conflicting views held among

different government circles. The government authorities

have, however, reached a consensus on the issue,

culminating in the announcement of pending legislation by

the Ministry of Justice.

According to the announcement, the salient points of the

pending legislation are as follows:

● By amending their articles of incorporation, corporations

may introduce and adopt poison pills, and upon the

consent of at least two-thirds of the directors, may

grant existing shareholders certain rights to acquire new

securities (the “New Share Acquisition Option”).

● If a shareholder acquires shares of a corporation for the

purpose of influencing major management decisions of

the corporation, it is possible to block the shareholder

from exercising the New Share Acquisition Option

or to even terminate such option as set forth in the

corporation’s articles of incorporation.

● Courts will be able to scrutinize and protect the New

Share Acquisition Option of the shareholders. Specifically,

if a corporation unfairly limits or terminates the New

Share Acquisition Option of a certain shareholder, the

shareholder may file a court claim requesting that the

corporation be prohibited from issuing new securities or

demanding that the newly issued securities be deemed

invalid.

On December 16, 2009, foreign institutional investors

submitted an opinion opposing the pending legislation.

Korean conglomerates have also submitted an opinion to

the Ministry of Justice asserting that the pending legislation

will not practically benefit listed corporations based on

their view that the requirements for implementing poison

pills are too stringent. The Ministry of Justice is planning

to gather opinions on the matter during the relevant

solicitation period, after which it will submit a final draft of

the proposed legislation to the National Assembly.

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CORPORATE by Jong Koo Park (jkpark@kimchang.com), Sung-Soo Choi (sschoi@kimchang.com)

THE MINISTRY OF JUSTICE ANNOUNCES POISON PILL LEGISLATION

LIMITED INTRODUCTION OF HEDGE FUNDS

T he enforcement decree (the “Enforcement Decree”) to

the Financial Investment Services and Capital Markets

Act (the “FSCMA”), which was promulgated on December

21, 2009, allows for a limited introduction of hedge funds.

Prior to the issuance of the Enforcement Decree, the

government had postponed launching a hedge fund system

due to the recent financial crisis.

The Enforcement Decree permits the establishment of

hedge funds by setting forth in detail the scope of qualified

investors who may invest in hedge funds, borrowing limits,

and debt guarantee limits. The Enforcement Decree is,

however, poised to allow for only a limited implementation

of a hedge funds system as it requires each hedge fund to

invest at least 50% of its assets in companies targeted for

restructuring.

Winter 2009 | �

Since the economic crisis in September 2007, returns on

investments have been relatively low and investors

have filed numerous lawsuits against asset management

companies and commissioned companies. In a recent

decision, the Seoul Central District Court held that a fund

management company and a commissioned company

were liable for the entire investment losses resulting from

unilaterally changing the investment target of over-the-

counter (“OTC”) derivatives under the initial investment

explanation guide.

In this case, the asset management company was to enter

into an OTC derivatives transaction with a specified party

pursuant to the investment guide. However, the asset

management company then unilaterally changed the

counterparty to a different party (Lehman Brothers) and

as a result the investors lost all of their investments after

Lehman Brothers collapsed.

The court stated that where a counterparty of an OTC

derivatives transaction was specified in an investment guide,

an agreement exists between the investors and the asset

management company to enter into the OTC derivatives

transaction with the specified counterparty. Accordingly,

the court found that the asset management company’s

unilateral change of the counterparty without the investors’

prior consent was in breach of the agreement. The court

further held that the commissioned company had a duty to

demand that the asset management company withdraw,

modify, or amend its purchase order that was in breach

of the above agreement, which meant the commissioned

company breached its duty when it followed the order

to purchase OTC derivatives issued by Lehman Brothers

without raising any objections.

In prior cases where courts have acknowledged liability

for investment funds, courts recognized that investors

were partially responsible for their own losses. This case

marks the first stance in which the court ordered a fund

management company to compensate the entire amount

of the investors’ losses suffered.

There was a similar case in June 2008, where a lower

court held that an asset management company’s change

of investment target at its own discretion was within

its delegated authority and accordingly dismissed the

plaintiff investor’s claim. On appeal, the upper court will

rule with respect to the unilateral change of the transaction

counterparty in this particular case.

LITIGATION by Byung Chol Yoon (bcyoon@kimchang.com), Sung Hoon Lim (shlim@kimchang.com)

LIABILITY OF ASSET MANAGEMENT COMPANIES AND COMMISSIONED COMPANIES FOR BREACH OF DUTY IN FUND MANAGEMENT

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On December 16, 2009, Ho-Yul Chung, Chairman of

the Korea Fair Trade Commission (the “KFTC”),

announced the KFTC’s business plan for the year 2010.

The KFTC plans to focus on promotion of competition,

protection of consumers and small and medium-sized

enterprises, and re-enforcement of protection of consumer

rights. It is anticipated that the regulation of cartels will

continue to be strengthened, and that large-scale M&A

transactions will be subject to a more in-depth review by

the KFTC in 2010. The following is a summary of the key

points of the business plan:

Improvement of Marketplace Competitiveness

The KFTC plans to reduce anti-competitive barriers to entry

in key service industries that have a large ripple effect

on the general public, such as the healthcare, finance,

distribution and energy industries.

The KFTC will also focus its efforts on preventing the formation

of monopolies and oligopolies by conducting a closer

analysis of the anti-competitive effects of large-scale M&A

transactions, which are expected to grow in number in 2010.

Reinforcement of Free Competition and Eradication of

Cartels

The KFTC plans to carefully monitor the industries that

produce goods closely related to the everyday lives of

consumers or business activities of enterprises, such as

daily necessities, raw materials and business equipment,

with the goal of preventing the formation of domestic or

international cartels in those industries.

In order to prevent bid-rigging in the public sector, the

KFTC plans to require that procurement agreements set

forth amounts of liquidated damages (as agreed between

the contracting parties) that would become payable upon

discovery of a cartel. In addition, the KFTC will enforce

more strictly the relevant laws prohibiting unfair support

practices among affiliates of large conglomerates and

reinforce its investigation of related party transactions

among those affiliates.

Protection of Small and Medium-Sized Enterprises

Reflecting the focus of Korean competition law on

protecting smaller companies from larger companies’ abuse

of their superior position, the KFTC will strengthen its

efforts on monitoring and correcting unfair subcontracting

practices of large conglomerates, such as unfair reduction in

the supply price and unlawful acquisition of key technology.

The KFTC also plans to closely monitor and supervise unfair

business practices by large-scale retailers.

Enhancement of Responsible Consumer Behavior

In order to foster practical and responsible consumer

behavior, the KFTC plans to establish a comprehensive

online information network for consumers by the year

2011.

The KFTC will strengthen its monitoring of advertisements

for the sale of real estate and stores. The KFTC also plans

to expand consumers’ opportunities to use their airline

frequent flyer miles and to improve the mechanism that

currently governs the expiration of airline frequent flyer

miles.

In addition, the KFTC will reinforce its examination of the

standard terms and conditions used in the finance industry

with the goal of protecting consumer interests.

ANTITRUST & COMPETITIONby Sung Eyup Park (separk@kimchang.com), Kee Hong Chun (khchun1@kimchang.com)

KOREA FAIR TRADE COMMISSION’S 2010 BUSINESS PLAN

Winter 2009 | �

KFTC DISAPPROVES LOTTE HOTEL’S ACQUISITION OF PARADISE GROUP’S DUTY FREE SHOPS

On October 6, 2009, the KFTC made an announcement

disapproving the acquisition by Lotte Hotel of casino

operator Paradise Group’s duty free shops.

The KFTC defined the relevant product market for this

proposed acquisition as “duty free shops” while defining

the relevant geographic market as the “Busan/Kyung-

Nam Province region.” The market analysis considered the

pattern in which consumers used duty free shops, price

differences among duty free shops, and the perceptions of

business people in the industry. Based on this analysis, the

KFTC determined that the proposed acquisition would result

in a 97.4% market share for Lotte, potentially producing

anti-competitive effects and risks such as the elimination

of competition, price increases (i.e., fewer discounts), and

reduction in consumer choice. Based on an econometric

analysis of the effect of price increases on consumer value,

it was estimated that consumer value would be decreased

by KRW 14 billion to KRW 40 billion.

This was only the fifth time that the KFTC disapproved a

business combination. In cases where there is no barrier to

entry in the relevant market and the relevant market tends

to experience dynamic changes through new entrants,

the KFTC may approve a business combination application

with certain qualifications such as “behavioral” corrective

measures, even if the contemplated business combination

may pose anti-competitive concerns. However, in order

to prevent harm to consumers, the KFTC has shown its

clear intention to issue “structural” corrective orders, such

as orders to sell assets or outright prohibition of business

combinations that may produce anti-competitive effects, if

the relevant market is static and has high barriers to entry,

meaning there is little possibility of regaining the level of

competition enjoyed prior to the business combination.

SEOUL HIGH COURT RULES THAT NHN HAS NO MARKET DOMINANCE OVER UCC VIDEO SHARING PROVIDERS

On October 8, 2009, the Seoul High Court ruled that a

leading Internet portal business in Korea, NHN Corp.

(“NHN”), did not violate the Monopoly Regulation and Fair

Trade Law (the “FTL”) by restricting user-created content

(UCC) video sharing service providers from displaying

advertisements in advance of playing the main video

contents. The court based this decision on its finding that

NHN is not a market-dominant enterprise.

Established in 1998, NHN operates the Naver portal, which

is the most popular Internet portal and search engine in

Korea. In 2007, the KFTC conducted an investigation into

the Korean Internet portal market and concluded that,

based on advertising revenue, NHN is dominant in that

market, which it defined broadly as consisting of all Internet

portals with so-called 1S-4C (search, communication,

community, contents and commerce) services. The KFTC

also determined that NHN’s restriction on advertising by

video sharing service providers constituted an abuse of

NHN’s market dominant position and was therefore a

violation of the FTL. Accordingly, the KFTC issued a cease-

and-desist order prohibiting such restrictions.

In reaching its decision to vacate the KFTC’s order, the court

accepted the position asserted by NHN, that the relevant

market should be defined by focusing on the specific

business area where the alleged abusive behavior took

place rather than including all business activities irrespective

of their connection with the alleged behavior. Despite its

large share of advertising revenue, the court found that,

based on a properly limited market definition, NHN has no

dominant power vis-à-vis video sharing service companies

in providing video search and linking services, given its

small portion of the total viewer inflow paths of video

sharing service companies.

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The court’s ruling means that, in cases of abuse of market

dominant position, the market definition cannot be made

a priori but should be specifically made in close connection

with the alleged abusive behavior. For Internet portals with

multiple platforms, where competitive conditions are usually

different for each platform, the relevant market should be

cautiously defined in light of competitive conditions of the

platform where the allegedly abusive behavior took place,

in order to determine whether the behavior was driven by

market dominance.

This decision was the first to be rendered by a Korean

court on the issue of FTL restrictions on Internet portal

businesses, and it is poised to provide a roadmap for

applying the FTL to multi-sided platform businesses. Kim &

Chang represented NHN in this case.

KOREAN COURT REJECTS CLAIMS AGAINST MICROSOFT ONCE AGAIN

On September 11, the Seoul Central District Court denied

relief for the plaintiff in a damages claim against

Microsoft Corporation and Microsoft Korea.

Dideonet, a Korean media server software company, had

filed a damages claim against Microsoft, claiming damages

of KRW 100 billion (approximately US$83 million), following

a 2006 decision by the KFTC concluding that Microsoft

had illegally bundled media server software and instant

messaging functionality with its operating systems. The

court dismissed Dideonet’s claims in their entirety for lack

of causation between Microsoft’s violation of the FTL and

the alleged losses in business of Dideonet.

This decision follows on the heels of recent dismissals of

damages claims brought by two other plaintiffs. On June

11, 2009, a different panel at the court dismissed damages

claims brought against Microsoft by SanviewTech, a Korean

media server software company, and Digito, a Korean

messenger developer, for lack of causation.

In the SanviewTech and Digito cases, the court stated that

while the FTL allowed the court to award damages based

on the totality of the circumstances in cases where it was

too difficult to prove the specific amount of damages

incurred, this did not lessen the plaintiff’s burden of proof

for proving causation. Based on the evidence presented in

the case, the court then found that the damages alleged by

the plaintiffs had not been caused by Microsoft’s actions.

Kim & Chang’s antitrust litigation team represented

Microsoft throughout the proceedings.

The legislative notice for the amendment proposals to the

Trust Act was announced on October 27, 2009. The major

points of the amendment proposals are summarized below.

Self-Entrustment

The current Trust Act prohibits self-entrustment as a

trustor may not entrust assets to itself as the trustee.

The amendment proposals, however, permit a trust in

which a trustor entrusts its assets to itself by declaring

itself the trustee. Self-entrustment is expected to be used

in securitization transactions. To prevent abuse, self-

entrustment will only be allowed if it is executed in the

form of an officially authenticated deed.

SECURITIESby Sun Hun Song (shsong@kimchang.com), Ie Hwan Yoo (ihyoo@kimchang.com)

PROPOSED AMENDMENTS TO THE TRUST ACT

Winter 2009 | �

Trust Beneficial Interest as Securities

Under the current Trust Act, beneficial interest certificates

representing the beneficial interest in a trust may be issued,

but their transferability is limited because such certificates

are not “securities” (i.e., negotiable instruments). Issuing

beneficial interest in a trust as a “security,” thus enhancing

its transferability, will help broaden the scope of potential

trust beneficiaries. The amendment proposals specify that

a general trust may issue beneficial certificates as securities

representing beneficial interests in the trust. The issuance

of beneficial certificates as securities will enable large

scale financings that use a trust as the investment vehicle.

Improved transferability will make it easier for investors to

make investment decisions, while the trustee will be able

to save costs incurred by the management of beneficial

interest.

Introduction of Limited Liability Trust

Under the current Trust Act, a trustee will technically be

subject to unlimited liability for any obligations arising from

the administration of trust-related business. To encourage

the use of the trust structure for commercial purposes,

a type of trust in which the trustee’s liability is limited to

the trust assets was necessary. The amendment proposals

introduce a “limited liability trust” where the scope of the

trustee’s liability is limited to the trust assets.

Issuance of Trust Bonds

In order to allow for large scale financings through trust

structures, bonds issued by the trust itself (“Trust Bonds”)

can be utilized in the case of limited liability trusts that issue

beneficial interest certificates as securities.

BILL ON ELECTRONIC REGISTRATION OF SHORT-TERM BONDS

The legislative notice for the bill on electronic registration

of short-term bonds was announced on November 2,

2009. The goal of this bill is to rejuvenate and enhance

transparency in the short-term finance market and

promote balanced development of the corporate finance

market. Short-term bonds will be an alternative short term

financing tool to corporate commercial paper but with

certain characteristics not found in corporate commercial

paper (i.e., transferability following split and adequate

information disclosure).

An account with the Korea Securities Depository is required

for the issuance of short-term bonds. Any person intending

to own short-term bonds or exercise certain rights

relating to short-term bonds must open an account with

a participating institution and, in turn, any participating

institution intending to own short-term bonds or exercise

certain rights relating to short-term bonds must open an

account with the Korea Securities Depository. In addition,

short-term bonds may not be issued in the form of physical

securities or certificates.

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F ollowing the amendment to the Financial Holding

Companies Act (the “Act”), which generally eased

restrictions on financial holding companies (“FHCs”), the

amendment to the Enforcement Decree of the Act (the

“Enforcement Decree”) was promulgated on January 18,

2010. This amendment sets forth matters delegated by

the Act, including requirements of obtaining approval for

establishment of or conversion into a non-bank holding

company and inclusion of subsidiaries as well as other

matters necessary for the enforcement thereof. The major

points of the amendments to the Enforcement Decree are as

follows:

Embodiment of Requirements for Approval of Plan for

Conversion into Non-Bank Holding Company

The Act stipulates that in the event a person who controls a

company included in a business group subject to limitation

on cross-capital investment or its specially related person,

submits to the FSC a plan for its conversion into a non-bank

holding company and obtains the approval thereof, such

person or its specially related person shall be deemed an

FHC from the date of FSC approval until the implementation

of the conversion plan. Therefore, the amendment to the

Enforcement Decree embodies the conditions to obtaining

the approval of the FSC as follows: (i) the conversion plan

shall be adequate, reasonable and feasible, (ii) the method

of raising financial resources shall be adequate and (iii) the

requirements for major shareholder shall be satisfied prior

to the implementation of the conversion plan.

Relaxation of Requirements for Approval of Insurance

Holding Company and Financial Investment Holding

Company

The amendment to the Enforcement Decree makes less

restrictive the requirements applicable to an insurance

holding company and financial investment holding company

in connection with investments made by their respective

major shareholders, relative to those applicable to a bank

holding company. In particular, (i) while the shareholders

equity of a major shareholder of a bank holding company

shall be at least four times its investment in such bank

holding company, an insurance holding company or financial

investment holding company would no longer be subject

to such requirement and (ii) while a major shareholder of

a bank holding company is prohibited from making any

investment in such a bank holding company with borrowed

funds, a major shareholder of an insurance holding company

or financial investment holding company would be allowed

to borrow up to two thirds of its investment.

Embodiment of Procedures for Approval of Dual Positions

of Officers and Employees in FHC and its Subsidiary

The amendment to the Enforcement Decree provides that in

the event (i) an employee of a subsidiary holds dual positions

as a staff responsible for the business management and

financing activities in an FHC or (ii) an officer of a subsidiary

responsible for any business that cannot be delegated to a

third party holds dual positions as an officer or employee

of another subsidiary, the approval of the FSC shall be

obtained. Under the amendment to the Enforcement Decree,

in the event an officer of a subsidiary responsible for any core

business that can be delegated to a third party holds dual

positions as an officer responsible for the same activities in

another subsidiary, such dual positions shall be reported to

the FSC at least seven days prior to the date on which the

relevant officer begins to hold dual positions.

Expansion of Scope of FHC’s Businesses

Under the amendment to the Enforcement Decree, the scope

of business of an FHC was expanded in order to improve

means of controlling and supporting a subsidiary of the FHC.

Under the amendment, an FHC is further allowed to carry

out (i) internal control and risk management businesses of

a subsidiary and (ii) other services delegated by a subsidiary

including without limitation IT, legal and accounting services.

BANKINGby Sang Hwan Lee (shlee@kimchang.com), Geon Ho Kim (ghkim@kimchang.com)

AMENDMENT TO THE ENFORCEMENT DECREE OF THE FINANCIAL HOLDING COMPANIES ACT

Winter 2009 | 9

The proposed amendment of the Presidential Decree of

the Insurance Business Law (the “Amendment”) was

finally approved by the State Council. Set forth below are

some of the major items included in the Amendment.

Standards for Solicitation by Specialized Credit Card

Companies

Until recently, specialized credit card companies (“SCCCs”)

that sell insurance products have been exempted from

the regulations applicable to other financial-institution

insurance agencies (“FIIAs”). However, the Amendment,

in principle, will treat the SCCCs and other FIIAs equally.

Provisions such as those prohibiting insurance-soliciting

personnel from engaging in credit-extension business will

immediately be applied, while the requirement for sales

of multiple insurers’ products will be implemented after

the lapse of a three-year grace period. The Amendment

will also permit certain exceptions for the SCCCs, such as

allowing them to sell insurance products through the TM

(telemarketing) channel.

Preparation for Introduction of the IFRS

Under the Amendment, the so-called “pricing method”

(or “cash flow method”) for premium calculation will

be introduced in place of the current tri-revenue source

method based on the risk rate, interest rate and acquisition

cost rate. The two methods will co-exist until the end of

December 2012, but from January 1, 2013 onward only

the pricing method may be used.

In addition, the reserves for risks that are ceded to

reinsurers, which are currently offset with insurance

liabilities, will be recognized on the books separately as

“reinsured assets” in accordance with the International

Financial Reporting Standards (the “IFRS”).

Delegation of Authority to Supervise Insurance Agencies

The Amendment delegates the authority to supervise

insurance agencies, which currently rests in the Financial

Supervisory Service (the “FSS”), to insurance associations

and other insurance-related institutions. The delegatees

are required to establish organizational structures that

ensure fair and independent exercise of the delegated

supervisory function and to receive prior approval of these

structures from the FSS. The Amendment allows the FSS to

set detailed standards for the subject, scope, method and

procedures of the supervisory function to be delegated.

INSURANCEby Woong Park (wpark@kimchang.com), In Sang Kim (iskim@kimchang.com)

AMENDMENT OF THE PRESIDENTIAL DECREE OFTHE INSURANCE BUSINESS LAW

10 | Newsletter

The Supreme Court recently affirmed a High Court

decision holding that branch managers of insurance

companies are not employees of insurance companies.

Certain branch managers of a life insurance company,

whose independent contractor contracts were terminated,

filed a petition against the company while arguing that they

were employees of the company rather than its independent

contractors and that the company’s termination of

their contracts was in fact a “dismissal of an employee

by the company.” The branch managers demanded that

their dismissal be held null and void and that they be

compensated for back pay wages until they are reinstated.

The District Court recognized the plaintiffs as employees of

the company and ruled in their favor. On appeal, however,

the appellate high court accepted arguments made by

Kim & Chang acting as the insurance company’s newly

appointed counsel and overruled the lower court decision.

The branch managers appealed, and the Supreme Court

affirmed the judgment of the High Court.

The Supreme Court held that the branch managers were

independent contractors rather than employees of the

insurance company on the grounds that the insurance

company did not exercise substantial supervision and

control over the branch managers. The primary factor the

court considered in distinguishing between an independent

contractor and an employee in this case was the degree

of supervision and control the company exercised over the

branch managers.

If branch managers are otherwise regarded as employees,

dismissal of the branch managers will be restricted and

retirement benefits must be paid. The company will have

to wrestle with other legal obligations as well, such as

payment of the difference between the earned income tax

and the business income tax, and retroactive payment of

industrial accident insurance premiums and employment

insurance premiums.

LABOR & EMPLOYMENTby Weon Jung Kim (wjkim@kimchang.com), Yunjoh Lee (yjlee1@kimchang.com)

INSURANCE COMPANY BRANCH MANAGERS’ EMPLOYEE STATUS

2010 ROADMAP OF THE FINANCIAL SERVICES COMMISSION IN RELATION TO THE INSURANCE INDUSTRY

On December 16, 2009, the Financial Services Commission

(the “FSC”) announced its roadmap for 2010. Below are

some of the important items related to the insurance industry.

Reinforcement of Regulations on Financial Soundness

of Insurance Companies

Instead of the single risk quotient used to calculate risks

under the present risk-based capital (“RBC”) system, risk

quotients adjusted for each insurance company will be used

to reflect unique characteristics of their risks. Moreover,

the standards for calculating the aggregate risks will be

improved based on international standards and in-depth

analysis of the correlation among different risk factors.

Development of Diverse Insurance Products for

Preparing for Old Age

In order to proride support to the lower and middle classes

in preparing for old age, the FSC will induce insurers

to develop insurance products offering various types of

services such as investment advice, health check-ups, etc.

in addition to payment of claims. The FSC will also support

development of various medical insurance products by

improving the process for accessing medical history data

and medical service payments.

Winter 2009 | 11

In connection with this case, Kim & Chang conducted in-

depth research and thoroughly reviewed relevant precedent

cases with regard to the critical elements courts would

likely take into account in determining branch managers’

status as employees.

DISMISSAL NOTICE TO EMPLOYEES VIA E-MAIL

Article 27, Paragraph 1 of the Labor Standards Act

provides that “if an employer intends to dismiss an

employee, the employer shall notify the employee of the

reasons for dismissal and the date of such dismissal in

writing.” Paragraph 2 of the same article provides that

“the dismissal of a worker shall take effect only after the

written notification is given to the worker pursuant to

Paragraph 1.”

As to the meaning of “in writing” or “written notice,”

the courts and the Ministry of Labor have refused to

recognize notice given via e-mail as a valid form of written

notice. Accordingly, if an employer intends to dismiss

an employee, the employer is required to provide the

concerned employee with the written notice specifying

the reasons for dismissal and the date of such dismissal in

paper form.

Recently, however, the Seoul Central District Court held

that an e-mail notification of dismissal can be regarded

as a written notice in the context of the following

circumstances:

● It was very difficult for the employer to obtain the

employee’s mailing address because the employee

moved often;

● The employer and the employee had communicated

with each other by e-mail during the period of the

employee’s overseas training;

● The employer sent an e-mail regarding the employee’s

dismissal and attached to the e-mail a “notice of the

HR Committee’s resolution” containing the reasons for

dismissal; and

● The employee acknowledged receipt of the e-mail as he

had done before.

It is noteworthy that this is the first case in which the

court expanded the meaning of “writing” or “written

notice” to cover electronic documents. It is necessary to

see whether the higher courts (i.e., the High Court and the

Supreme Court) will take the same or similar position as

that of the Seoul District Court.

12 | Newsletter

On November 10, 2009, the MLTMA announced that

the cabinet had approved the recently proposed

amendments to the Real Estate Development Management

and Promotion Law (the “REDMPL”). These amendments

propose relaxing registration requirements for real estate

developers and are therefore expected to result in much

easier establishment of real estate developers.

Under the REDMPL, in order to engage in a certain amount

of real estate development each year, a real estate developer

must register after satisfying certain requirements. Under

the prior laws, in order to register as a real estate developer,

entities were required to have a minimum paid-in capital of

KRW 500 million and individuals were required to have a

minimum commercial asset value of KRW 1 billion used

for the operation of real estate development business.

Under the proposed amendments, however, a real estate

developer would be able to register if it has, (i) in the case

of an entity, a minimum paid-in capital of KRW 300 million

or (ii) in the case of an individual, a minimum commercial

asset value of KRW 600 million.

The proposed amendments to the REDMPL have been

submitted to the National Assembly and will become

effective only upon approval by the National Assembly and

promulgation thereof by the President.

RELAXED CRITERIA FOR ESTABLISHMENT OF REAL ESTATE DEVELOPERS

O n November 10, 2009, the Ministry of Land, Transport

and Maritime Affairs (the “MLTMA”) announced

that the cabinet had approved the recently proposed

amendments to the Residential Site Development Promotion

Act and the Industrial Site Location and Development Law.

These amendments propose that private enterprises should be

permitted to participate in projects in previously restricted areas

and are therefore expected to result in increased opportunities for

private enterprises to participate in residential site development

projects and projects for construction within industrial parks.

Traditionally, residential site developments have been

primarily undertaken by public institutions and enterprises,

such as the national or municipal governments, the

Korean Land & Housing Corporation, and other municipal

corporations, with private participation permitted only in

exceptional cases. Under the proposed amendment to the

Residential Site Development Promotion Act, however,

private enterprises (such as private residential construction

companies) will be able to participate in residential site

development projects.

Also, until now, only entities that are 20% or more owned

by national and municipal governments or other public

institutions or entities were permitted to construct factories

and other industrial, commercial, display, distribution, and

residential facilities within an industrial park. Under the

addendum to the proposed amendment to the Industrial

Site Location and Development Law, this ownership

requirement would be suspended for two years from the

effective date of the amendment so that even wholly

private enterprises may undertake such construction

projects.

The proposed amendments to the Residential Site

Development Promotion Act and the Industrial Site Location

and Development Law have been submitted to the National

Assembly and will become effective only upon approval by

the National Assembly and promulgation thereof by the

President.

REAL ESTATEby Kwan Sik Yu (ksyu@kimchang.com), Hyo Sang Kim (hskim5@kimchang.com)

INCREASED OPPORTUNITIES FOR PRIVATE ENTERPRISES TO PARTICIPATE IN PUBLIC DEVELOPMENT PROJECTS

Winter 2009 | 1�

For purposes of promoting balanced regional development,

if a legal entity establishes a new corporation (including

a branch) in or relocates to the Seoul Metropolitan Area,

a tripled registration tax is imposed on any registration

of capital or real estate made within the five-year

period beginning from the date of the corporation’s

establishment or relocation. In order to avoid this tax,

there have been many instances where taxpayers acquired

dormant companies that have been in existence in the

Seoul Metropolitan Area for five years or more, instead of

establishing new companies.

To prevent this perceived abuse of the tax laws,

amendments to the Local Tax Law (the “LTL”) and

Presidential Decree, which will become effective as of

January 1, 2010, have been proposed. The newly proposed

Presidential Decree of the LTL specifies when a dormant

company (an “Applicable Dormant Company”) may

become subject to the tripled registration tax and other

relevant application criteria in detail.

According to the newly proposed Presidential Decree of the

LTL, a company will be treated as an Applicable Dormant

Company if (i) it has been dissolved or is considered to have

been dissolved under the Korean Commercial Code; (ii) its

business was closed under the Value Added Tax Law; (iii) it

was dissolved but re-registered as a going concern within

the one-year period prior to being acquired and does not

conduct any business; or (iv) its business was closed but it

re-applied for a business entity registration within the one-

year period prior to being acquired and does not conduct

any business.

In addition, when (i) a company becomes a majority

shareholder through the acquisition of a company that

has not conducted any business for at least two years prior

to being acquired and (ii) 50% or more of the acquired

company’s directors are replaced within the one-year period

prior to or following the acquisition, the acquired company

will be treated as an Applicable Dormant Company.

TAXby Sang Ik Han (sihan@kimchang.com), Sang Bum Oh (sboh@kimchang.com)

AMENDMENT OF RULE TO PREVENT THE AVOIDANCE OF THE TRIPLED REGISTRATION TAX THROUGH THE ACQUISITION OF A DORMANT COMPANY

The Supreme Court recently held that certain cost

reimbursements made only to a select number of

customers do not constitute “entertainment expenses” for

tax purposes.1

The taxpayer in this case was a corporation, which was in

the business of importing consumer products and selling

them in the Korean market. In order to promote its sales,

the taxpayer entered into agreements with certain agents,

pursuant to which the taxpayer reimbursed the salaries and

vehicle maintenance costs of salespeople of only certain

agents based on their respective sales performance. The tax

authorities treated such reimbursements as entertainment

expenses for tax purposes and levied additional corporate

income taxes on the taxpayer.

The main issue in this case was whether such

reimbursement of salaries and vehicle maintenance costs

should be treated as fully deductible sales related incidental

expenses or as partially deductible entertainment expenses.

RECENT COURT DECISION ON ENTERTAINMENT AND SALES RELATED INCIDENTAL EXPENSES

1 The deductibility of entertainment expenses is subject to certain ceiling limitations for tax purposes.

1� | Newsletter

The Seoul Central District Court recently issued a decision

in which the scope of Internet open market operators’

duty to prevent trade of counterfeits is summarized in

phases.

The court made clear that both a seller’s act of

manufacturing and selling counterfeits without permission

of a trademark owner, and an act of directly or indirectly

aiding and abetting such an activity constitute trademark

infringement.

The court then found that although Internet open market

operators are not directly involved in individual transactions

between sellers and purchasers on their websites, they

provide a marketplace for those sellers and purchasers and

receive commission fees from them in return. Under these

circumstances, the operators can easily identify transactions

that involve trade of counterfeits. Operators also have the

authority to manage and control the sellers; and therefore,

they have an obligation to take appropriate measures to

prevent trade of counterfeits.

In the above case, the court summarized the obligations of

Internet open market operators in the following four phases:

(1) Duty to Delete Listings of Counterfeits: The operators

have an obligation to delete from their websites listings

of counterfeit goods that were reported by a trademark

owner, or goods that have been confirmed to be

counterfeit.

(2) Duty to Build Appropriate Operating System: The

operators have an obligation to minimize the anonymity

of sellers and apply a more stringent standard when

listing certain classes of products that are frequently

found to be counterfeit (e.g., by requiring the sellers to

post information or materials showing the authenticity

of their products).

(3) Duty to Manage Personal Information of Sellers of

Counterfeits: The operators have an obligation to

create and operate a system where they can manage

personal information of sellers who trade a large

volume of counterfeit products and to disclose this

information to a trademark owner upon request.

(4) Duty to Limit Transactions for Sale/Purchase of

Products Bearing Certain Trademarks: In cases where

counterfeits bearing a certain trademark are excessively

traded on their websites to the extent that it impairs

social order, and if it is impossible to control them by

implementing the measures described in (1) through

(3) above, the operators have an obligation to require

a reservation period before actually listing products on

their websites, during which the authenticity of the

subject products can be examined by the trademark

INTELLECTUAL PROPERTYby Young June Yang (yjyang@kimchang.com), Ji Eun Lee (jelee1@kimchang.com)

INTERNET OPEN MARKET OPERATORS’ OBLIGATIONS TO PREVENT TRADE OF COUNTERFEITS

In holding that the salary and vehicle maintenance

cost reimbursements did not constitute entertainment

expenses, the Supreme Court reasoned that the imposition

of additional taxes was inappropriate because such

reimbursements were consistent with local industry practice

and were provided to encourage customers to increase

their sales.

This decision is meaningful because the Supreme Court

held that the expenses incurred with respect to only a select

number of customers no longer constitute entertainment

expenses as long as such expenses are directly related to the

sales of products or services and are incurred in a reasonable

way. In other words, this case strictly limits the scope of

what constitutes entertainment expenses for tax purposes.

The tax department of Kim & Chang, acting as counsel for

the taxpayer, successfully argued this case after intense

legal arguments in court, thereby securing an important

taxpayer-favorable Supreme Court case precedent.

Winter 2009 | 1�

COURT DECISION GRANTING PRELIMINARY INJUNCTION AGAINST TRADE SECRET INFRINGEMENT FOR UNLIMITED TIME PERIOD

The Seoul Central District Court recently issued a

preliminary injunction in favor of a former employer

(“Company A”), prohibiting its ex-employees and their

new employer (“Company B”) from infringing Company A’s

trade secrets in developing Company B’s new automobile,

without imposing a limitation on the time period during

which the injunction should be enforced.

The court’s decision was based on the following facts: (i)

the ex-employees were mainly engaged in developing and

manufacturing automobiles during their employment with

Company A; (ii) when they left Company A, they actively

engaged in taking with them certain materials containing

the company’s trade secrets, such as detailed drawings and

technology standard materials, etc.; (iii) after termination of

their employment with Company A, they joined Company

B and referenced and used those materials in the course of

conducting research for and developing a new automobile

for Company B, and as a result, were able to save a

substantial amount of time that would have otherwise

been required to develop the automobile on their own; and

(iv) Company B completed the development of the new

automobile based on the materials that were taken from

Company A, manufactured parts thereof and semi-finished

products and exported them to its headquarters in Russia,

after which the headquarters assembled them to produce

completed automobiles and sold them in the market.

The court granted an injunction against Company B

prohibiting the acquisition, use and disclosure of Company

A’s trade secrets and also prohibiting the manufacture,

transfer, sale and exportation of the semi-finished products

and parts of the new automobile in question.

Moreover, with regard to the enforcement period for the

above injunction order, the court mentioned that although

the time period should be limited to the amount of time

required for a fair competitor to acquire the subject

technology in a legitimate way - e.g., through independent

development, etc. - in the case at issue, Company B did not

provide a sufficient explanation and thus, it was difficult for

the court to easily conclude what the required amount of

time would be. The court added that because a preliminary

injunction by its nature must be issued promptly, and since

Company B may later seek to cancel the injunction order

if there are any changes in the circumstances, the court

decided to issue the injunction without a time limitation for

the time being.

Kim & Chang represented Company A in this case and

its efforts successfully led to the above court decision

that granted injunctive relief prohibiting Company B’s

infringement of Company A’s trade secrets with no time

limitation.

owner or the operators themselves. Or, as an extreme

measure, the operators should consider establishing a

system where relevant trademarks can be blocked from

turning up in keyword search results.

In this case (which involved counterfeit sports products),

however, the court did not find any special circumstances

that triggered the measure discussed in (4) above.

Accordingly, the court held that the Internet open market

operator did not have the obligation to prohibit transactions

involving the sale and purchase of all products bearing

the mark at issue (regardless of whether the products

are genuine or counterfeit), to verify authenticity of the

products beforehand, or to delete all of the relevant listings

from its website.

The trademark owner in this case has filed an appeal to a

higher court contesting the above district court decision,

and it will be noteworthy to monitor the outcome of this

appeal.

1� | Newsletter

On December 4, 2009, an amendment bill to the IPTV

Act was submitted to the National Assembly of Korea.

This bill aims to ease restrictions on foreign ownership of

content providers that do not provide real-time broadcasting

services, by granting them the same treatment as “value added

service providers” defined under the Telecommunications

Business Act. The bill also aspires to simplify existing reporting

and registration requirements for content providers. The key

points of the amendment are as follows:

Easing Restrictions on Foreign Ownership

The IPTV Act obstructed foreign content providers from

entering the Korean IPTV market by limiting the foreign-

owned percentage of each content provider (regardless

of whether the content provider provided real-time

broadcasting services) to 49%. The amendment bill

abolishes restrictions on foreign ownership of content

providers that do not engage in real-time broadcasting

services. It is anticipated that this amendment will allow

establishment of 100% owned subsidiaries in Korea and

therefore assist the growth of the IPTV broadcasting

industry and further Korean viewers’ right to choose

Existing Content Providers May Provide IPTV Program

Services without Additional License Requirements

The amendment bill also exempts existing broadcasting

service providers and value added service providers that

obtained relevant licenses under the Broadcasting Act or

Telecommunications Business Act from the reporting and

registration requirements under the IPTV Act. This will

eliminate the inefficiencies that result from overlapping

restrictions and remove entry obstacles, thereby allowing

the provision of competitive IPTV content and promoting

competition in the Korean IPTV market.

BROADCASTING & TELECOMMUNICATIONby Dong Shik Choi (dschoi@kimchang.com), Mi-Ryung An (mran@kimchang.com)

EASING RESTRICTIONS ON IPTV PROGRAM PROVIDERS

Beginning in 2010, the environmental impact of greenhouse

gases will be assessed for a variety of development

projects, starting at the projects’ establishment phase.

Pursuant to the amendment to the Presidential Decree of

the Environmental Impact Assessment Act (the “Act”),

which became effective on January 1, 2010, the impact

of greenhouse gases on the environment has been newly

added as an assessment item under the Act. Accordingly,

the Ministry of Environment (the “MOE”) announced

the amendment to the “Regulation on Preparation of

Environmental Impact Assessment Report” on December

7, 2009. The MOE also provided the draft Guideline for

Environmental Impact Assessment of Greenhouse Gases to

assist entrepreneurs in preparing their assessment reports.

The Korean government recently set a goal to cut the

nation’s greenhouse gas emissions by 30% by 2020, on

a BAU (Business As Usual)2 basis. It should be noted that

the environmental impact assessment of greenhouse gases

has been introduced as part of the first legislative move

to implement the nation’s goal to reduce greenhouse gas

emissions.

ENVIRONMENTby Yoon Jeong Lee (yjlee@kimchang.com) Seong Ik Hwang (sihwang@kimchang.com)

INCLUSION OF GREENHOUSE GASES IN ENVIRONMENTAL IMPACT ASSESSMENTS

2 BAU refers to the level of the greenhouse gas that the country will likely emit by a certain year if emissions increase at the current rate.

Winter 2009 | 1�

In light of the foregoing, businesses that emit large volumes

of greenhouse gases such as high-rise buildings, housing

development businesses, power plants, waste treatment

facilities and industrial complexes are subject to the

environmental impact assessment under which greenhouse

gas emissions are assessed as a priority item, starting at the

establishment phase.

Entrepreneurs should forecast the level of anticipated

greenhouse gas emissions or energy consumption in light

of the overall energy sources, fuel consumption, electricity

usage, traffic volume, construction materials, etc., and based

on such forecasts, propose reduction measures thereto.

The MOE and other governmental authorities involved in

the environmental impact assessment will evaluate the

soundness of proposed reduction measures based on

relevant data and forecasts. According to the outcome

of this assessment, entrepreneurs should implement

reduction measures for greenhouse gas emissions, as well

as establish and implement ex post environmental research

plans to confirm the effects of the reduction measures

implemented.

Because no permissible emission standards exist for

greenhouse gases, unlike other air and water contaminants,

the purpose of the Act is to guide entrepreneurs

to incorporate appropriate reduction measures for

greenhouse gases into their business plans using the latest

technology, rather than to reduce emissions quantitatively.

Entrepreneurs who plan to engage in urban development,

energy development, etc., should consider greenhouse gas

emission forecasts and corresponding reduction measures

from the early stages of their development projects.

The Comprehensive Economic Partnership Agreement

(the “CEPA”) between Korea and India has entered into

effect as of January 1, 2010. The CEPA carries the symbolic

importance of being the first free trade agreement (“FTA”)

between such an industrial powerhouse as Korea and

an emerging economic power (often referred to as the

“BRICs”) in the world, as well as the practical benefit of

further expanding trade and investment between the two

economies.

Impact on Tariffs

The CEPA is in essence a free trade agreement that allows for

the parties’ gradual adjustment to a more liberalized trade

regime. Compared to the Korea-EU FTA or the Korea-U.S. FTA,

which will eliminate tariffs on close to 100% of manufactured

goods in seven (EU) or ten (U.S.) years, the Korea-India CEPA

binds the parties to remove tariffs on an average of 80% of

goods over eight (Korea) or ten (India) years.

As of the CEPA’s effective date, India has immediately

abolished customs duties on Korean wireless and landline

telephones and other household electronics, while Korea

has eliminated tariffs on red hematite, benzene, naphtha

and non-alloy pig iron from India. Both countries will

continue to lower their customs duties according to the

tariff concession schedules under the CEPA over the next

few years.

Non-Tariff Barriers

In addition to tariff elimination or reduction, the CEPA

seeks to promote bilateral trade by reaffirming the parties’

commitment to ban intangible trade barriers and by

adopting the WTO rules on anti-dumping and safeguards

to enhance transparency in the trade practices of respective

governments.

CUSTOMS & INT’L TRADEby Wan Gi Ahn (wgahn@kimchang.com), Yeojin Yi (yeojin.yi@kimchang.com)

KOREA-INDIA CEPA TAKES EFFECT AS OF JANUARY 1, 2010

1� | Newsletter

Services and Investment

Korea and India have undertaken to mutually open up their

accounting, communications, architectural, engineering,

medical, computer related and R&D related services, among

others. As the CEPA is the first agreement under which

Korea has liberalized cross-border movement of persons

offering professional services, it is generally anticipated

that Korea’s demand for India’s technicians and computer

programmers will increase significantly.

As for financial services, India committed to give “favorable

consideration” to up to ten Korean banks if they apply for

establishment of branches in India within four years of the

CEPA’s effective date. India has also agreed to open up to

Korea’s investment, providing for investor-to-state dispute

mechanisms and reinforcing investor protection for Korean

companies and financial institutions.

Korea has also concluded an FTA with the U.S., which is

still pending ratification in both countries. Korea’s FTAs

with the EFTA (comprising Switzerland, Norway, Iceland,

and Liechtenstein), ASEAN, and Chile are already in effect.

Most recently, Korea has successfully completed its FTA

negotiations with the European Union, which is projected

to take effect by the end of 2010.

NATIONAL OILWELL VARCO ACQUIRES A KOREAN MARINE EQUIPMENT MANUFACTURER

Kim & Chang advised National Oilwell Varco, Inc. (NOV) in

connection with the acquisition of 100% equity stake in

Hochang Machinery Industries Co., Ltd, a manufacturing

and fabrication business with facilities in Ulsan and Geoje,

Korea. The deal was successfully completed on December

8, 2009.

NOV is a worldwide leader in the design, manufacture

and sale of equipment and components used in oil and

gas drilling and production operations, the provision of

oilfield services, and supply chain integration services to the

upstream oil and gas industry.

Kim & Chang advised NOV on all legal aspects of the

transaction, including legal due diligence, structuring the

transaction, preparation and negotiation of the principal

and ancillary transaction documents, certain employment/

labor and tax matters, and obtaining necessary Korean

regulatory approvals. The deal structure comprised the

setting up by NOV of a special-purpose company (“SPC”)

in Korea and the use of the SPC structure in the acquisition

to optimally utilize NOV’s investment capital with a

combination of equity and debt.

VOGO FUND ACQUIRES BC CARD

In December 2009, VOGO Fund and Korea Global Fund

acquired shares of BC Card from Hana Bank and SC First

Bank for KRW 194 billion, with the goal of acquiring

management rights of BC Card. Kim & Chang acted as

counsel to the acquirers and provided legal advice on

the share acquisition, government authorization, and

acquisition financing, and prepared and negotiated

definitive agreements in connection with the consummation

of the transaction.

MAGNACHIP SEMICONDUCTOR SUCCESSFULLY EMERGES FROM VOLUNTARY CHAPTER 11 RESTRUCTURING

On November 9, 2009, MagnaChip Semiconductor LLC

and certain affiliate companies in the U.S. successfully

emerged from voluntary Chapter 11 restructuring,

which commenced in June 2009. Upon completion of

the restructuring, MagnaChip Semiconductor LLC and

its affiliate companies significantly reduced their long-

term debt (from approximately US$850 million to

US$62 million) and Avenue Capital Management II, L.P.

SELECTED REPRESENTATIONS

(“Avenue Capital”) became the controlling shareholder

of MagnaChip Semiconductor LLC, which is the ultimate

parent company of MagnaChip Semiconductor Ltd., the

Korean semiconductor manufacturer.

This transaction successfully restructured a failing

LBO structure - which was used for the acquisition of

MagnaChip Semiconductor Ltd. - in connection with U.S.

Chapter 11 proceedings for the ultimate holding company

and some of its U.S. affiliates.

Kim & Chang provided advice on Korean legal and

regulatory issues relating to MagnaChip Semiconductor Ltd.

in connection with the debt and equity restructuring of its

ultimate parent company (MagnaChip Semiconductor LLC)

and certain affiliates.

TEMASEK’S SUBSIDIARY INVESTS IN SEOUL SEMICONDUCTOR AND SEOUL OPTODEVICE

In November 2009, Ion Investments B.V., a Dutch investment

holding company and a subsidiary of Temasek Holdings

(Private) Limited, subscribed for new shares issued by Seoul

Semiconductor Co., Ltd. and Seoul Optodevice Co., Ltd.,

whose largest shareholder was Seoul Semiconductor Co.,

Ltd., for KRW 284.7 billion. Upon consummation of the

transactions, Ion Investments B.V. owned an approximately

12% interest in Seoul Semiconductor Co., Ltd. and 9%

interest in Seoul Optodevice Co., Ltd. Kim & Chang advised

Ion Investments B.V. in this transaction.

SUCCESSFUL REGULATORY CLEARANCE ON MERGER OF LG TELECOM, LG DACOM AND LG POWERCOM

In order to strengthen competition in this era of wired/

wireless convergence, LG Telecom Co, Ltd. has decided to

merge LG Dacom and LG Powercom to widen its business

scope by covering both wired and wireless services. Kim &

Chang provided legal advice for the transaction and also

assisted in the regulatory clearance process conducted

by the Korea Communications Commission (the “KCC”)

and the Korea Fair Trade Commission (the “KFTC”).

Following issuance of the KFTC’s opinion dated December

3, 2009, stating clearly that the merger does not result in a

restraint on competition, the KCC approved the merger on

December 14, 2009.

SALE OF PACIFIC TOWER BY MIRAE ASSET MAPS REF

On November 24, 2009, Maps Frontier Real Estate Funds

No. 4 and Maps Frontier Real Estate Funds No. 6 sold the

Pacific Tower Building located in Daechi-dong, Gangnam-

ku, Seoul, to a domestic entity. The transaction was

noteworthy in that it was a sale of real property jointly

owned by two real estate funds established under the

old Indirect Investment Asset Management Business Act.

In addition, the transaction was noteworthy as a sale

that closed despite difficult domestic real estate market

conditions.

Kim & Chang represented both Maps Frontier Real Estate

Funds No. 4 and Maps Frontier Real Estate Funds No. 6

in the transaction and was closely involved from the very

outset of the transaction (including interviewing bidders

and selecting preferred bidders) to its consummation, thus

contributing to the successful closing of the transaction.

HANJIN SHIPPING’S FINANCING BY ISSUANCE OF US$200 MILLION ABS BONDS

Hanjin Shipping successfully issued US$200,000,000 in

ABS bonds by securitization of its future freight receivables.

Hanjin Shipping entrusted the future freight receivables

to the Industrial Bank of Korea (“IBK”) under the Asset-

Backed Securitization Act (the “ABS Act”), and IBK issued

two tranches of beneficial certificates based on the trust

assets. Hanjin Shipping, as originator, purchased Tranche B

beneficial certificates and FAF Securitization Specialty Co.,

Ltd., an SPC established under the ABS Act, purchased

Tranche A beneficial certificates. Out of such Tranche A

beneficial certificates, FAF Securitization Specialty Co.,

Winter 2009 | 19

Ltd. issued US$200,000,000 in ABS bonds guaranteed

by IBK, consisting of US$50,000,000 notes due in 2010,

US$50,000,000 notes due in 2011 and US$100,000,000

notes due in 2012. Based on its past experience in cross-

border ABS transactions, Kim & Chang, legal counsel to

Nomura International Plc. and lead arranger, advised on

overall legal issues raised in the course of the negotiations,

which included transaction structure-related matters such

as foreign exchange and tax matters as well as ABS-related

laws.

This ABS transaction is significant in that a Korean shipping

company successfully raised funds through negotiations

with investors in U.S. dollar-denominated ABS bonds

amid a worldwide depression in the shipping industry and

difficulties in financing by way of securitization. Kim &

Chang, based on its accumulated know-how in the ship

financing field, presented creative solutions to complicated

legal issues that arise in the securitization of receivables

held by a shipping company, thereby facilitating by means

of an ABS vehicle a stable supply of funds to the shipping

industry, which currently is suffering a liquidity crunch.

KCC DECISION FOR KT WORTH KRW 20 BILLION ANNUALLY

On April 8, 2009, KT filed a claim with the KCC against a

major telecommunications service provider (the “Service

Provider”) for unfairly refusing KT’s request for direct

interconnection with the Service Provider’s mobile switching

center (the “MSC”) and connection to its home location

register (the “HLR”) in its 3G network, based on an

Interconnection Agreement between KT and the Service

Provider. In its claim, KT argued that the Service Provider

was obliged to perform direct interconnection to the MSC

and connection to the HLR under the Interconnection

Agreement. Kim & Chang successfully represented KT in the

proceedings and on November 18, 2009, after about seven

months of discussion and deliberation at the KCC, obtained

a favorable decision ordering the Service Provider to provide

MSC/HLR direct connection to KT in accordance with the

Interconnection Agreement. Once direct connection to the

MCS is complete, KT will save a total of KRW 20 billion

per year in interconnection fees under the Interconnection

Agreement.

Winter 2009 | 20

FIRM NEWS

AWARDS & RANKINGS

Maintains top ranking in Korea and Asia,

mergermarket 2009 M&A League Tables of Legal

Advisers - Kim & Chang was recognized as the top

legal adviser in the Korean legal market with remarkable

achievements in 2009 by the M&A League Tables of

Legal Advisers to Asia-Pacific M&A 2009 announced

by mergermarket. The firm took the top ranking in the

categories of both deal count and deal value for South

Korean M&A in Q1~Q4 (January 1st - December 31st) of

2009. In addition, Kim & Chang ranked second in terms

of deal count among Asian countries (excluding Japan and

Australasia). The firm also ranked second in terms of deal

count and third in terms of deal value in the mid-market

volume table for Asia-Pacific (excluding Japan) M&A. (Mid-

market is based on deals with values in the US$ 10 million

- US$ 250 million range.)

Ranked first in Asia Pacific based on deal count in

the Bloomberg 2009 Asia Pacific Legal Advisory M&A

Rankings - Kim & Chang ranked first in deal count and

eighth in deal volume in the league tables of Asia Pacific

(excluding Japan) Announced Deals for 2009, which were

published in the Asia Pacific Legal Advisory M&A Rankings

announced by Bloomberg, a global media group. Further,

the firm secured its outstanding position, which is second

to none in Korea, by retaining its top ranking in the league

tables of Korea Announced Deals for 2009 based on both

deal count and deal volume.

Kim & Chang’s tax department recognized as top-

tier in Tax Directors Handbook 2010 - Kim & Chang

was recognized as having a top-tier tax department in Tax

Directors Handbook 2010, which is published by Legalease,

a leading UK publisher of legal market information. In

addition, the firm ranked 16th in the “Law Firm Tax 100,”

which lists the world’s leading law firms by tax department

size.

Kim & Chang recognized as top-tier law firm in all

areas in Asia Pacific Legal 500 (2009/2010 Edition)

- Kim & Chang was recognized in Asia Pacific Legal 500

(2009/2010 edition) published by Legalease, a leading UK

publisher of legal market information, as a top-tier law

firm for all 14 practice areas surveyed, including Antitrust

and Competition, Banking and Finance, Capital Markets,

Corporate and M&A, Dispute Resolution, Employment,

Insurance, Intellectual Property, Intellectual Property:

Patent and Trade Marks, Projects and Energy, Real Estate,

Shipping, Technologies, Media & Telecommunications, and

Tax. Kim & Chang is the only law firm in Korea with a top

ranking in all surveyed areas.

Kim & Chang recognized as a leader in all major

practice areas in IFLR 1000 (2010 edition) - In the

2010 edition of IFLR 1000, published by Euromoney, Kim

& Chang was recognized as a top-tier law firm for all

four practice areas surveyed, including capital markets,

banking and project finance, mergers and acquisitions, and

restructuring and insolvency. Kim & Chang is the only law

firm in Korea with a top ranking in all surveyed areas.

Winter 2009 | 21

This publication is provided for general informational purposes only and should not be considered a legal opinion of KIM & CHANG nor relied upon in lieu of specific advice.

If you wish to change an address, add a subscriber, or comment on this newsletter, please e-mail newsletter@kimchang.com.For more newsletters and client updates of KIM & CHANG, please visit our website - www.kimchang.com.

MEMBERS

We are pleased to announce that following professionals

recently joined Kim & Chang:

Mr. Byungbae Kim, the former Vice Chairman of the

Korea Fair Trade Commission (the “KFTC”), has joined

the firm as Senior Counsel to the firm’s Antitrust and

Competition Practice Group. Before joining Kim &

Chang, Mr. Kim held numerous positions at the KFTC

and other government ministries in Korea, and worked

as Senior Counsel for International Business Affairs in the

Washington D.C. office of Wilson Sonsini Goodrich &

Rosati.

Mr. Nelson K. Ahn has joined Kim & Chang. Prior to

joining the firm, Mr. Ahn worked at Winston & Strawn,

Sidley Austin LLP and Bae, Kim & Lee LLC as partner. He

has over 20 years of experience advising financial and non-

financial institutions in the areas of cross-border and local

transactions.

Mr. Sang Hyuk Park has joined Kim & Chang on

December 7, 2009. Before joining the firm, Mr. Park

practiced law in New York at Dechert LLP since 1996,

where he was a partner in the Corporate & Securities

Department since 2003.

Mr. Young Woo Lee, who previously served as a Standing

Tax Judge at the Tax Tribunal of the Prime Minister’s Office,

joined Kim & Chang and is working in the Tax Department

of the firm.

Mr. Yung Wook Kim, who previously worked at the Korea

Accounting Standards Board (KASB) and the International

Accounting Standards Board (IASB), also joined Kim &

Chang and is working in the firm’s Tax Department as a tax

attorney/CPA.

Foreign attorneys, Daniel Joe, Heili Kim, Kaylynn S. Yoon,

and Marianne Kim joined Kim & Chang. Mr. Daniel

Joe, who previously worked at Dewey & LeBoeuf LLP,

is working in the Tax Department of the firm. Ms. Heili

Kim, who previously worked at the U.S. Food and Drug

Administration and Patton Boggs LLP, is working in the

Health Practice Group of the firm. Ms. Kaylynn S. Yoon,

who previously worked at Epstein Becker & Green, P.C., is

working as a foreign attorney in the Health Practice Group

of the firm. And Ms. Marianne Kim, who previously

worked at Goldman, Sachs & Co., is working as a foreign

attorney in the firm’s Finance Department.

Ms. Apara Tayal has joined the firm’s Finance Department.

Ms. Tayal, who is a qualified lawyer in India and is admitted

as a solicitor in the Law Society of England and Wales,

worked for Linklaters in London before joining Kim & Chang.

Seyang Building, 223 Naeja-dong, Jongno-gu, Seoul 110-720, Korea Tel: +82-2-3703-1114 Fax: +82-2-737-9091~3 E-mail: lawkim@kimchang.com www.kimchang.com