LIN NEWS
-
LIN News[Research] Economic Analysis of Collateralized Trusts: Focusing on the Issues of Insolvency InsulationHyo Jong Choi, head of the Insolvency Team at Lin, together with Jinsoo Yoon, Professor Emeritus and Doctor of Laws at Seoul National University School of Law, published a research paper titled "Economic Analysis of Collateralized Trusts: Focusing on the Issues of Insolvency Insulation" in the Journal of Law and Economics published by the Korean Society of Law and Economics. In the paper, Hyo Jong Choi argued that the Supreme Court's precedent recognizing the insolvency insulation of collateralized trusts is inconsistent with the general insolvency doctrine, that it is difficult to find cases in other countries that grant insolvency insulation to collateralized trusts, and that the market impact of a change in the precedent is unlikely to be as large as expected, so it is worth considering a change in the Supreme Court's precedent. The article is likely to be of great reference to PF companies in the real estate sector that have been facing difficulties in the recent past and are facing insolvency proceedings. The full text of Mr. Choi's article can be found in Volume 20, Issue 1 of the Journal of Law and Economics published by the Korean Society of Law and Economics.2023.05.30
-
News LetterLIN successfully overturned the first trial court decision in KRW 50 billion ABCP investment case, in favor of Hyundai Motor SecuritiesLIN achieved a significant victory in the appeal court by overturning the initial trial court decision in the KRW 50 billion asset-backed commercial paper (the “ABCP”) case. The case involved Hyundai Motor Securities’ losses due to its investment in the ABCP, with foreign private placement bonds as the underlying assets. Hyundai Motor Securities filed a lawsuit against two Korean securities firms (the “Defendants”) that sponsored and organized the issuance of the ABCP. After the initial trial court dismissed the claim in its entirety, LIN joined as co-counsel of Hyundai Motor Securities for the appeal proceedings and successfully overturned the initial decision. The Appellate Court ruled in favor of Hyundai Motor Securities and held the Defendants liable for KRW 24.5 billion, representing 50% of the losses incurred. In 2018, the Defendants sponsored and organized the private issuance of ABCP totaling approximately KRW 160 billion. The ABCP were based on foreign currency bonds issued by CERCG Capital and guaranteed by its Chinese parent company CERCG. Hyundai Motor Securities was one of the institutional investors that purchased the ABCP in the amount of approximately KRW 50 billion. Unfortunately, just three days after the purchase, a corporate bond issued by another subsidiary of CERCG and guaranteed by CERCG defaulted on its payment. This default triggered the cross-default provision of the ABCP’s payment guarantee, ultimately leading to the ABCP being unable to be repaid on the due date. In light of these developments, Hyundai Motor Securities filed a claim for unjust enrichment and damages against the Defendants. The trial court initially ruled in favor of the Defendants, resulting in no damages awarded to Hyundai Motor Securities. Following this outcome, LIN joined as co-counsel and pursued the case with a focus on reinforcing fiduciary duty and investor protection legal principles. LIN placed particular emphasis on the sponsor’s obligation to exercise due diligence and conduct thorough investigations of the underlying assets, particularly considering that various circumstances indicated CERCG's poor financial condition prior to and at the time of the issuance of the ABCP. In doing so, LIN highlighted the trust relationship that exists between sponsors and investors in securitization transactions and argued that failure to fulfill these obligations constitutes a tort under civil law. Such neglect not only puts investors at risk but also undermines the integrity of the securitization process. The court concurred with our position and ordered the Defendants to pay KRW 24.5 billion, representing 50% of Hyundai Motor Securities’ losses resulting from their investment in the ABCP. This court ruling has established a fundamental principle that financial institutions or sponsors responsible for the structuring of asset-backed securities must ensure that investors are safeguarded through proper due diligence on underlying assets and accurate provision of information. This principle applies equally to private placement transactions involving professional investors, with the extent and nature of the sponsor’s duty of care dependent on the specific circumstances and substance of the transaction. Our Firm intends to contribute to the healthy development of the domestic capital market by establishing a fair and equitable legal doctrine for bona-fide institutional investors against sponsors or underwriters that fail to fulfill their obligation to protect investors by neglecting their due diligence responsibilities on the underlying assets. We believe that this ruling will help level the playing field for institutional investor plaintiffs, who often face a disadvantage when seeking to protect their rights and interests simply because they are deemed “professionals”. If you have any inquiries regarding case, please contact below: Hong Won LEE(hwlee@law-lin.com) Yoon Min RAH(ymrah@law-lin.com) Hyun Sang YOUN (US)(hsy@law-lin.com) Chosunbiz, Ja Woon Noh View original article▼ https://biz.chosun.com/topics/law_firm/2023/02/22/A32OHTJEINDSFBQ5F3ON2D5DQI/2023.03.08
-
NoticeA Guide to Selling Offshore Funds in South KoreaA Guide to Selling Offshore Funds in South Korea I. Introduction In recent years, South Korean institutional investors have significantly increased their overseas investments as record-low interest rates and unfavorable market conditions at home have limited profitable investment opportunities in Korea. The National Pension Service, the country’s largest institutional investor, which currently manages more than 800 trillion won in assets, invested roughly 23 trillion won (approximately $20.4 billion) in overseas assets in 2020 alone, and it has announced a plan to further expand its overseas allocations over the next few years. Amid the growth of Korean overseas investments, global asset managers are increasingly finding Korea to be an attractive destination for finding new investors to whom they can market and sell their investment products. This article provides a brief guide to marketing and selling offshore funds in Korea. II. Offshore Fund Registration in Korea Under the Financial Investment Services and Capital Markets Act of Korea (the “FSCMA”), all offshore funds marketed or sold to Korean residents must be registered with the Financial Supervisory Services of Korea (the “FSS”) in advance, and they must be marketed or sold through a locally licensed distributor, such as Korean banks and securities companies that are licensed to distribute fund products. Generally speaking, to register an offshore fund with the FSS, the fund and its asset manager must satisfy certain eligibility requirements, which vary depending on whether the fund is marketed to certain qualified professional investors only, or it is offered to general investors. Since most of the offshore funds sold in Korea are private funds marketed only to certain professional investors, the scope of this article is limited to the legal requirements applicable to the registration of such privately placed funds. The eligibility requirements for offshore private funds placed to qualified professional investors are as follows: The fund should have been established lawfully in accordance with the laws of its home country, and its constitutional documents should not contain any terms contrary to any Korean law or regulation, or the interests of Korean investors; The fees and expenses to be incurred by investors should be clearly stated in the fund documents; The fund manager should not have been subject to any suspension of business or major administrative sanctions, or to criminal fines or criminal penalties, by Korean regulators in the recent three years; The fund manager should have a track record with the management of similar funds (which can be shown by presenting audited financial statements proving the same); and The fund manager, trustee/custodian, distributor, and administrator of the fund should not have been subject to a suspension of business. Procedurally, the following steps are required to register all private funds. The applicant prepares a fund registration application and supporting documents, which include (among others) the offering documents of the fund and documents evidencing the satisfaction of the eligibility requirements discussed above. The applicant must then have a pre-filing consultation with an FSS officer and supplement the application package as requested by the officer. Once the FSS officer finds the application to be in order, the application is officially submitted to the FSS electronically. Because of the large volume of the applications, now it generally takes about four to five months for the registration to be completed. Once a fund is registered and becomes operational, the fund must comply with certain ongoing compliance requirements. These ongoing requirements include filing reports on fund sales to the FSS, keeping investors informed of the asset management performance and the base price of interests (i.e., NAV per share or unit), reporting changes in any registered information regarding the fund, and paying the annual registration tax. III. Asia Region Funds Passport On May 27, 2020, Korea implemented the Asia Region Funds Passport (the “ARFP”), which essentially allows funds registered as ARFP funds in any of the ARFP-member countries (i.e., Korea, Australia, New Zealand, Japan, or Thailand) to be offered and sold in any other ARFP-member country through a simplified registration process. Thus, ARFP funds registered in Australia, New Zealand, Japan, or Thailand may be publicly offered in Korea through a fast-track registration process without an eligibility review. Please be informed, however, that regardless of whether or not a fund is ARFP-registered in its home country, any ARFP fund sold in Korea must still comply with all applicable Korean laws and regulations, including the obligation to sell such funds through a locally licensed distributor, and to satisfy all ongoing compliance requirements. IV. Conclusion While fund registration in Korea may seem like a procedurally straightforward process, it is extremely important that the application package be prepared properly and that consultations with FSS officers conclude smoothly, in order to ensure the timely administration and processing of a fund’s registration application. We have extensive experience in assisting with the registration of offshore funds in Korea, including consultations with regulatory authorities. We have represented TPG, Macquarie and other major international asset managers, and the types of funds we have successfully registered for clients include US limited partnerships, Luxembourg partnerships, Australian stapled trusts, exempted companies organized under the Cayman Islands law, and segregated portfolio companies in the Cayman Islands. Mr. Hyun Sang Youn who worked as a general counsel for global asset managers has deep business acumen and technical experience built over decades of experience, and based on our in-depth understanding of various overseas fund types and fund business, we ensure that the registration process runs smoothly, from document preparation to consultation with the regulatory authorities, and that our clients are able to get their registration completed timely and accurately. If you have any inquiries regarding fund registration in Korea, please contact below: Hyun Sang Youn (hsy@law-lin.com) Ye Jin Han (yjhan@law-lin.com)2021.11.10
-
Select MattersLIN Wins $75 Million in U.S. International Litigation on Behalf of the Korean GovernmentOn behalf of the Republic of Korea, LIN achieved a major victory in a civil lawsuit in a New Jersey court, securing a USD 75.5 million summary judgment against the shareholders of a U.S. company that exported defective weapons. GMB USA Inc. and Hackenco, Inc., both incorporated in New Jersey, USA, had contracts with the South Korean Defense Acquisition Program Administration to supply equipment to be attached to the Navy's Tongyeong vessel, and after receiving a total of $75.5 million in advance payments, they supplied the defective equipment. The Korean government initiated arbitration proceedings against these U.S. companies at the Korean Commercial Arbitration Board, which resulted in a favorable award for Korea. LIN's International Disputes Team (led by U.S. Attorney Hyun Sang Youn) sought recognition and enforcement of the foreign arbitral award in the court in New Jersey, where GMB and Hackenco were located, and obtained a recognition and enforcement judgment from the New Jersey court in March 2019. However, the companies had transferred or sold all their assets to their shareholders' families and affiliates and subsequently dissolved. In response, we commenced an action for declaratory judgment, rescission, and successor liability in the New Jersey court, naming as defendants the shareholders of GMB and Hackenco, Bryant Kang, his wife, Lauren Kim, their children, and other U.S. entities behind them. Over the course of the litigation, the defendants filed various counterclaims, thereby delaying the case, but in October 2022, more than three years after the initial filing of the complaint, LIN and the local legal team obtained a summary judgment ruling against Kang Deokwon and Kim Juhee in the New Jersey court. The ruling denied GMB and Hackenco corporate personhood, making their shareholders, Deokwon Kang and Juhee Kim, personally liable for the debts of the companies. The $75.5 million in advance payments that GMB and Hackenco received from the South Korean government must also be returned by the shareholders. We will do our best to recover the Korean taxpayers' precious funds in the international litigation against the companies and their shareholders that supplied the defective weapons.2022.10.28
"What Corporate Rehabilitation and Health Checkups Have in Common, 'Timing'" (THEBELL INTERVIEW)
Corporate bankruptcy filings have been surging this year amid the ongoing high interest rates, high inflation rates, and high exchange rates, so-called “triple highs”, and there are grim predictions that the number of corporate bankruptcy filings will continue to rise in the second half of this year as liquidity in the money market continues to dry up, raising concerns that construction companies and startups could collapse in the wake of real estate project financing (PF).
LIn, Hyo Jong Choi
Under such situation, corporate rehabilitation is a way for companies to survive the crisis, and two lawyers who are experts in this field, Hyo Jong Choi, head of the Insolvency Team at Lin, and Jung Yup Lee, a managing partner at LKB & Partners, were interviewed by The Bell.
The two lawyers agreed that the “deadline” for a smooth progress of corporate rehabilitation is the point at which the operating funds are left for at least 3 to 4 months. "There is a perception that the rehabilitation system completely takes away the management rights of the existing managers and ruins the company so that it cannot be revived by putting a 'stigma' on it as a rehabilitated company," said Choi. "However, if you go through the rehabilitation process at an early stage, you can actually save the company while preserving the management rights, so it is necessary to clear up misunderstandings about the rehabilitation system."
"Due to the abundance of liquidity during the pandemic, the number of rehabilitated companies has decreased significantly in the last three years, and many law firms have disbanded their insolvency teams," Choi said, adding, "It is important to have experience in corporate rehabilitation, not just from books or lectures, so it is helpful to meet and consult with a law firm with a lot of experience."
Choi is a big name in the field of insolvency and recently moved to Lin, where he has worked on the turnarounds of companies such as Eastar Jet, Ssangyong Motors, and Mesh Korea. Lee joined LKB in March of this year after serving as a deputy chief judge at the Seoul Bankruptcy Court, where he handled turnaround cases for big-name companies. Following the merger, Lin and LKB plan to build a strong insolvency team backed by Choi and Lee.
The original article can be found below.
THE BELL, Reported by Jihyo Kim
View original article▼
http://m.thebell.co.kr/m/newsview.asp?svccode=00&newskey=202305151528153640105111
Dongdaemun Apparel Platform 'LinkShops' Applies for Receivership and Appoints LIN as its Legal Counsel
“LinkShops”, which once received venture capital (VC) investment totaling 16.5 billion Korean Won, has filed for receivership. It seems that the company has decided that it is no longer viable after experiencing business difficulties in the aftermath of the pandemic. LinkShops is a wholesale clothing brokerage platform startup.
According to a legal report on Wednesday, the company filed an application for rehabilitation proceedings with the Seoul Bankruptcy Court late last month. The court then issued a blanket injunction earlier this month. A blanket injunction is a procedure that prevents the court from arbitrarily proceeding with enforcement, seizure, and auction procedures for all rehabilitation debts until the court makes a decision to initiate rehabilitation proceedings.
The Seoul Rehabilitation Court will review the application and other documents and decide whether to initiate the rehabilitation proceedings for LinkShops. In this regard, LinkShops has entered into a legal advisory agreement with Lin. The firm is represented by attorneys Hyo Jong Choi, Tae Eon Koo, and Ha Nel Lee.
The original article can be found below.
THE BELL, Reported by Myung-kwan Lee
View original article▼
http://m.thebell.co.kr/m/newsview.asp?svccode=00&newskey=202305151528153640105111
Preventing Unwarranted Damages in Loophole-Ridden Foreign Investments through Lawsuits
In recent years, the rapidly expanding domestic capital market has seen financial investment companies going abroad to bring overseas investment products into Korea under the theme of 'enhancing global competitiveness', resulting in a series of cases where domestic investors have lost up to hundreds of billions of Korean Won due to the lack of verification (due diligence) of such overseas financial products, such as the default of the bonds issued by China International Energy Recycling Corporation (CERCG), a Chinese state-owned company.
Financial litigation is not easy as it involves penetrating the highly complex and esoteric structure of financial investment products and pinpointing the loopholes; accordingly, the more difficult the case, the more competent the experts must be. EDAILY met with attorneys Hyun Sang Youn (U.S.), Yoon Min Rah, Hong Won Lee, and Min Gu Kang from the finance team at Lin, who have been active in numerous financial investment litigation cases in the domestic capital market.
[LIN_(From left) Hyun Sang Youn, U.S. Attorney, Yoon Min Rah, Hong Won Lee, and Min Gu Kang]
Before the CERCG case, there were no reasonable standards for the due diligence obligations of financial firms that broker financial products in Korea, and there was no explicit concept in the Capital Markets Act, so the duty of due diligence was no more than a moral obligation or mere recommendation despite its importance. This case, in which Lin proved insufficient due diligence by financial firm, is expected to serve as an important milestone case in the future for similar cases.
The original article can be found below.
Reporter, Jiyoung Lee, EDAILY
View original article▼
https://n.news.naver.com/article/018/0005488862?sid=101
