Korean Business Law

Korean Business Law

Elgar Korean Law series

Edited by Hwa-Jin Kim

The approach of the book is two-fold. On the one hand the book offers valuable insight into the fundamental principles of Korean business law, and landmark cases in the field. On the other hand there is extensive analysis of more recent developments and of current issues raised by recent court cases. The book combines coverage of Korean corporate law and Korean financial law and includes detailed examination of corporate law issues such as director liability, minority shareholder protection, and the dynamic practice area of mergers and acquisitions, and of financial law topics, including private equity, structured finance and foreign financial institutions.

Chapter 10: Private Equity in Korea: Legal Issues

Hee Jeu Kang and Hyun Kim

Subjects: asian studies, asian law, law - academic, asian law

Extract

10. The present and future of private equity funds (PEF) in Korea Hee Jeu Kang and Hyun Kim I. INTRODUCTION With the enactment of the Indirect Investment Asset Management Business Act (Asset Management Act) on January 5, 2004, asset management companies became able to form mutual funds and investment trusts to manage assets. Such types of funds could not play a significant role as investment tools for mergers and acquisitions (M&A), however, because they were subject to various regulatory restrictions. Notable restrictions included their inability to essentially function as limited liability partnerships despite being private funds; as well as their obligation to treat investors equally and their obligation to engage outside custodians and other outside service providers. To promote corporate restructuring and M&A markets and be in line with global standards, amendments to the Asset Management Act were made on October 5, 2004 and went into effect on December 6, 2004. These amendments scaled back certain restrictions and introduced private equity funds (PEF) in Korea. With its enactment on February 4, 2009, the Financial Investment Services and Capital Markets Act (FSCMA), designed to be the overarching body of law governing all aspects of capital markets, replaced and took over the functions of the Asset Management Act. Even under the FSCMA, PEFs are regulated separately from other types of collective investment schemes. Corporate restructuring funds and M&A funds, being organizational forms provided for under the Asset Management Act, were abolished under the FSCMA due to low utilization as...

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