Case Studies
[Copyright Know-How] How much can ideas and expressions be protected?
As we enter the age of digital content, copyright issues have become important for both creators and consumers. Today, let's explore one of the core principles of copyright, the idea-expression dichotomy. We will also discuss exceptions to this principle, such as the principle of merger, the principle of de facto standard, and the principle of standard scene. Let's learn more about this with copyright attorneys from Law firm Veat. Q. I’m hearing that the 'idea-expression dichotomy' is an important concept in copyright. Can you explain it in detail? The principle of the idea-expression dichotomy clearly states that ideas themselves are not subject to copyright protection, and only creative expressions are protected. For example, the rules of a game or a cooking recipe are considered ideas, and only the method of expression can be protected. However, actually distinguishing between an idea and an expression is not easy. Q. So, are there exceptions to the idea-expression dichotomy? There are cases where a specific idea and expression are inseparable. This is known as the principle of merger. For example, there may be only one or a very limited way to effectively express a particular idea. In such cases, the idea and expression are considered merged. Think about explaining the rules of a game. For example, when describing the ‘Rock-Paper-Scissors’ game, expressions like "Rock beats Scissors, Scissors beats Paper, Paper beats Rock" are practically the only way to describe it. If copyright were granted to such an expression, other people wouldn't be able to describe the game’s method. Therefore, even creative expressions are excluded from copyright protection. Q. So, what is the 'principle of de facto standard'? The ‘principle of de facto standard’ refers to the case where although there were various expression methods initially, a specific method became a standard in the industry or market, making other expressions impossible. A prime example is the QWERTY layout. While there were several keyboard layout methods initially, the QWERTY method has become standardized, making it difficult to sell keyboards using other methods. As in user interfaces (UI), standardized menu arrangements or icon arrangements are often considered de facto standards and do not receive copyright protection. Q. Finally, please explain the 'principle of standard scene'. The ‘principle of standard scene’ is the principle that typical scenes or elements that inevitably appear in specific genres are not subject to copyright protection. For example, in an adventure movie, the protagonist searching for a treasure chest and passing through a cave filled with snakes, or a flock of birds flying in the forest, almost inevitably appear. If these essential elements of a specific genre are protected by copyright, it would risk imposing excessive restrictions on creators. Q. So, how should we resolve these complex copyright issues? Copyright issues can be very complex, depending on the situation and context. It is especially important to carefully evaluate the possibility of protecting a work and to prudently review the possibility of utilizing expression in an environment where creation and technology are combined. Therefore, it is essential to seek help from professionals with a deep understanding of copyright laws and abundant experience. Law firm Veat TIP team specializing in copyright and intellectual property rights Law firm Veat handles copyright issues in various fields, such as digital content, user interfaces, movies, and games, and provides practical solutions. The Law firm Veat TIP (Technology, Intellectual Property) team provides practical and effective legal advice based on domestic and international case studies, and offers legal strategies tailored to each industry, such as film, drama, and games. Copyright law requires a complex balance between protecting the rights of creators and not infringing on creative freedom. The TIP team at Law firm Veat understands this balance and supports clients in achieving optimal results. If you need copyright disputes or professional guidelines related to digital content, please contact the Law firm Veat TIP team. Thank you. Law firm Veat
Startup Essential! Platform Terms of Service and Privacy Policy, Organize These.
Law firm Veat, at the request of a company operating a university student career platform (hereinafter referred to as the “client”), reviewed and improved the terms of service and personal information processing policy for that service and provided them. This case is a crucial undertaking focused on establishing a solid legal foundation for platform business operations, and it is a representative example of paving the way for stable platform operations and securing user trust. Matters to Consider When Drafting Platform Terms of Service and Personal Information Processing Policies Platform Terms of Service a. Related Regulations Act on Regulation of Terms of Trade Article 4 (Obligation to Draft and Explain Terms, etc.) ① A business operator shall draft terms in Korean so that customers can easily understand them, use standardized and systematic terminology, and clearly indicate important terms of the terms of trade using symbols, colors, bold and large fonts so as to make the terms easy to understand. Article 6 (General Principle) ① Terms of trade that violate the principle of good faith and lose fairness are invalid. ② The following provisions are presumed to have lost fairness: 1. Provisions that are unfairly disadvantageous to customers 2. Provisions that customers cannot reasonably anticipate based on all relevant circumstances, including the type of transaction 3. Provisions that restrict essential rights accompanying the contract to such an extent that the purpose of the contract cannot be achieved b. It is necessary to draft them so as not to lose fairness. According to the "Act on Regulation of Terms of Trade" (hereinafter referred to as the "Terms of Trade Act"), provisions that are unfairly disadvantageous to customers, provisions that customers cannot reasonably anticipate based on all relevant circumstances, and provisions that restrict essential rights accompanying the contract to such an extent that the purpose of the contract cannot be achieved are presumed to have lost fairness and may be deemed invalid. Therefore, Law firm Veat informed the client of the existing terms of service provisions that could be recognized as unfair under the Terms of Trade Act and revised them to be non-invalid under the Terms of Trade Act. c. It is necessary to draft them so that customers can easily understand the contents. Furthermore, according to the Terms of Trade Act, a business operator must draft terms in Korean so that customers can easily understand them. In particular, in the case of platform services, the services are often new, and users may not accurately understand the service provision process. Therefore, after confirming the contents of the service, it is necessary to incorporate them into the terms of service, define definition clauses specifically and in an easy-to-understand manner so that service users can easily understand the contents of the terms of service. d. It is necessary to have a disclaimer. Also, since the terms of service are written considering not only specific counterparties but also a large number of counterparties, it is necessary to have a disclaimer to prepare for unexpected situations. Based on the wealth of experience accumulated through numerous years of providing advice on the review and drafting of terms of service, Law firm Veat reviewed the client's terms of service and revised them to be consistent with the platform service provided by the client. 2. Personal Information Processing Policy a. Related Regulations Personal Information Protection Act Article 30 (Establishment and Disclosure of Personal Information Processing Policy) ① A personal information processor shall establish and disclose a personal information processing policy (hereinafter referred to as the "personal information processing policy") including the following matters. In this case, public organizations shall register personal information files subject to registration under Article 32 with the personal information processing policy. 1. Purpose of processing personal information 2. Processing and retention period of personal information 3. Matters regarding transfer of personal information to third parties (only when applicable) 3-2. Procedures and methods for disposal of personal information (including the basis for retention and items of personal information to be retained when personal information must be retained pursuant to the proviso of Article 21(1)) 3-3. Possibility of disclosure of sensitive information pursuant to Article 23(3) and method of selecting non-disclosure (only when applicable) 4. Matters regarding entrustment of personal information processing (only when applicable) 4-2. Matters regarding processing of pseudonymized information pursuant to Article 28-2 and Article 28-3 (only when applicable) 5. Rights and obligations and methods of exercising them of information subjects and legal representatives 6. Name of personal information protection officer pursuant to Article 31 or name of department handling personal information protection duties and related grievance matters and contact information such as telephone number 7. Matters regarding installation and operation of devices automatically collecting personal information such as Internet connection information files and methods for refusal thereof (only when applicable) 8. Other matters stipulated by presidential decree regarding processing of personal information b. Reflection of Mandatory Items to be Included in the Personal Information Processing Policy In the case of platform services, a business operator often acts as an intermediary between service users and service providers, so there is a high probability of collecting personal information of service users. When operating personal information files for business purposes, such as this, the business operator may be considered a personal information processor regulated by the Personal Information Protection Act, and if they are a personal information processor, they must establish a personal information processing policy. Based on a deep understanding of the Personal Information Protection Act and numerous years of experience in similar cases, Law firm Veat revised the client's personal information processing policy reflecting the mandatory items required by the Personal Information Protection Act. Law firm Veat with Expertise in Terms of Service and Personal Information Thanks to the advice of Law firm Veat, the client was able to establish clear and transparent terms of service that build trust with platform users. In addition, the personal information processing policy was revised in a manner consistent with the Personal Information Protection Act, securing both personal information protection for service users and legal stability. In this way, Law firm Veat is establishing itself as a reliable partner supporting the business success and legal safety of startups and platform businesses through its expertise in legal advice required for them. Need Legal Advice? Law firm Veat not only provides advice on review of terms of service and personal information processing policies but also provides professional advice on various IT and startup related legal issues. If you would like more information or want legal advice related to your company's management, please feel free to contact Law firm Veat. Thank you. Law firm Veat
How to become a companion for startup success as an individual investor
Recently, there has been increasing interest in early-stage startups and venture businesses, leading to an increase in businesses forming accelerators and personal investment syndicates, or attracting investments through them. Within this trend, personal investment syndicates are gaining attention. In this post, we will thoroughly examine the concept and investment methods of personal investment syndicates with a Veat investment attorney. Q. What is a personal investment syndicate? A personal investment syndicate is a syndicate formed for the main purpose of venture investment and the distribution of its performance, and means a syndicate registered in accordance with Article 2, Paragraph 12 of the "Venture Investment Promotion Act" (hereinafter referred to as the "Venture Investment Act") (Article 2, Paragraph 8 of the Act). A personal investment syndicate is established when registered with the Ministry of SMEs and Startups, and must meet certain requirements for registration. The total investment amount must be 100 million won or more, the amount per investment unit must be 1 million won or more, and the number of members is limited to 49. In addition, the duration of the syndicate must be a minimum of 5 years. (Article 12, Paragraphs 1 and 2 of the Venture Investment Act, and Article 6, Paragraph 2 of the Enforcement Decree). Q. Are there any advantages to individual investors forming a personal investment syndicate? Yes, since personal investment syndicates were introduced with the purpose of promoting investment in early-stage founders and venture businesses, various tax benefits are provided to syndicate members who invest in a personal investment syndicate. For example, when a personal investment syndicate invests in a venture business, individual syndicate members who have invested in the personal investment syndicate may deduct 100% of up to 30 million won from their total income, 70% of the amount exceeding 30 million won up to 50 million won, and 30% of the amount exceeding 50 million won (Article 53 of the Tax Evasion Restriction Act), and may also receive tax exemptions when transferring their shares later (same law, Article 54), and corporate syndicate members may deduct the amount equivalent to 5% of the shares or investment units acquired through the personal investment syndicate from corporate tax (same law, Article 28, Paragraph 2). These tax benefits are one of the main advantages of personal investment syndicates. Q. So, who and how can a personal investment syndicate invest? Since a personal investment syndicate is a syndicate formed for the main purpose of 'venture investment,' there are limitations on the investment targets. First, for three years after registration, a personal investment syndicate must use more than 50% of the total investment amount for investment in founding companies (companies within 7 years from the commencement of business) and venture businesses (small and medium-sized enterprises that have received confirmation from a venture business confirmation agency as a venture investment type/research and development type/innovation growth type/pre-venture type), and if a business planner is a business execution member, the personal investment syndicate must use more than 50% of the total investment amount for investment in early-stage companies (companies within 3 years from the commencement of business) (Article 13, Paragraphs 1 and 2 of the Venture Investment Act). There are also limitations on the investment methods for personal investment syndicates, which must be by way of acquisition of newly issued shares or investment units (except for newly issued shares for listing on the stock market), newly issued unsecured convertible bonds (CB), unsecured warrants and bonds (BW), unsecured exchange bonds (EB), or conditional equity purchase agreements (SAFE), as stipulated in the Venture Investment Act (Article 13, Paragraph 4 of the Venture Investment Act, Article 7 of the Enforcement Regulations). When the required investment ratio is met, investments can generally be made freely within the scope excluding the required investment ratio. It is possible to invest in the desired manner, such as acquiring existing shares or acquiring shares of listed companies on the stock exchange or KOSDAQ market. However, there may be investment methods restricted by the Venture Investment Act or related laws, such as limiting investment to 10% of the investment amount when investing in companies listed on the stock exchange or KOSDAQ market, so it is important to carefully check the possibility of investment through a professional’s review beforehand. Personal investment syndicates are an attractive investment method for capitalizing on the high growth potential of early-stage founders and venture businesses, but they also carry risks, so we recommend obtaining sufficient legal review from Veat investment attorneys. If you need legal advice on personal investment syndicates and the Venture Investment Act, please feel free to contact Veat. Thank you. Veat Law Offices
"Law firm Veat provides a legal guide ‘Intent, Key Contents, and Precautions’ for lawyers participating in establishing the Virtual Convergence Industry Promotion Act."
✅Now we have become "Virtual Convergence Business Entities"! On August 28, 2024, the Virtual Convergence Industry Promotion Act came into full effect, marking an important turning point for the virtual convergence world (metaverse) and the virtual convergence industry. This law provides a legal basis to promote innovation in virtual convergence technology and support the rapid introduction of new business models into the market. Since 2020, we will discuss the intent, key content, matters that companies should pay attention to, and expected effects of the Virtual Convergence Industry Promotion Act with Song Do-young, managing partner, who has participated in the process of enacting the Virtual Convergence Industry Promotion Act. Q: The Virtual Convergence Industry Promotion Act has finally been implemented. It must be more meaningful for you, having participated in the legislative process since 2020!
Successful startup growth's first step, the secret of stock assignment reservation contract!
Startups need various legal documents from the early stages of business to the growth process, including shareholder composition, securing management rights, and investment conditions. One such document is a stock transfer reservation agreement. Law firm Veat received a request from a secondhand fashion startup (hereinafter “Client”) and drafted a stock transfer reservation agreement stipulating that the company would transfer stocks held to a specific price when the contract counterparty achieved certain conditions, and has provided tailored legal advice according to the client's situation. Precautions for Drafting a Stock Transfer Reservation Agreement 1. Review of Third-Party Rights Stocks can be subject to a security interest. Furthermore, startups may receive investment and agree to conditions restricting the transfer of shares held by interested parties from investors. Therefore, the stocks that are the subject of a stock transfer reservation agreement may have rights in rem and claims that a third party other than the transferor and transferee can assert. If a stock transfer reservation agreement is concluded hastily without reviewing these aspects, there is a high probability of subsequent legal disputes with third parties. Therefore, before concluding a stock transfer reservation agreement, it is necessary to thoroughly understand all relevant circumstances and develop countermeasures. 2. Clarification of Stock Transfer Execution Conditions When drafting a stock transfer reservation agreement, it is necessary to clearly specify a conditional performance clause so that stock transfer is executed only when certain conditions (e.g., shareholder meeting resolution, successful investment attraction) are met. If these stock transfer execution conditions are not clearly defined, it may be necessary to execute a stock transfer even in situations not intended at the time of contract conclusion, or disputes may arise between the contracting parties regarding the interpretation of the conditions. Law firm Veat has accurately drafted the stock transfer execution conditions in the stock transfer reservation agreement based on a thorough understanding of the client’s current situation and review of numerous similar cases. 3. Specification of Contract Termination and Cancellation Reasons A stock transfer reservation agreement involves reserving a future stock transfer, so there is generally a significant time interval between the contract conclusion date and the actual execution of the stock transfer. During that period, it is impossible to rule out the possibility that the contracting parties may no longer want to proceed with the stock transfer reservation agreement. Therefore, it is common to include provisions for termination and cancellation. Law firm Veat has specifically stipulated the validity period of the reservation agreement, reasons for contract termination, and cancellation conditions to prevent unnecessary disputes between the contracting parties even in unforeseen circumstances. Law firm Veat, a partner for successful startups Law firm Veat ranked 5th in the Bloomberg M&A League Table (2024 Bloomberg M&A League Table) for the first quarter of 2024, based on the number of transactions, and has established itself as a leader in domestic and international investment and M&A legal advisory services. This stock transfer reservation agreement case is another demonstration of Veat’s extensive experience and expertise. Startup executives or legal personnel are recommended to actively utilize the professional legal advice of Law firm Veat to proactively prevent potential risks during the contract conclusion process and promote stable business operations. If your startup needs legal advice and contract review, please feel free to contact Law firm Veat at any time. Thank you. Law firm Veat
Posting Suspension Measures! Reasons Online Service Providers (OSP) Must Know
Law firm Veat received a request from online service provider A and proceeded with a review of whether the cessation of posting due to copyright holder or supervisory authority action constitutes copyright infringement. The Copyright Act imposes certain responsibilities and obligations on online service providers (OSPs) to prevent copyright infringement. Generally, online service providers (OSPs) perform the role of managing and providing content uploaded by users through a platform, but problems can arise if the postings infringe on the copyright holder’s rights. Law firm Veat thoroughly reviewed whether the copyright holder’s request to cease posting or the poster’s demand for reposting by the online service provider (OSP) could constitute copyright infringement and the potential liability for damages, and provided legal opinions. Online Service Provider (OSP) An online service provider (OSP) refers to an operator who runs a platform that provides various information and content over the internet or enables information exchange between users. Examples include social media platforms, online communities, content sharing sites, portal sites, and cloud services. Copyright Holder's Posting Cessation - Online Service Provider (OSP)'s Responsibility When a copyright holder discovers that their copyrighted work has been illegally posted and requests deletion or cessation of posting, the online service provider (OSP) must immediately cease the copying and transmission of the posting in accordance with Article 103 of the Copyright Act. At this time, the online service provider (OSP) may be liable for copyright infringement when ceasing the posting at the request, which requires review. Furthermore, although the cessation of posting is made at the request of the copyright holder, if the poster or original copyright holder objects and demands reposting, the online service provider (OSP) has an obligation to process this lawfully. The poster may argue that the cessation of the posting is an unfair infringement of rights, claiming that they did not have the intention of copyright infringement or legitimately utilized the content. At this time, the online service provider (OSP) must maintain a neutral position, judge whether to restore the posting to minimize legal liability, and the matter may lead to legal disputes. Supervisory Authority's Posting Cessation - Online Service Provider (OSP)'s Responsibility Posting cessation may also be made according to the actions of a supervisory authority, not just the request of a copyright holder. For example, a supervisory authority such as the Korea Communications and Media Authority (KCMC) may assess copyright infringement and, if it deems there is a problem, may issue a forced cessation order for the posting. Although this measure is meaningful as a legal device to protect the rights of copyright holders, there are also cases where the action is deemed unfair. In particular, when a posting is stopped due to the action of a supervisory authority, it is necessary to legally interpret whether the action actually constitutes copyright infringement for the following two aspects. - Is the online service provider (OSP) free from copyright infringement liability when ceasing posting following the order of the supervisory authority? - Does the online service provider (OSP)’s liability for damages arise if the original copyright holder or poster sues, claiming copyright infringement due to the cessation of posting? If the action of the supervisory authority is deemed unfair, the aggrieved party will challenge the action through an administrative lawsuit. However, the legal liability and damages that may arise in this process may depend on the response of the online service provider (OSP). If the online service provider (OSP) performs the action after reasonable review and judgment of the supervisory authority’s action, it can minimize liability. As such, balancing the protection of copyright holders’ rights and the rights of posters is the core of the posting cessation measure under the Copyright Act. It is especially important for online service providers (OSPs) to respond neutrally and cautiously and to carefully review whether the posting cessation has been lawfully performed. Online Service Provider Response to Prevent Legal Disputes - Secure Procedural Transparency: When proceeding with posting cessation according to the request of a copyright holder or the action of a supervisory authority, clear procedures and criteria should be established and disclosed. This can minimize backlash from stakeholders and reduce the possibility of legal disputes. - Respond Quickly and Cautiously: When a request to cease posting is received, the online service provider (OSP) must respond promptly but at the same time review the legal validity to prevent indiscriminate posting cessation. - Strengthen Objection Procedures: It is important to have a system to fairly process objections raised by the poster regarding the cessation of posting. - Collaborate with Legal Professionals: It is necessary to receive professional legal advice to respond to complex situations related to copyright law. Especially when legal issues arise, a strategy is required to protect the position of the online service provider (OSP). Online service providers must make efforts to minimize legal liability by respecting both the copyright holder’s right to protection and the poster’s freedom of expression. To do so, they must comply with legal procedures and maintain a neutral position that balances the interests of stakeholders. Online service providers should regularly receive legal advice to prevent copyright infringement issues from arising in the first place, and if copyright infringement issues do arise, it is important to respond quickly with professionals who have extensive experience in the field. Law firm Veat provides specialized legal advice with a strengthened team in copyright and intellectual property law, led by Oh Seung-jong, former chairman of the Korea Copyright Committee. If you need professional response or advice on copyright legal issues, please contact Law firm Veat. Thank you. Law firm Veat
[202412] Monthly Veat December Issue_Personal (Credit) Information Protection, Is Your Company Safe?
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The first step towards successful investment, legal due diligence.
Law firm Veat represented a venture capital (hereinafter referred to as "client") and successfully carried out investment advisory services of 1.5 billion won for SK Plasma, a company specializing in blood products production. Prior to the investment stage, we thoroughly reviewed legal violations and potential risk factors related to SK Plasma’s business area of blood products production and export, and closely analyzed the status and rights of existing investors and the company's capital structure to draft a legal due diligence report. Also, after the legal due diligence, we drafted and revised investment contracts and coordinated the rights and obligations between the investor and the target company, as well as the investment conditions and rights of the investors. In particular, we reviewed even the detailed wording of the contract to prevent conflicts with existing investors and led to a smooth negotiation. Law firm Veat minimized legal risks by comprehensively considering the investor's characteristics, the target company's business characteristics, and the investment transaction structure, and by swiftly conducting this legal due diligence, we were able to maximize the satisfaction of both SK Plasma and the investor. Importance of Legal Due Diligence Legal due diligence is one of the essential stages to be performed in M&A and investment processes. Even if a company appears attractive on the surface, there may be invisible legal risks lurking within. Identifying and responding to these risk factors through legal due diligence is like taking the first step towards a successful transaction. The first purpose of legal due diligence is to identify legal risks inherent in the target company. If there are ongoing lawsuits or issues with a high possibility of legal violations, it will significantly impact the decision of whether or not to acquire the company. For example, if there is a high probability of losing a dispute that has reached the court stage, it can have a significant impact on the company’s business and financial status. Legal due diligence does not merely involve discovering problems; it also allows these problems to be leveraged as a favorable lever in negotiations. For example, if legal vulnerabilities are discovered, they can be used to adjust the acquisition price (valuation) or change the contract terms to secure favorable transaction conditions. Specialized in Corporate and M&A, Law firm Veat Law firm Veat has experience advising startups and companies on securing investment, providing over 487 investment advisory services. We have entered the top 5 based on the number of transactions in the Bloomberg league table for the first half of 2024, demonstrating Law firm Veat's unique expertise in investment and M&A areas. Also, Law firm Veat is centered around Seongho Choi, a lawyer with expertise in the Corporate and M&A field, and assists with essential legal reviews and contract structure settings when preparing or expanding businesses through M&A, and has successfully led several IT and startup companies’ investments and M&A, effectively resolving legal issues in complex merger and acquisition processes. If you need legal advice related to investment, M&A, please contact Law firm Veat. Thank you. Law firm Veat
Global company acquisitions safely, Law firm Veat’s secret.
Law firm Veat received a request from an Indonesian corporation (hereinafter referred to as the “client”) with shares held by a Korean, and proceeded with drafting an Indonesian corporate acquisition agreement and providing acquisition advice. Law firm Veat, from the perspective of the acquirer, set forth clauses restricting contract termination and limiting damages claims in the event of a breach of representations and warranties, so as to accurately assess the information and financial soundness of the company being acquired. Also, in the event that the information provided by the company being acquired differs from the actual situation or problems arise, safety measures were established to allow for termination of the transaction and restoration to the original state, and the ability to claim damages was limited to a certain amount, simultaneously securing fairness and stability. We also carefully reviewed the securities acquisition reporting and foreign exchange transaction reporting procedures, which are essential for the acquisition of shares of a foreign corporation. We helped the client by smoothly conducting the preparation of reporting documents and execution of procedures to comply with the foreign exchange transaction law and regulations related to overseas direct investment in this transaction for the acquisition of shares of an Indonesian corporation. Reporting Procedures for Stock Transactions Between Residents and Non-Residents Overseas M&A transactions involve stock transactions, and stock transactions between residents and non-residents may require reporting according to the applicable law. If a resident acquires shares of a foreign corporation, it may be subject to overseas direct investment reporting if they acquire more than 10% of the total number of shares or the total investment, or if an executive dispatch or technology provision contract is concluded, even if it is less than 10% for the purpose of participating in management. Also, if a non-resident acquires shares of a domestic corporation, foreign investment reporting may be required if the investment amount is 100 million won or more and acquires more than 10% of the total number of voting shares or dispatches an executive. Therefore, in transactions between residents and non-residents, appropriate reporting procedures should be identified and implemented according to the conditions and scale of the transaction. Failure to do so may result in sanctions or make it difficult to proceed smoothly, so it is important to receive assistance from a legal professional who deeply understands related legislation such as the Foreign Exchange Transaction Act and the Foreign Investment Promotion Act to conduct accurate reporting. Based on the experience of successfully executing various domestic and overseas M&A transactions, Law firm Veat designs detailed clauses to reduce potential disputes that frequently occur in global M&A and systematically analyzes legal risks that may arise during the acquisition process, providing clients with the optimal solutions. Veat operates a foreign exchange reporting center and accurately determines whether reporting is necessary based on the nature of the transaction, such as overseas direct investment reporting, foreign investment reporting, and securities acquisition reporting, and promptly supports the procedures. In particular, we provide one-stop service for preparing and submitting reports, helping clients to successfully complete the complex reporting process without any problems. In this way, Veat provides clients with optimized legal advice for the overseas corporation’s entry into the domestic market and M&A transactions. We thoroughly respond from initial contract drafting and due diligence to transaction closing and reporting procedures, overcoming legal and institutional barriers to support the company’s successful growth. If you need legal advice for various corporate acquisitions and investment transactions, please contact Law firm Veat at any time. From contract drafting to transaction procedures, M&A attorneys will carefully advise to minimize the client’s legal risks and help with smooth completion of the transaction. Thank you. Law firm Veat
Startup’s Must-Know Core of RCPS Contract Review
Law firm Veat received a request from a semiconductor company (hereinafter "client") to review RCPS (Redeemable Convertible Preferred Shares, 전환상환우선주) investment contracts, and provided professional legal advice to ensure the company receiving investment could grow in a legally stable environment. Law firm Veat's investment lawyers meticulously reviewed the RCPS contract proposed by the client. This ensured the protection of the receiving company's interests and confirmed that the investor's consent and consultation rights were not excessive. First, the representation and warranty provisions were modified to prevent the client from being placed in an unfavorable position. For example, the phrase “the investee warrants that all statements are true” in the contract was changed to “materially true” to prevent the client from bearing more responsibility than necessary. Also, the scope of consent and consultation rights were reasonably adjusted, and recommendations were made to delete or modify ambiguous or client-unfavorable clauses. Finally, clauses that could restrict the company's management activities in the long term were carefully reviewed to provide advice focused on protecting the client's management rights. What is RCPS (Redeemable Convertible Preferred Shares)? Raising investment is essential for startups to grow and secure competitiveness in the market. In particular, complex investment instruments such as Redeemable Convertible Preferred Shares (RCPS) can be stably achieved through trust building and clear contracts between investors and investees. RCPS is a widely used method in startup investment, offering flexibility in capital raising for startups and stability for investors, possessing advantages for both investors and companies. - Conversion Right: Investors can convert preferred shares into common shares under certain conditions, allowing them to benefit from the stock value appreciation of the company. - Redemption Right: Investors have the right to redeem principal under specified conditions, reducing investment risk. - Priority Right: Investors are guaranteed priority in the distribution of remaining assets upon company liquidation. RCPS contracts may contain complex clauses, therefore, it is recommended to receive advice from investment legal experts before entering into investment contracts to ensure the company’s long-term growth and stable management. Law firm Veat, the leader in Startup Investment and M&A Legal Advice There are cases where the proceedings continue without knowing whether the consent and consultation rights in the investment contract are within an acceptable range. If an investor’s authority is set excessively, it can significantly restrict the company’s independent decision-making and management activities. Therefore, it is essential to thoroughly review clauses in investment contracts such as consent and consultation rights and examine them in advance to ensure they are acceptable from the startup’s perspective. Especially startups in the growth stage need to be flexible in responding to rapidly changing business environments, so setting appropriate scopes for consent and consultation rights is beneficial. Law firm Veat has provided over 487 investment consultations and possesses experience advising startups and companies on investment attraction. In the first half of 2024, Law firm Veat entered the TOP 5 in the Bloomberg League Table based on the number of transactions, demonstrating Law firm Veat’s unique expertise in investment and M&A areas. If you need legal advice related to startup investment attraction and RCPS, please contact Law firm Veat.