Small business M&A essential guide, a shortcut to startup success.

Law firm Veat represents small companies (hereinafter "client companies") with capital of less than 1 billion won, conducting legal reviews and procedures for the Commercial Code, articles of incorporation, and existing investment contracts for business transfers.

Law firm Veat carefully reviews the main issues of business transfers, confirms procedures that can be omitted according to the special rules for small companies, and proposes simplified methods while maintaining legal validity. Also, we thoroughly analyzed the client’s articles of incorporation and detailedly guided procedures that can replace the board of directors in cases where a board does not exist.

Also, we reviewed existing investment contracts to confirm whether there was a prior written consent for technology transfer and whether there were transactions that would have a significant impact on management performance, and informed you.

Legal Considerations Related to Business Transfers

• Key Requirements under the Commercial Code

Business transfers are not merely a transfer of assets but a comprehensive assignment including rights and obligations, and require important decisions in legal, financial, and operational aspects. In business transfers, it is necessary to consider various legal matters such as key requirements under the Commercial Code, articles of incorporation, and investment contract conditions.

According to Article 274 of the Commercial Code, in order to protect the rights of shareholders and ensure transparent decision-making regarding matters related to company assets, a company must obtain a special resolution of the shareholder meeting if it transfers all or a significant portion of its business or decides to do so. A special resolution requires more than two-thirds of the attending shareholders to vote in favor and more than half of the issued shares to be voted in favor, unlike a regular resolution.

Also, in order not to cause creditors or contract counterparties, who are stakeholders in the business transfer process, to receive unfavorable treatment, compliance with creditor protection procedures must be observed (Article 230 of the Commercial Code).

However, Article 230-1 of the Commercial Code provides that small companies with capital of less than 1 billion won may be exempt from the special resolution requirements of the shareholder meeting under the Commercial Code and other certain requirements, reflecting the realistic management environment and the need for rapid decision-making.

• Company Internal Regulations

The articles of incorporation are a document specifying the company’s internal regulations and may be the conditions for resolutions by the board of directors and shareholder meeting for business transfers. In a company that does not have a board of directors, this can be replaced with a resolution by the board of directors, and the procedures may vary depending on the provisions of the articles of incorporation, so a thorough review must be performed.

• Investment Contract Conditions

Conditions regarding technology transfer, intellectual property rights, and shareholders are important items, and the impact of these conditions on business transfers must be analyzed from various angles during the legal review process, and they should be implemented through counterparties and legal experts if necessary.

As business transfers like these involve many things to be reviewed comprehensively, it is important to seek advice from a legal expert specializing in business transfers.

Law firm Veat, a reliable partner for startups

Since its establishment in 2015, Law firm Veat has provided legal advice to various companies, including startups, IT companies, and venture capital firms, accurately understanding the legal issues faced by companies and providing prompt advice, and has established itself as a trusted legal partner from the initial stage of startups to business expansion.

Law firm Veat was ranked among the top 5 in the Bloomberg M&A league table for the first half of 2024 in terms of the number of transactions, and has successfully executed various investment contracts and M&A projects. We also provide practical and executable solutions by analyzing clients’ legal problems from various angles. If you need legal advice related to business transfers, please contact Law firm Veat specializing in M&A.

Thank you.

Sincerely,

Law firm Veat