Kyusung Lee Attorney at Law

Hello, I’m Kyusung Lee, an attorney and your dedicated legal partner for foreign investment matters in Korea.

When a foreign company establishes a joint venture (JV) or co-manages a company with a local partner in Korea, the very first item that should be discussed is the Shareholders’ Agreement.

A Shareholders’ Agreement is a core legal instrument that determines the direction of the business and its governance structure. Company bylaws (articles of incorporation) alone rarely capture the concrete mechanisms for adjusting control or handling disputes. In practice, a Shareholders’ Agreement functions as the company’s ‘invisible constitution.’

This guide is designed for foreign investors who are considering or preparing a Korean joint venture or co-ownership structure.

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What a Shareholders’ Agreement Does

While the Korean Commercial Act provides a basic framework for shareholders’ rights and obligations, it does not address the many fine-grained interests that arise in real-world management — often a source of disputes.

For example, a partner with a smaller equity stake may be contributing critical technology or brand value, while a larger capital contributor may seek managerial control.

A Shareholders’ Agreement clarifies these complex interests. By defining board composition, the appointment and removal of the CEO, and voting thresholds, it makes the governance structure explicit. Provisions such as transfer restrictions, pre-emptive rights (ROFR/ROFO), tag-along rights, and drag-along rights help prevent unexpected shifts in ownership.

You can also predetermine how disagreements will be mediated between shareholders and specify the forum for dispute resolution — court jurisdiction or arbitration.

Importantly, you should plan for a potential exit or wind-down: how residual assets will be distributed and how and when investors can recover their investment.

Because cultural differences can heighten friction in decision-making, foreign investors are well-advised to set clear rules at the contracting stage.

Key Components of a Shareholders’ Agreement

① Capital Contributions & Equity Split

Clearly state each shareholder’s contribution, equity percentage, and any conditions for additional funding. Foreign investors must also confirm compliance with Korea’s Foreign Investment Promotion Act (FIPA) filing requirements.

② Voting Rights & Management Control

Include board composition, procedures for appointing/removing the representative director (CEO), and special voting requirements for reserved matters. Even minority holders commonly negotiate veto rights over critical issues.

③ Restrictions on Share Transfers

Provide rights of first refusal/offer to existing shareholders, and use tag-along provisions to protect minority holders in a sale. Drag-along clauses may be included to enable exit in a third-party sale under agreed conditions.

④ Confidentiality & Non-Compete

Protect technical information and managerial know-how through NDAs and tailored non-compete obligations.

⑤ Dispute Resolution

Many cross-border ventures choose arbitration. If so, specify the institution, seat, language, and rules. Clear procedures make outcomes more predictable in international disputes.

These terms are not boilerplate. They must be custom-designed to fit the business model, investment purpose, and regulatory context.

Why You Need Counsel to Draft It

A single sentence can shift control of the company.

Korean law and case law are detailed, and there may be restrictions depending on foreign ownership levels and management participation. Local counsel review is therefore essential.

I analyze each shareholder’s interests objectively and tailor the agreement to comply with the Korean Commercial Act and foreign-investment regulations.

I also propose risk-management options for future scenarios: share transfers, follow-on investments, and potential control disputes.

Ultimately, a Shareholders’ Agreement is not a mere form document — it is a legal tool for designing the company’s future.

If you want a successful partnership in Korea, focus less on ‘filling in a template’ and more on strategic structuring. With experienced legal guidance, you can operate stably and avoid unforeseen disputes.

For foreigners running a joint business in Korea, a Shareholders’ Agreement is a key safeguard for investment protection, governance stability, and dispute prevention. Have every clause carefully reviewed by counsel before signing.

Attorney Kyusung Lee — Profile

• B.A. in Economics with Honors, Brown University (Providence, RI, USA)
• Graduate, The Hotchkiss School (Lakeville, CT, USA)
• Startup Law Specialist registered with the Korean Bar Association (KBA)
• Certified Anti-Money Laundering Specialist (CAMS)
• Former Legal Team, Samsung C&T (Engineering & Construction Group)
• Former Bank of America Merrill Lynch — Securities Research

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