{"id":123748,"date":"2026-01-05T11:45:12","date_gmt":"2026-01-05T11:45:12","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=123748"},"modified":"2026-01-05T16:38:17","modified_gmt":"2026-01-05T16:38:17","slug":"south-korea-private-equity","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/south-korea-private-equity\/","title":{"rendered":"South Korea: Private Equity"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-123748","comparative_guide","type-comparative_guide","status-publish","hentry","guides-private-equity","jurisdictions-south-korea"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Lee &#038; Ko<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/12\/lee__ko_logo.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Lee &#038; Ko<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/12\/lee__ko_logo.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Private Equity laws and regulations applicable in South Korea<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What proportion of transactions have involved a financial sponsor as a buyer or seller in the jurisdiction over the last 24 months?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>During the last 24 months, M&amp;A deals with financial sponsor as buyer or seller saw a proportion of approximately 33.5% among M&amp;A deals in Korea. (Source: Mergermarket)<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the main differences in M&A transaction terms between acquiring a business from a trade seller and financial sponsor backed company in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Financial sponsors generally demonstrate strong desire to avoid or limit their post-closing exposures (e.g., indemnification obligations, covenants, etc.), including by use of (i) representations and warranties with limited survival periods or non-surviving covenants, (ii) liability caps, higher de minimis and\/or basket thresholds and (iii) W&amp;I insurance obligations. In particular, for deals involving global financial sponsor exits, capital gains tax is also a key issue as this entails substantive negotiation between the parties regarding the withholding mechanism.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">On an acquisition of shares, what is the process for effecting the transfer of the shares and are transfer taxes payable?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Transfer of shares are effected differently depending on the share certificates of the particular company: (i) If no share certificates have been issued: by (a) the seller\u2019s written notice of the share transfer to the target company with a fixed-date stamp (occasionally accompanied by the target company\u2019s written consent with a fixed-date stamp, if desired) and (b) an updated shareholders\u2019 register reflecting the purchaser as the holder of the transferred shares; (ii) if share certificates have been issued: by (a) delivery of the share certificates and (b) an updated shareholders\u2019 register reflecting the purchaser as the holder of the transferred shares; and (iii) if shares are electronically registered: by updating (a) shareholders\u2019 account managed by the relevant securities companies and (b) shareholders\u2019 account managed by the Korea Securities Depository. In a share sale, securities transaction tax (normally at 0.35% of the transfer price) is imposed on the seller. If the seller is a foreign entity with no permanent establishment in Korea, the buyer must withhold and pay the securities transaction tax on behalf of the seller.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How do financial sponsors provide comfort to sellers where the purchasing entity is a special purpose vehicle?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Korea, sellers often rely on the reputation and credibility of financial sponsors and do not require any additional guarantee from them (particularly in the transaction involving well-recognised financial sponsors) other than documentation evidencing the vehicle is set up by the financial sponsor. Sometimes, financial sponsors are requested to provide binding debt and\/or equity commitment letters from their financing sources or limited parent guarantees depending on the negotiation dynamics between the parties and other transaction considerations (e.g., auction deals or deals involving attractive targets).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How prevalent is the use of locked box pricing mechanisms in your jurisdiction and in what circumstances are these ordinarily seen?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Use of locked box pricing mechanisms is not very common in Korea, and is occasionally used in cross-border auction deals or deals involving highly sought-after targets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the typical methods and constructs of how risk is allocated between a buyer and seller?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The typical methods and constructs of how risk is allocated between a buyer and seller in Korea is generally consistent with the practice in other jurisdictions (e.g., use of representations and warranties, covenants, closing conditions, indemnification and post-closing price adjustments). The Korean market is also experiencing a heavy increase in use of W&amp;I insurance policies, particularly in private equity transactions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How prevalent is the use of W&I insurance in your transactions?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There has been a significant growth in use of W&amp;I insurance in M&amp;A transactions in Korea for the last few years. Korea saw the use of W&amp;I insurance starting from around 2013, with approximately one or two deals using W&amp;I insurance per year until 2015. Use of W&amp;I insurance started becoming more popular from 2016. While there are no official statistics available on deal trends in Korea, Lee &amp; Ko conducted an internal survey last year analyzing share purchase transactions involving Korean companies over the preceding three years. The findings indicate that approximately 7% of transactions with a deal size of KRW 10 billion or more, and around 15% of transactions exceeding KRW 100 billion, utilized W&amp;I insurance. Nowadays, most private equity sellers and also strategic sellers in high profile auction deals at least consider the option of requiring bidders\/buyers to subscribe to W&amp;I insurance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How active have financial sponsors been in acquiring publicly listed companies?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While financial sponsors are more active in acquiring private companies, it is primarily due to the fact that the M&amp;A transactions involving listed companies constitute only a small portion of the entire M&amp;A transactions in Korea. Taking into the account the total number of M&amp;A transactions involving listed companies and the total number of M&amp;A transactions involving private companies, we note that financial sponsors are as active in acquiring publicly listed companies as acquiring private companies, though public M&amp;A deals may not necessarily result in a buy-out due to existing minority shareholders and other applicable regulatory restrictions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Outside of anti-trust and heavily regulated sectors, are there any foreign investment controls or other governmental consents which are typically required to be made by financial sponsors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign direct investments are generally subject to pre-transaction reporting requirements under the Foreign Investment Promotion Act (FIPA) or the Foreign Exchange Transactions Act (FETA). The FIPA applies, among other cases, in cases where a foreign investor invests a minimum of KRW 100 million in a target company and (i) acquires 10% or more of the equity interest in the target company, or (ii) owns any equity interest in the target company and dispatches or appoints directors, statutory auditors or executive officers of the target company. If the FIPA is not applicable the FETA applies. Investments by non-resident financial sponsors are generally subject to the FIPA.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is the risk of merger clearance normally dealt with where a financial sponsor is the acquirer?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The risk of merger clearance is normally dealt with in the transaction documentation via (i) a closing condition and (ii) a covenant requiring buyer\u2019s action to submit the filing and seller\u2019s obligation to cooperate. Buyer\u2019s obligation can range from use of reasonable efforts to use of best efforts, or even reverse break-up fee provisions. Imposing a full-scaled \u201chell-or-high water\u201d clause (buyer undertaking to agree to antitrust authority\u2019s requirements to clear the transaction, including complying with certain structural remedies) is not prevalent, financial sponsors with no anticipated competition issues sometimes accept a \u201chell-or-high water\u201d clause as a buyer in the auction deals where closing certainty is a key factor to the seller.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Have you seen an increase in (A) the number of minority investments undertaken by financial sponsors and are they typically structured as equity investments with certain minority protections or as debt-like investments with rights to participate in the equity upside; and (B) \u2018continuation fund\u2019 transactions where a financial sponsor divests one or more portfolio companies to funds managed by the same sponsor?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>(A) In 2025, among private equity transactions, around 9% accounts for minority investments (32 of 354 private equity transactions) (Source: Mergermarket) The investment structure varies from common shares, redeemable convertible preferred stocks (RCPS) or convertible preferred stocks (CPS) to bonds with warrants (BW) or convertible bonds (CB) depending on the circumstances.<\/p>\n<p>(B) In July 2022, Hahn &amp; Co (South Korea\u2019s biggest private equity firm) set up the very first and largest continuation fund along with Coller Capital and closed a USD 1.5bn GP-led transaction involving\u202fSsangyong C&amp;E Co. (a South Korea-based cement manufacturer). Other South Korean private equity firms started using continuation funds as well, including IMM Investment\u2019s acquisition of 33.7% of Oheim through a continuation fund for KRW 30 billion (USD 22.6 million). In line with the general market consensus, we expect continuation funds to be more widely used in the Korean M&amp;A market.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are management incentive schemes typically structured?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management incentive schemes are typically structured as cash compensation (typically by way of M&amp;A bonus or severance pay). Stock options or phantom stock are also frequently used.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any specific tax rules which commonly feature in the structuring of management's incentive schemes?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management incentives are generally treated as ordinary income, and will be taxed accordingly. It is always recommended to have tax and legal experts involve in an early stage to exploit any tax efficient alternative structures.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are senior managers subject to non-competes and if so what is the general duration?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In the context of a M&amp;A transaction (i) senior managers that are also the seller are often asked (and agree in consideration of the transaction) to be subject to noncompete obligations for a duration of around one to five years; however, (ii) senior managers that are not the sellers are rarely asked (or agree) to be subject to any noncompete obligations. As a matter of principle, the Korean courts will recognize post-termination noncompete obligations, but solely to the extent that such obligations are limited in its scope and duration and do not overly limit or restrict the subject\u2019s freedom of occupation and right to work (as provided for in Articles 15 and 32 of the Constitution of the Republic of Korea). In determining the enforceability of non-compete obligations, the Korean courts will consider (i) the employer\u2019s needs, (ii) subject\u2019s position at the employer company, (iii) scope and duration, (iv) whether the subject is adequately compensated and (v) the circumstances around termination of the subject\u2019s employment.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does a financial sponsor typically ensure it has control over material business decisions made by the portfolio company and what are the typical documents used to regulate the governance of the portfolio company?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A financial sponsor would typically enter into a shareholders agreement (in case of joint ventures) and\/or amend the Articles of Incorporation and the board rules of the portfolio company to ensure that the financial sponsor has control over material business decisions (i.e., veto rights), and (ii) nominate one or more directors and executive officers for the portfolio company to (x) control the board of directors or (y) exercise veto rights as stipulated in the shareholders agreement and\/or the Articles of Incorporation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it common to use management pooling vehicles where there are a large number of employee shareholders?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>It is not common to use management pooling vehicles in transactions involving financial sponsors. Sometimes private equity buyers offer individual sellers to re-invest certain portion of their sales proceeds into the private equity\u2019s acquisition vehicle so that they can share the leverage and upside when the private equity exits.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most commonly used debt finance capital structures across small, medium and large financings?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Regardless of the size of the capital financing, the most commonly used debt finance capital structure is a syndicated loan. For small and medium size capital financing, issuance of redeemable convertible preferred stocks (RCPS) or convertible bonds (CB) are also commonly used.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is financial assistance legislation applicable to debt financing arrangements? If so, how is that normally dealt with?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no law on point with respect to debt financing arrangements. In Korea, it is normally dealt with the assessment of whether there is any breach of fiduciary duty of the relevant directors (which breach may give rise to criminal liabilities). In general, provision of the target company\u2019s assets as a collateral to the buyer\u2019s acquisition financing (or the target company guaranteeing the buyer\u2019s acquisition financing) without receiving the adequate consideration for such provision of collateral (or guarantee) is deemed a breach of fiduciary duty by the directors of the target company; and as such, such arrangements are not permitted in Korea. The buyer would typically provide the shares in the target company as collateral to its acquisition financing. Occasionally, the buyer (i.e., its investment vehicle, which is the borrower for the buyer\u2019s acquisition financing) would merge with the target company after completion of the M&amp;A transaction.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">For a typical financing, is there a standard form of credit agreement used which is then negotiated and typically how material is the level of negotiation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no legally required or commonly used standard form of credit agreement. However, most financial institutions have (and prefer to use) their own standard forms and there are market terms and conditions normally agreed. The level of negotiation varies on a deal-by deal basis, but the material terms (e.g., mandatory payment, change of control, representations and warranties, covenants, collateral package and event of defaults) are often heavily negotiated.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What have been the key areas of negotiation between borrowers and lenders in the last two years?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>They vary on a deal-by-deal basis, based on our experience, mandatory prepayment and (financial and other) covenants are heavily negotiated recently. In particular, in the past two years where sellers\u2019 need for closing certainty and buyers\u2019 need for a walk-away right became important in light of the unstable movements in the cost of financing and foreign exchange rate, the definition of \u201cmaterial adverse effect\u201d as well as the closing conditions and termination rights are also heavily negotiated.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Have you seen an increase or use of private equity credit funds as sources of debt capital?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, there has been an increase in use of private equity credit funds as sources of debt capital. However, the credit funds primarily engage in conventional minority equity investments and are only seldom used for convertible bond investments; and as such, the market does not view credit funds as a meaningful source of debt capital yet.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">2326<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/123748","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=123748"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}