Atlas Legal drafted a comprehensive shareholders agreement for a Korea-Japan joint venture, establishing 90:10 equity protection, share transfer restrictions, and deadlock resolution mechanisms.
Project Overview
This engagement involved drafting a shareholders agreement for a joint venture between Japan and Korea.
Corporate Governance and Decision-Making Framework
Clear procedures for board composition, shareholders meetings and board operations were established, along with a regular consultation system for management issues. A phased consultation and mediation procedure was implemented to ensure management stability in case of deadlock situations.
Share Transfer Restrictions and Shareholder Protection
Free transfer of shares was restricted in principle, with systematic design of Right of First Refusal, Tag-Along Rights, and Drag-Along Rights. The Right of First Refusal allows existing shareholders to purchase shares ahead of third parties, while Tag-Along Rights guarantee minority shareholders’ exit rights. Pre-emptive rights provisions were included to prevent equity dilution upon issuance of new shares.
Non-Compete and Confidentiality Provisions
Officers and employees’ duty of care and fiduciary duty were explicitly stated, with non-compete obligations extending beyond employment termination for a specified period. Confidentiality obligations survive for five years after agreement termination, with liquidated damages of KRW 30 million for violations to strengthen trade secret protection. Conflict of interest disclosure requirements promote transparent management.
Exit Strategy and Dispute Resolution
Detailed provisions for IPO and M&A scenarios clarify shareholders’ rights and procedures for future investment recovery. Provisions addressing special situations such as dissolution or merger of corporate shareholders were included. Disputes are resolved through arbitration under Korean Commercial Arbitration Board rules in Seoul using Korean language, with court injunctions available during arbitration proceedings.
Agreement Term and Automatic Renewal
The agreement term was established, with automatic two-year renewals unless termination notice is given six months before expiration. Even after termination, non-compete obligations, confidentiality duties, sanction provisions, and dispute resolution clauses remain effective to ensure long-term rights protection.
Legal Expertise
Atlas Legal possesses extensive experience in international joint ventures, corporate governance design, and shareholders agreement drafting.