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Blogs Corporate & BizMandatory 'AI Content Labeling System' Starting 2026: An Essential Guide for Businesses and Marketers
With the rapid advancement of AI technology, marketing strategies utilizing virtual humans or AI-generated content have become commonplace. In response, to prevent consumer confusion and establish a sound market order, the government is set to fully implement the ‘AI Content Labeling System’ starting January 2026. This column summarizes the key aspects of the AI Labeling System—including its background, legal basis, practical labeling methods, and risks of non-compliance—that corporate marketing managers and influencers must be aware of. 1. Background: Preventing Misinformation and Market Disruption The primary reason for enforcing the AI Labeling System as a legal obligation is the surge in false and exaggerated advertisements exploiting AI technology. The "Fake Expert" Problem: There has been an increase in cases where fake doctors or experts created via deepfake technology recommend unverified products, hindering consumers' rational choices and causing financial damage. Establishing Market Order: The government has defined these practices not merely as marketing but as "acts disturbing market order." Consequently, it has mandated the disclosure of AI generation (e.g., "This content was created by AI") to ensure consumers can clearly identify the authenticity of information. 2. Legal Basis and Key Provisions The AI Labeling System is not a simple recommendation but a strong legal obligation based on the following laws: Category Key Provisions Note Framework Act on AI Effective Jan 22, 2026. Mandates labeling and notice for high-impact and generative AI services. Administrative Fines IT Network Act Requires uploaders to label AI content and imposes management/notice responsibilities on platforms. Amendment targeted for Q1 2026 Labeling & Advertising Act Regards concealing or exaggerating AI use as Unfair Labeling/Advertising. Punitive Damages In particular, the Fair Trade Commission (FTC) plans to strictly sanction AI Washing—the act of concealing the use of AI to make content appear human-created—viewing it as deceptive advertising. 3. Practical Guide: Who, What, and How to Label 1) Obligated Parties: AI Business Operators Under the law, the obligated parties are defined as "AI Business Operators." This encompasses not only AI technology developers but all business entities (corporations, organizations, and individuals) that provide products or services utilizing AI. 2) Content Subject to Labeling Generative AI Products/Services: Prior notice is mandatory when providing AI-based services such as chatbots or image generation tools. Deepfake Results: Virtual audio, images, or videos that are difficult to distinguish from reality. Advertising Content: AI-generated content for commercial purposes, such as shopping mall detail pages and influencer sponsored ads. 3) Labeling Methods and Exceptions General Principle: Must be labeled in a way that consumers can clearly recognize (e.g., subtitles, watermarks, etc.). Cultural/Artistic Exception: However, if the content qualifies as a "artistic or creative expression" and labeling would significantly hinder appreciation, flexible labeling exceptions may apply (Article 31, Paragraph 3 of the Framework Act on AI). 4. Penalties and Risks (Fines vs. Damages) Sanctions for violating the AI labeling duty are divided into administrative sanctions (fines) and civil liability (damages). ① Violation of the Framework Act on AI: Administrative Fines If an AI business operator fails to comply with the labeling duty or fails to notify the production of deepfakes, they will receive a corrective order from the Minister of Science and ICT. Failure to comply may result in an administrative fine of up to 30 million KRW. ② Violation of the Labeling & Advertising Act: Punitive Damages Beyond simple failure to label, if the act involves malicious false or exaggerated advertising (e.g., using fake experts), the Fair Labeling and Advertising Act applies. Current: Liability for damages up to 3 times the amount of damage. Proposed Amendment: The government is pushing for an amendment to increase this limit to up to 5 times to eradicate market disturbance. 5. Conclusion and Response The AI Labeling System is not a regulation saying "Do not use AI," but rather a standard of trust requiring "Transparency if AI is used." With the January 2026 implementation approaching, companies must review their internal compliance processes to prevent unnecessary legal disputes. The Corporate Law Team at Decent Law Firm provides professional assistance regarding AI and IT-related legal advisory and compliance system construction. Please feel free to contact us if you have any inquiries.
2026-01-07 Naver Blog -
Blogs Corporate & Biz
Key Issues in Stock Option Disputes
A Stock Option Lawyer’s Perspective Stock option disputes often turn on the exact wording of the agreement and how the terms were explained at the time of grant. In practice, a single clause—or the absence of one—can lead to disputes worth millions of dollars. Stock options usually begin as an “incentive for talent.” However, when variables such as failed IPOs, resignation or termination, or changes in company valuation arise, stock options quickly become one of the most contentious legal issues in corporate disputes. 1. Why Do Stock Option Disputes Keep Occurring? At their core, stock options are based on future value appreciation. The company promises significant rewards if it grows, and employees commit their efforts based on that expectation. Disputes arise when those expectations diverge. Growth may stall, valuations may decline, or unexpected resignation or dismissal may occur. At that point, one party often claims, “This was not the condition we agreed to.” Common causes of stock option disputes include: Vague or ambiguous contract language open to multiple interpretations Key terms explained verbally but not documented in writing or email No clear rules governing exercisability upon resignation or termination These gaps allow each party to interpret the agreement in their own favor, frequently leading to litigation. 2. Lessons from the Flex Case: Cash-Settled vs. Equity-Settled Stock Options A widely discussed case in the Korean startup ecosystem involving Flex, an HR technology company, highlights the importance of specificity in stock option agreements. The central issue was whether the options were: Equity-settled (physical delivery): Shares are issued upon exercise, or Cash-settled (difference settlement): Only the difference between the exercise price and fair market value is paid in cash Korean law explicitly allows cash-settled structures. Under Article 340-2 of the Korean Commercial Act and Article 16-3 of the Special Act on Venture Business Promotion, companies may compensate the exercise gain in cash or treasury shares equivalent to the price difference. Key legal issues a stock option lawyer examines in such cases: Explicit contractual language: Does the agreement clearly permit cash settlement? If not, courts may presume physical share delivery. Procedural clarity: Are the exercise method and payment mechanics clearly defined? Duty to explain: Did the company adequately explain the structure and risks (including tax implications), and is there documentary evidence such as emails or briefing materials? 3. Tax Risk: Why “Tax Bombs” Occur Tax issues can be as damaging as legal disputes. In many cases, tax authorities impose substantial additional assessments years after the exercise. Valuation disputes: Stock option gains are generally taxed as employment income. For private companies, determining “fair market value” is critical. Even if tax was initially paid based on a low valuation, later discovery of third-party transaction prices may lead to reassessment and retroactive taxation. Loss of tax benefits: Failure to meet venture company tax exemption or deferral requirements in advance may result in losing valuable tax incentives altogether. Without proactive tax planning, compensation can quickly turn into a liability. 4. Group Structures and M&A Complications Legal complexity increases significantly in holding company, subsidiary, or M&A scenarios. Cost allocation issues: When a parent company grants stock options to subsidiary employees, determining who bears the cost—and whether it is tax-deductible—requires careful structuring and internal agreements. IPO failure or M&A scenarios: Many employees rely on “exercisable upon IPO” clauses. If the IPO is canceled or the company is acquired, options may become worthless unless the contract clearly addresses acceleration, succession, or cash compensation. A well-drafted agreement must include a clear exit strategy covering changes in control, failed listings, and acquisition scenarios. 5. Stock Option Lawyers Start with Preventive Design Stock options are not merely an HR matter—they are a core corporate legal issue. Decent Law Firm’s corporate law team advises not only on dispute resolution, but also on preventive legal structuring. Our approach includes: Compliance review: Articles of incorporation, shareholder resolutions, statutory procedures, and registrations Precision drafting: Clear distinction between cash-settled and equity-settled options; detailed rules for voluntary resignation, involuntary termination, and disciplinary actions Contingency planning: Treatment of options in M&A, IPO cancellation, or control changes Tax risk management: Advance analysis of taxation timing and valuation risks Dispute resolution: Legal opinions, contract interpretation, and litigation support in damages claims A well-structured stock option plan and clear explanatory materials serve as proof of a company’s credibility to both talent and investors. With extensive experience from large corporations and in-house legal teams, Decent Law Firm understands internal decision-making structures and real-world business dynamics. For complex stock option issues, Decent Law Firm’s corporate law team provides clear, defensible standards.
2025-12-31 Naver Blog -
Blogs Corporate & Biz
Korea’s AI Basic Act: Key Compliance Checkpoints for AI Businesses
The public notice period for the Enforcement Decree of the “Framework Act on the Advancement of Artificial Intelligence and Establishment of Trust” (hereinafter the 'AI Basic Act') concluded on December 22, 2025. With the Act set to take effect on January 22, 2026, the South Korean government has finalized the institutional framework. For AI service providers, these regulations are not merely post-launch checklists but essential specifications that must be integrated from the initial planning and design stages. 1. Labeling Obligations for Generative AI and UX Integration Transparency requirements under Article 31 of the AI Basic Act have been further refined through the Enforcement Decree. Labeling Methods: Providers must choose between a "Human-Perceptible Format" (visible text/watermarks) and a "Machine-Readable Format" (C2PA, metadata, etc.) to identify AI-generated content. Mandatory Notification: Even when adopting machine-readable formats, providers are obligated to notify users at least once via text or audio prompts. Avoidance of Double Regulation: If content (e.g., deepfakes) has already been labeled in accordance with other relevant laws, it may be exempt from redundant labeling duties under this Act. Practical Impact: This is not a simple notification task; it directly impacts UX/UI design. Legal reviews should be conducted during the design phase to avoid the prohibitive costs of post-launch modifications. 2. High-Impact AI Confirmation and Launch Risk Management The Act defines "High-Impact AI" as systems that significantly affect human life, physical safety, or fundamental rights (e.g., healthcare, transportation, recruitment, credit scoring, etc.). Confirmation Procedure: Businesses can apply to the Ministry of Science and ICT (MSIT) to confirm whether their service qualifies as "High-Impact AI." The government must respond within 60 days (30 days + a possible 30-day extension). Business Risk: The government's response timeline is a critical variable for service launch schedules. If a service is retroactively classified as High-Impact AI, the provider may face the risk of redesigning the entire system architecture to meet enhanced safety standards. 3. Integration with the Personal Information Protection Act (PIPA) The Enforcement Decree reflects efforts to resolve overlapping regulations with the existing PIPA. Deemed Compliance: If a business faithfully fulfills its obligations under PIPA, it is deemed to have satisfied the safety and reliability requirements of the AI Basic Act regarding the processing of personal information. Limitations: Note that this "deemed compliance" applies only to personal data processing. Obligations regarding algorithm transparency and accountability for AI outputs must still be addressed separately under the AI Basic Act. 4. Post-Management Accountability: 5-Year Data Retention & Domestic Agents The Decree formalizes accountability measures to verify regulatory compliance. Record-Keeping: Documents including risk management plans, explanation protocols, and user protection measures must be retained for 5 years. These serve as crucial evidence during disputes or regulatory investigations. Domestic Agent Appointment: Overseas AI providers are now explicitly required to appoint a domestic agent in Korea. Domestic companies utilizing APIs from global Big Tech firms must also conduct supply-chain compliance checks. 5. Safety Obligations for Large-Scale AI Models (High-Compute AI) The Decree imposes obligations to establish risk identification and management systems for developers of large-scale AI models with cumulative training computation exceeding $10^{26}$ FLOPs. Domestic businesses providing services based on these hyper-scale models must also review the legal structure of liability and risk-sharing. Conclusion: A 1-Year Grace Period, but the Time to Prepare is Now The government intends to provide a one-year grace period following the enforcement of the Act. However, given the nature of the AI industry, reactive adjustments can lead to immense technical costs and legal exposure. Enterprises must now view "Compliance by Design" as a core element of their service, moving beyond mere technological development. We recommend a thorough diagnostic of whether your services fall under the "High-Impact" or "Generative AI" categories to ensure full readiness by the enforcement date. DECENT Law Firm provides tailored legal counsel and solutions to navigate the evolving regulatory landscape of the AI industry. If you require a detailed review or a compliance audit, please contact us.
2025-12-24 Naver Blog -
Blogs Corporate & Biz
How to File an Unfair Dismissal Remedy Application – Methods and Procedures
Concept and Criteria of Unfair Dismissal In an employment relationship, dismissal is a serious measure that directly affects an employee’s livelihood. For this reason, the law strictly limits an employer’s authority to dismiss employees. Under Article 23(1) of the Korean Labor Standards Act, an employer is prohibited from dismissing, suspending, disciplining, transferring, or reducing the wages of an employee without justifiable cause. Such actions are collectively referred to as “unfair dismissal or unfair disciplinary measures.” When an employee is unfairly dismissed, the law provides a fast and simplified administrative remedy through the Labor Relations Commission, separate from civil litigation. The core of this system lies in understanding the proper method for filing an unfair dismissal remedy application. For employees who have just received notice of dismissal and are overwhelmed by uncertainty and anxiety, this procedure may serve as the minimum legal safeguard to protect their rights. Understanding the Overall Procedure for Filing an Unfair Dismissal Remedy Application To challenge an unfair dismissal, it is essential to clearly understand the procedural framework. An employee must file an application for remedy with the competent Local Labor Relations Commission within three months from the date the dismissal occurred. This deadline is strictly enforced, and even a one-day delay makes recovery impossible. The application is filed by submitting a prescribed application form to the Local Labor Relations Commission. Upon receipt, the Commission promptly conducts a fact-finding investigation and holds a hearing where both the employer and the employee are required to appear. During this process, evidence submission, witness examination, and cross-examination may take place, and in some cases, a recommendation for settlement may be offered. Once the hearing is concluded, the Commission renders a decision on whether the dismissal constitutes unfair dismissal. If unfair dismissal is recognized, the Commission may order reinstatement to the original position or monetary compensation. If not, the application will be dismissed. If either party disagrees with the decision, an appeal may be filed with the Central Labor Relations Commission within 10 days. The decision of the Central Commission may further be challenged through administrative litigation. This sequence represents the standard practical flow of an unfair dismissal remedy application. Key Issues to Consider During the Remedy Process The most common and critical issue in remedy proceedings is the filing deadline. If the three-month statutory period lapses, the application will be dismissed regardless of the merits of the case. This is not a matter to be taken lightly, as delayed action effectively results in a forfeiture of rights. Another preliminary issue is whether the Labor Standards Act applies to the workplace. If the employer has fewer than five regular employees, the unfair dismissal remedy system may not apply, making prior legal review essential. The existence of a legitimate interest in seeking relief is also significant. Even if a fixed-term employment contract has expired, an application may still be meaningful if there is a practical interest in recovering wages equivalent to the dismissal period. In addition, when calculating wages for the period of unfair dismissal, potential wage increases under employment rules or collective bargaining agreements must also be considered. If reinstatement is not desired, the employee may opt for monetary compensation instead. This decision should be made strategically at an early stage of the procedure. As such, filing an unfair dismissal remedy application is not a mere formality. It requires an accurate understanding of issue-specific legal frameworks, making the initial process critically important. How Decent Law Firm Can Assist Unfair dismissal cases are not simple labor disputes. They require a sophisticated approach that combines thorough fact-finding with precise legal analysis. Without proper preparation, employees may face unfavorable outcomes despite having legitimate claims. Decent Law Firm provides structured and strategic support by analyzing the legitimacy of the dismissal grounds, procedural violations, and wage calculation frameworks to develop case-specific response strategies. Accurately designing the unfair dismissal remedy application at the initial stage often determines the final outcome. Decent’s role is to provide practical assistance to clients facing dismissal alone and to clearly hold employers legally accountable for unilateral and unjust measures. Dismissal disputes are never trivial. Missing the right timing can lead to irreversible consequences. For this reason, we strongly recommend consulting with a former labor official-turned-attorney at the earliest stage.
2025-12-19 Naver Blog -
Blogs Corporate & Biz
MBK's Tender Offer for Korea Zinc: Key Legal Insights and Implications
What is a Tender Offer? A tender offer is a system where a party acquires a significant number of shares from multiple shareholders of a listed company to obtain management control. Under Article 134 of the Financial Investment Services and Capital Markets Act (FSCMA), tender offerors must publicly announce their offer and submit a tender offer statement to the Financial Services Commission and the stock exchange. MBK's recent tender offer for Korea Zinc serves as a notable example of how this system is applied in practice. MBK’s Tender Offer Terms and Comparison to HYBE’s SM Case MBK specified the tender offer price at 660,000 KRW per share and set the minimum purchase quantity at 6.98% of the total issued shares. This conditional tender offer ensures that the offeror can withdraw if the minimum purchase requirement is not met. In contrast, during HYBE’s tender offer for SM Entertainment, no such condition was established. Despite a significant increase in SM's stock price due to competing offers, HYBE had to purchase all shares tendered, resulting in substantial losses. Impact of Competing Offers and Stock Price Volatility Korea Zinc’s current stock price (735,000 KRW) exceeds MBK’s tender offer price (660,000 KRW), reflecting market speculation about a potential competing tender offer. If a competing offer emerges, stock prices often rise to levels comparable to or higher than the tender offer price, increasing volatility in the market. If MBK fails to meet the minimum purchase threshold or decides to withdraw due to a sharp increase in Korea Zinc’s stock price, they can legally cancel the tender offer under Article 139 of the FSCMA. However, existing shareholders would not be entitled to seek damages or penalties against MBK in such a case. Legal Effects of Tender Offer Withdrawal Should MBK’s tender offer be withdrawn or fail to meet its minimum purchase condition, the company is not obligated to proceed with the acquisition. Shareholders are left with no legal recourse to claim compensation for the failed tender offer. Conversely, if MBK raises the tender offer price through an amended filing to meet market expectations, Korea Zinc’s stock price could see further increases during the tender period. Conclusion: Caution for Individual Investors During the tender offer period (September 13, 2024 – October 4, 2024), Korea Zinc’s stock price is expected to experience significant volatility due to factors such as competing offers and adjustments to the tender price. Individual investors are advised to carefully evaluate the risks and opportunities before making investment decisions in this highly dynamic environment. MBK’s tender offer highlights critical legal and financial considerations in tender offers, providing valuable insights for future cases in the market.
2024-09-22 X (Twitter) -
Blogs Corporate & Biz
Validity of Share Nominee Trust Agreements for Startups
What is a Share Nominee Trust Agreement? A share nominee trust agreement is a contract between the actual shareholder (trustor) and the nominal shareholder (trustee), where the external shareholding structure differs from the internal shareholding arrangement. Why Are Share Nominee Trust Agreements Created? Legal Restrictions: When ownership of shares is prohibited by law or other regulations. Privacy Reasons: To conceal share ownership for practical purposes. Industry Practices: To avoid potential management disputes by consolidating shares under one name while actual ownership is divided among multiple stakeholders. Are Share Nominee Trust Agreements Illegal? No, such agreements are not inherently illegal. Contracts are governed by the principle of freedom of contract, and there are no specific provisions penalizing share nominee trust agreements under the law. Are Share Nominee Trust Agreements Valid? The answer depends on the perspective: Internal Relationship (Trustor vs. Trustee): The agreement is valid. The trustee is bound by the contractual obligations outlined in the agreement, and the trustor can hold the trustee accountable for breaches. External Relationship (Trustee vs. Company): According to the Supreme Court, only the shareholder listed in the company’s shareholder registry is considered the legitimate shareholder. This means the nominee is recognized as the official shareholder in dealings with the company. Importance of a Well-Drafted Share Nominee Trust Agreement For startups, situations may arise where equity is divided among stakeholders but listed under the name of the founder or another nominee. In such cases, the drafting of the share nominee trust agreement is critical. The agreement must clearly define the rights and responsibilities of each party to avoid potential disputes. Key Provisions to Include in a Share Nominee Trust Agreement Clear Identification of Parties: Clearly define the trustor and trustee. Transfer Restrictions: Specify limitations on the transfer of shares. Shareholder Registry: Include clauses regarding the nominee’s entry in the shareholder registry. Liability and Damages: Outline provisions for compensation in the event of a breach. Termination of Agreement: Define the conditions and procedures for contract termination. Practical Note: The effectiveness of the agreement depends on its substantive content rather than its title or formal structure. Each provision must be carefully reviewed for legal enforceability. Relevant Case Law Supreme Court Decision 2013. 2. 14. (2011Da109708) Supreme Court En Banc Decision 2017. 3. 23. (2015Da248342) These rulings underscore the importance of properly drafted agreements and the distinction between internal and external validity in share nominee trust arrangements.
2024-06-17 X (Twitter)
