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BlogsValidity 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) -
Media Coverage
Hooked by Promises of High Returns, Trapped by Endorsement Ads
Instagram is being exploited as a platform for various scams disguised as 'high-income side jobs.' According to the fraud information sharing website 'The Cheat,' the first report of an Instagram side job scam was registered in June 2020, four years ago. These scams led to 348 cases last year, and as of the 2nd of this month, 241 cases have already been reported this year. A representative from the Financial Supervisory Service (FSS) stated on the 14th, "Many scams involve using Instagram as a recruitment platform, luring victims to Telegram and then inducing them to transfer money under the guise of investment." (omitted) Accounts advertising promotional services and recruiting members for side jobs often either have a structure that generates no real income or exaggerate potential earnings. Pureun “Ian” Hong , managing partner at Decent Law Firm and a financial crime expert, explained, "Recently, most of the scam reports related to Instagram involve types such as proxy shopping scams." (omitted) While catching the perpetrators is the only solution, it is challenging to track them because they frequently change their Instagram accounts. The police handling the case involving Mr. Kim remarked, "It's difficult to identify the targets, so it's unclear how long the investigation will take." Attorney Hong pointed out, "Fraud investigations can take months, but for these types of scams, it takes even longer due to the difficulty in securing evidence and identifying the suspects. The problem is that in the meantime, the criminals can funnel the money elsewhere." He added, "We need to interpret the 'fraudulent use of accounts' defined under the Telecommunications Fraud Victim Compensation Act more broadly, rather than limiting it to voice phishing, to develop more practical methods for victim compensation."
2024-06-15 Kukmin Ilbo -
Blogs
How to Draft a Contract, and Why You Need a Lawyer's Review
Contracts can be formed as "consensual contracts," meaning they are valid as long as there is mutual agreement between the parties (congruence of intentions). In other words, verbal agreements are still considered contracts, and a written contract is not always necessary for a contract to be established. If every contract in the world were honored as promised, there would be no need for written contracts. Unfortunately, because some people do not keep their promises, it is necessary to draft a contract before proceeding with any matter. The presence of a contract makes a significant difference when taking legal action against those who fail to uphold their promises. In litigation, a contract serves as a golden ticket. A contract is a dispositive document that includes the agreed-upon terms between the parties and their confirming seals or signatures. During a trial, the contract is the most crucial piece of evidence, and unless there are exceptional circumstances, the judge cannot make a decision that deviates from the content of the contract. Many people underestimate the importance of contracts. Actions such as proceeding without a contract due to "industry practices," relying on "trust," using a "standard contract," or signing a contract presented by the other party without review are all risky behaviors.
2024-06-14 -
Articles
Four Changes When the Virtual Asset User Protection Act Takes Effect on July 19
Starting from July 19, 2024, the Act on the Protection of Virtual Asset Users and Other Matters (Virtual Asset User Protection Act) will come into effect. The Virtual Asset User Protection Act aims to protect the rights and interests of virtual asset users and establish a transparent and sound trading order in the virtual asset market by determining matters related to the protection of user assets and the regulation of unfair trading practices. So, what will change with the implementation of the Virtual Asset User Protection Act? You can find out through an article by Jin Hyeonsu, the Managing Partner of Decent Law Firm.
2024-06-06 Premium Contents -
Media Coverage
CEO of Golden Goal Indicted and Arrested for 'Coin Fraud' Using Famous Football Figures
A fraudster who deceived people into believing that a famous former soccer player was involved in a coin business, swindling billions of won, has been brought to trial. According to the legal community on the 9th, the Bucheon District Office of the Incheon District Prosecutors' Office (headed by Chief Prosecutor Oh Gi-chan) indicted Kim, the CEO of 'Golden Goal (GDG),' on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (fraud) and other charges, on the 15th of last month. Kim is accused of defrauding 3.246 billion won by falsely claiming that the Golden Goal Coin would generate more than three times the profit within three months if listed on a major cryptocurrency exchange, and even if not, promising to refund the investment between 2021 and 2022. (omitted) The Golden Goal Coin, promoted as part of a soccer blockchain platform, was listed on the Singapore-based global exchange MEXC in June 2022, but was soon delisted. They also recruited soccer players as promotional models to attract investments. However, due to a lockup (restricted trading), investors were unable to recover their funds, leading to suspicions of it being a 'scam coin.' Attorney Pureun “Ian” Hong of Decent Law Firm, who represents the victims, stated, "This case involves a large-scale organized crime operation that utilized influencers, and it is clear that no legitimate business was being conducted while they collected money from numerous people. There are likely more accomplices involved, and thorough investigations should be conducted to recover criminal proceeds and compensate victims until the full extent of the damages is addressed."
2024-05-09 Financial News -
Media Coverage
'Retirement Fund Investment Scam' Targets Even Elderly with Dementia
As the country approaches becoming a 'super-aged society,' fraud crimes targeting the elderly are on the rise. It is particularly alarming that victims in their 60s and older are being targeted for their retirement funds. With most transactions like investing and shopping now conducted online, the elderly, who often lack financial and digital literacy, are increasingly falling prey to cyber fraud, prompting calls for solutions. (omitted) Experts attribute this phenomenon to the gap between improved digital accessibility and the lack of education on cyber fraud prevention. Pureun “Ian” Hong, managing partner at Decent Law Firm, which specializes in new types of fraud cases, explained, "In the current era of high inflation, many elderly people are inclined to invest their retirement savings to prepare for their later years, but without proper education, they easily fall for scams. As traditional offline channels transition to contactless methods, the elderly are left with no choice but to engage in cyber-based investments such as stocks or virtual assets, making it clear that societal measures are urgently needed."
2024-05-03 Seoul Economy
