Japan–Korea Cross-Border Acquisition: Legal Due Diligence for the Korean Subsidiary

Client Information

Corporate Client / Acquirer
 

Case Details

A Japanese manufacturing company sought to acquire its long-term Korean partner through a share transfer structure to ensure stable supply-chain operations.

Because Japanese M&A transactions often raise issues involving related-party transactions, unwritten commercial arrangements, and change-of-control risks, the client engaged Decent Law Firm’s International Practice Team to conduct a full-scope legal due diligence.

The Korean target operated mainly as an import-distribution business, but the Japanese side identified several areas of concern—including potential related-party dealings, financial soundness, oral contracts with key partners, and latent labor liabilities—requiring comprehensive verification. Decent conducted a Full-Scope Legal Due Diligence on these matters.

Leveraging our experience collaborating with Japanese law firms, Decent applied a cross-border DD standard tailored to Japan-origin acquisitions.

We prioritized the examination of (i) oral contract structures with major customers, (ii) potential related-party transactions, (iii) the target’s zero-debt financial structure, and (iv) retirement benefit reserves and other contingent liabilities.

To secure post-acquisition business continuity, we advised including a consulting-agreement clause for the existing representative. Additionally, we reflected critical representations and warranties in the SPA—such as the absence of related-party transactions, accuracy of the shareholder registry, and safeguards against double transfer—to mitigate acquisition risks identified by the Japanese side.