In July 2021, Hwaum Law Office provided legal advice to Korean Startup Company A in connection with the preparation of an English-language Term Sheet for an investment agreement with a foreign venture capital (VC) firm.
Compared with entering into an investment agreement with a Korean venture capital firm, transactions involving foreign VC investors require consideration of additional legal and structural issues. For example, under the Korean Commercial Act, shareholders are generally granted statutory preemptive rights to subscribe for new shares. In contrast, in the United States, preemptive rights are generally not provided as a statutory shareholder right in many states. Where the parties wish to ensure shareholders have such rights, the relevant provisions may therefore need to be expressly included in the company’s Articles of Incorporation or contractual documents.
Hwaum prepared the Term Sheet with careful consideration of these differences between Korean and foreign investment practices and legal frameworks. In addition, from the perspective of Startup Company A as the investee, Hwaum identified provisions that could potentially place the company at a disadvantage if included in the Term Sheet and provided guidance on the associated risks.
Based on this review, Hwaum prepared a customized Term Sheet tailored to the specific interests and circumstances of Startup Company A, helping the company navigate the investment process with a foreign VC investor more effectively.
Author: Attorney Hee-jae Choi