[THE KOREA TIEMS_박주홍 변호사] Do startups need legal advice?

47858c2a9f594169a769a39fa4d2f07dBy Park Ju-hong

In Korea, many start-ups, such as those involved in block-chain technology, are forming in the flow of the fourth industrial revolution. Most of these companies begin only with a name and a plan. And most of them think, “legal advice is not a problem because our company is just a startup.” But this is a really bad idea. From the very beginning, you should consider what kind of company you are going to be. If an investor puts money into a company at its founding, there should be a clear and explicit investment contract. If investment contracts are not in violation of the Articles of Incorporation, or if the capital comes from an organization based overseas, it is necessary to check whether it is an acceptable investment under domestic law or not.

If your company is already up and running, what should you check next? It’s easier to start a business today than it was in the past, but it’s also easier to duplicate a business model or technology. We can use the patent system to prevent this. Many people believe that patents are only available for special skills, but the content of services or a service model provided on the Internet or via applications through particular business models can also be registered as patents. In other words, applying for a patent for the business model itself, and being awarded it, you can strengthen your position by making it impossible for others to copy the way you operate. However, in this process, if the structure of the business model is not defined precisely in the patent application, it is often the case that the competitors can get ideas to create similar business models by cribbing from your patent. In order to prevent this from happening, you should have a lawyer review your patent application prior to filing. By thoroughly refining the patent application method and content through legal review, you can minimize risk.

And in Korea, labor law issues such as a minimum hourly wage, a 52-hour work week, and so on are also emerging. These will not be significant problems for a one-person startup, but from the moment you start to hire an employee, even if that worker is also a business partner with the founder, it can become a big headache for the employer. If you are violating labor laws by mistake, penalties and fines are a problem. Sometimes, even if you have a good business model, your business may fail due to a bad reputation resulting from violating Korean labor laws. You may think you are insensitive to reputational damage because yours is a small company, but small companies find it difficult to recover once they get hammered. Therefore, you should be careful not to fall into any legal traps or get caught up in controversy.

In addition, many contracts are required for the company to function. From office lease contracts and shareholder agreements, to contracts with customers and investors, even office cleaning contracts, these keep coming one after another. If you have a lawyer look over each of them prior to entering into these contracts, you can minimize your legal risks.

Smaller companies are more vulnerable to threats. Instead of thinking that it’s okay because you’re a small company, getting good legal advice is like having insurance ― it protects your company from unforeseen circumstances. Ultimately, that’s better for the growth of your start-up.

Park Ju-hong works for HMP Law as a lawyer. His major field is finance and the Fourth Industrial Revolution technology. The thoughts expressed in this column do not necessary reflect those of HMP Law.


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