Korea Puts Teams Inside the Definition of a Business, and Leaves the Price Floor

For Years People Only Showed Up Inside a Parenthesis

Korea’s merger filing guideline defines a business as a set of property rights organized and functioning as an integrated whole for the company’s business purpose. Under that sentence sit the examples: sales rights, which the text says include the organization, personnel and dealer contracts attached to selling, plus patents, trademarks and other intangible property. People appeared once, inside a parenthesis, as an accessory to a sales channel.

The draft published on September 9 adds a clause of its own. Where organized personnel and the technology or knowledge they hold combine to perform a core function of business activity, that personnel is included in the business. The Korea Fair Trade Commission takes comments until September 30, then finalizes the notice after deliberation by its full commission.

The transaction being targeted is named in the notice. An acqui-hire, in the regulator’s wording, is a deal that produces the same effect as a business transfer by signing personnel-transfer and cooperation agreements in place of a conventional transfer contract. No equity moves, so the share-acquisition trigger stays quiet. No assets move, so the business-transfer trigger was not obviously reached either. Microsoft hiring the team behind Sequoia-backed Cove in March, with the product shutting down on April 1, is the version of this that Korean founders read about most recently.

The Won Threshold Stayed Put in the Second Condition

Read only the headline and it sounds like moving a team now means filing. The text does not say that.

The current substantial-portion clause is a single block of prose. The draft splits it into two numbered conditions and requires both to be satisfied. The first offers three routes: the transferred part can stand on its own as an independent business unit, or the acquirer becomes able to carry on the same business activity the seller had been running, or the seller’s revenue falls substantially. The acqui-hire language went into the middle route, which is new.

The second condition is money, and it was left alone. The transfer amount has to reach at least 10 percent of the seller’s total assets on the balance sheet as of its most recent fiscal year end, or at least 10 billion won. Move five engineers for less than that and satisfying the first condition does not produce a substantial-portion transfer.

The outer thresholds did not move either. Article 11 of the Monopoly Regulation and Fair Trade Act, read with its enforcement decree, sets the filing-obligated company at total assets or revenue of at least 300 billion won and the counterparty at 30 billion won. A second route exists for targets below that size. Article 11(2) requires a filing when the total value paid or contributed for the deal exceeds an amount fixed by decree and the target operates at a substantial level in Korea, such as selling goods or services domestically or holding and using Korean research facilities and researchers. Both of those have to hold at once.

Consideration Scattered Across Contracts Gets Added Back Up

The valuation rule is the part closest to how these deals are actually papered.

The existing text assumes one comprehensive transfer agreement with one payment attached. Acqui-hires are not shaped that way. Money for the people, money for releasing a non-compete, a license fee filed under technology cooperation, each in a different document, each small on its own.

The draft instructs that for organized personnel, all economic consideration paid to the transferring company as the price of the deal is included regardless of what it is called: cash, benefits in property, anything else. Two examples are attached in the notice, and Yonhap reproduced the same pair: consideration for waiving rights related to the transferred personnel, and license fees for intellectual property needed to run the business. The 10 billion won line from the previous section did not change. What goes on the scale did.

Shutting the Startup Down Becomes an Act of Implementation

The quietest edit is in the implementation clause, and it is the one with teeth.

Today an act of implementation under a business transfer agreement means completing payment, and even before payment, delivery for movables or registration where registration is required, as with real estate or trademarks. The draft adds one more case: for organized personnel, the transferring company discontinuing the business it had been running.

Why that matters shows up only when you read it next to Article 11. A business transfer where at least one party is a large-scale company has to be filed before the combination date, and Article 11(8) bars anyone in that pre-filing category from performing an act of implementation until the KFTC’s review result is delivered. Review runs 30 days from filing and can be extended within a further 90-day range if the commission considers it necessary.

So in a deal where a large acquirer takes the team, the date the startup turns its service off now sits on the regulatory clock. Payment does not have to be complete. The moment the seller stops running its business is the moment counted. Teams that schedule the transfer announcement and the shutdown notice in the same week are, without checking the filing date first, scheduling a violation.

Two Lines to Watch in the Final Text

The supplementary provisions state that the notice takes effect immediately on the date it is issued and applies to combinations whose filing trigger arises after that date. Deals in negotiation now are not caught retroactively. Deals that trigger after the notice lands get no grace period either.

For a founder receiving an acqui-hire approach, the work right now is inventory. How many separate contracts carry consideration and under what names, whether their sum lands above 10 percent of total assets or 10 billion won, and on what date the company is scheduled to stop operating. The third item usually appears in an internal announcement or a sunset notice long before it appears in a contract.

The KFTC also says the revision was built on close information exchange with competition authorities in the European Union, Germany and the United Kingdom, and expects coordination on this deal type to tighten. For acquirers running the same playbook across several jurisdictions, that is the sentence worth pricing in.

The draft is still a draft. Comments close on September 30. When the final text lands, two lines are worth reading first: whether the substantial-portion test keeps both numbered conditions, and whether the 10 billion won figure is still there.