Corporate Legal Advisory Attorney Assistance Case | Advisory on the Transfer of Management Control through the Issuance of New Shares

The client in this case was a domestic mid-sized company whose principal business areas were infrastructure development and technology solutions.

As profitability deteriorated due to changes in the market environment, the company simultaneously pursued restructuring centered on its core business and the attraction of outside investment.

Because it was difficult to expand the business through internal funds alone, the company decided to attract strategic investment through the issuance of new shares on the condition of transferring part of its management control.

As complex procedures such as the change of governance structure, negotiation of the investment agreement, and regulatory response were anticipated, the client requested the assistance of a corporate legal advisory attorney.

The corporate legal advisory attorney comprehensively designed the method of issuing new shares, the adjustment of the rights of existing shareholders, and the change in the composition of the board of directors, in accordance with the investment structure accompanied by the transfer of management control.

Throughout the entire transaction, the attorney closely reviewed the relevant provisions of the Commercial Act, the Monopoly Regulation and Fair Trade Act, and the Financial Investment Services and Capital Markets Act.

Through this, the attorney prevented in advance the possibility of disputes arising from unfair trading or share dilution.

As the investor demanded management participation and post-transaction management authority, the corporate legal advisory attorney prepared a contract structure capable of maintaining the balance of the governance structure.

The attorney carefully reflected key provisions, such as the use of funds, the business direction, and the composition of the board of directors, in the new share subscription agreement and the shareholders' agreement.

As a result, the attorney secured both the stability of the transaction and the predictability of future operations.

Because the client was engaged in infrastructure-related business, industry licensing and review by the competition authority were essential.

The corporate legal advisory attorney managed the domestic and overseas approval procedures in parallel and closely reviewed the risks at each stage.

Through this, the attorney secured approval without delay in the review and minimized the legal risks related to disclosure.

As in this case, where a transfer of management control through the issuance of new shares is pursued in order to restructure core business and attract outside investment, legal and governance risks beyond mere capital raising may arise.

Accordingly, a company should carefully review the following matters in advance.

1. Review of the Reasonableness of the Purpose of Issuance

2. Securing the Propriety of the Procedure

3. Management of Disclosure and Regulatory Risk

As in the case above, where a transfer of management control through the issuance of new shares is pursued in order to restructure business and attract outside investment, complex legal and governance risks beyond mere capital raising are involved.

For example, various issues must be managed at the same time, such as the protection of existing shareholders’ preemptive rights, changes in the voting rights structure, the coordination of contract terms with investors, and industry regulation and disclosure requirements.

If such a process is handled solely within the company, it is difficult to completely prevent procedural defects or the possibility of disputes, so it is advisable to obtain the assistance of an experienced attorney.

Our firm organizes a collaborative framework of experts in each field, including M&A, capital markets, regulation, and tax, in order to comprehensively manage the risks of the transaction as a whole.

In addition, the firm establishes a systematic and tailored strategy so that legal stability and governance balance can be secured at every stage, including the structuring of the issuance of new shares, contract negotiation, and regulatory response.

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