Corporate Division Advisory Case | Separation of a Core Business Division Through a Physical Division and Attraction of Investment

The client in this case was a domestic mid-sized company that operated a diversified business structure.

As the growth rate of its core business division accelerated and its direction diverged from that of the existing business, the client pursued a physical division in order to establish an independent management system and to attract outside investment.

The client sought to secure stability through a structure in which the parent company would hold 100% of the shares of the newly established entity, but some shareholders raised objections out of concern over changes in the governance structure and the possibility of dilution of corporate value.

Accordingly, the client requested advice from a corporate law attorney on the overall matters of reviewing the legality of the division procedure, responding to the general meeting of shareholders, and managing disclosure and regulatory risks.

The corporate law attorney comprehensively reviewed the requirements for a physical division under the Commercial Act, the corporate group reporting requirement under the Monopoly Regulation and Fair Trade Act, and the taxation issues under tax law, and designed an optimal division structure.

In particular, the scope of asset and liability transfers and the valuation standards were set with precision so that no accounting distortion or tax risk would arise after the division.

The schedule for each stage, including the resolution of the board of directors, the notice convening the general meeting of shareholders, and the creditor protection procedure, was also examined in detail to prevent in advance any procedural defects that could affect the validity of the division.

When, after the announcement of the division, some shareholders expressed concern about a decline in corporate value resulting from the change in the governance structure, the attorney conducted a legal review of the IR presentation materials and shareholder explanatory materials that the management would use.

The attorney coordinated the disclosure wording, explanatory materials, and material event reports so as to maintain a consistent message, ensuring that the purpose and expected effects of the division were clearly conveyed.

Through this, the division agenda was stably approved at the general meeting of shareholders, and the disclosure was made without market confusion or misunderstanding.

During the physical division process, the employment stability of the workers transferring to the newly established entity was an important issue.

The corporate law attorney conducted a legal review of the worker succession procedure and the methods for changing employment conditions, and secured procedural legitimacy in the process of consultation with the union and the members.

In addition, the internal transaction contract structure and control system were arranged in advance so that transactions between the parent company and the newly established entity would not be mistaken for unfair intra-group support.

When dividing a company, it is not merely a matter of separating the organization; rather, a structural decision is made in which legal and financial procedures are closely interconnected.

Therefore, the following key matters must be reviewed comprehensively.

A corporate restructuring process such as a corporate division is not merely an internal decision; it is a complex procedure to which various laws, including the Commercial Act, the Financial Investment Services and Capital Markets Act, and the Monopoly Regulation and Fair Trade Act, apply simultaneously.

In particular, defects or deficiencies at the stages of the board resolution, the approval by the general meeting of shareholders, disclosure, and creditor protection may lead to a lawsuit to invalidate the division or to shareholder disputes, so a preventive legal review in advance is essential.

The corporate law attorneys of this firm legally examine the design of the division structure, the preparation of the plan, and the entire disclosure and registration procedure, and they provide comprehensive support extending to the coordination of shareholder and creditor interests and to risk management.

Through this, the firm prepares strategies that minimize the legal and financial uncertainty that may arise during the division process and that secure corporate credibility and transactional stability.

If you require legal advisory ahead of a corporate division, please feel free to request assistance at any time through 🔗Legal Consultation Reservation.