1. The Client's Situation
A manufacturing company discovered, in the course of an internal review, that it had lent several hundred million won in funds to an external corporation having a special relationship with its largest shareholder. This transaction was a situation that could run afoul of the provisions of the Commercial Act prohibiting the extension of credit to specially related persons, and in the event of a violation, both the company and its directors could face serious legal risks of criminal punishment and the imposition of administrative fines (penalty surcharges). In addition, since occupational breach of trust could also become an issue, it was a matter in which external reputation and the liability of management were intertwined in a complex way.
2. Your Legal Team's Advice
Considering that this was a matter requiring urgent response, Your Legal Team, after organizing the facts, promptly reviewed whether there was a violation of the relevant statutes, the possibility of applying exception provisions, the risk of criminal and administrative sanctions, and disclosure-response measures such as the board of directors and the audit report. Judging that the likelihood of illegality was clear, we proposed phased measures as a strategy to minimize risk—recovery of the funds, reinforcement of collateral, and reorganization of internal control procedures—and closely supported the overall execution.
3. Result
With the assistance of Your Legal Team, the client recovered the entire loan amount, completed the necessary disclosures, and we recommended that it voluntarily report the corrective action to the supervisory authority. Through this, we presented a method by which the matter could be concluded without criminal complaint or the imposition of penalty surcharges, and we presented an alternative through which the company's external trust could also be quickly restored. In addition, we established an internal control system that can prevent similar risks in the future.