Chapter 1 Introduction

1.
M&A Process Overview 2
2.
Basic Structure of a Stock Purchase Agreement 12
3.
Basic Structure of Shareholder Agreement 16
4.
Basics of Contract Writing 21

Chapter 2 Stock Purchase Agreement

1.
Introduction and Parties 28
2.
Expert 31
3.
Definition 33
4.
Object of sale and sale price 64
5.
Transaction closed 81
6.
Prerequisite 89
7.
Representations and Warranties 108
8.
Confirmation 175
9.
Compensation or Indemnification 203
10.
Release 252
11.
Other 271
12.
Signature 285
13.
Attachment 287

Chapter 3 Shareholder Agreement

1.
Introduction and Parties 290
2.
Expert 298
3.
Definition 300
4.
Company Management 303
5.
Disposition of Stocks 332
6.
Return on investment 391
7.
Compensation for damages, etc. 417
8.
Validity of Contract 423
9.
Other 428
10.
Signature 438
11.
Attachment 439

[Sample Stock Purchase Agreement] 442
[Shareholder Agreement Sample] 460

preface

This book covers the basic structure and content of mergers and acquisitions (M&A) contracts, particularly stock purchase agreements and shareholder agreements.
This book was written with the primary readers in mind: corporate practitioners engaged in M&A-related work, legal professionals providing legal advice or resolving related disputes, and law school professors and students who are researching and interested in this topic.


I first encountered M&A about two years after I started working at a law firm.
As a new lawyer, everything was new to me and I didn't really know what M&A was.
I was assigned to the due diligence task without even being familiar with the word "due diligence," and I learned the job by looking at examples of due diligence reports and asking questions to senior lawyers.
As my seniority increased, my scope of work expanded to include drafting contracts, negotiating, and reviewing transaction structures. However, my method of learning the job was mainly through referencing documents previously written by senior lawyers and receiving their knowledge and experience in an apprentice-like manner.
Thanks to the help of excellent senior lawyers, I was able to navigate the vast swamp of M&A. However, I constantly had doubts about whether I was seeing the whole forest and whether I was missing any issues, and I couldn't feel a firm grasp on the matter.
While drafting the contract, I came across a book titled “Model Stock Purchase Agreement with Commentary” published by the American Bar Association, and I thought it would be nice to have a book like this in Korea that systematically organizes M&A contracts.

As you know, the M&A contracts that are commonly seen in practice today are based on contracts used in the US and UK, and were developed by modifying them to suit the realities of Korea.
Although simpler contract forms are still used in M&As between small domestic companies, the use of Anglo-American contracts like the one above can be seen as becoming somewhat common.
Although a considerable amount of time has passed since these contracts were first introduced, the number of cases has increased, and a considerable amount of academic research and court precedents have accumulated on individual clauses and issues, it is difficult to find a book that analyzes the entire contract clause by clause.
In fact, I think many people working in the field would agree on the need for a book like this.
However, because they were busy with their work day after day, unable to afford the time, or because they did not want to share their work secrets with others, or because they were not sure if what they knew was accurate because it was fragmentary, they could not bring themselves to write a book.
Fortunately, I had some free time to review relevant literature and case law extensively and to organize my experiences and thoughts.
That's why this book is the product of work that anyone can do, but no one has done, and I feel proud that I was the one who started it.

M&A is complex and difficult.
Lawyers face and must resolve numerous legal issues in the process of advising and supporting M&A.
Since it is basically targeting companies, you must be familiar with corporate law, and since it involves drafting contracts, you must be familiar with contract law.
In addition, for matters related to securities, investments, and listed companies, you should have a certain level of understanding of the Securities Act; for matters related to company employees, you should have a certain level of understanding of the Labor Act; for matters related to the impact of transactions on market competition, you should have a certain level of understanding of the Competition Act; and for matters related to the impact of transactions on market competition, you should have a certain level of understanding of various laws that apply depending on the industry in which the company is operating.
Accordingly, this book has attempted to comprehensively analyze the legal issues that may arise in each clause of an M&A contract.

We also wanted to cover the things to keep in mind when drafting an M&A contract from a practical perspective.
A contract is a promise by which the parties agree to bind themselves, and is nothing less than a law that governs the relationship between the parties.
Therefore, how you write a contract is very important.
However, the content of a contract varies depending on the status of the parties and the purpose of the contract.
Moreover, since the content of a contract is determined through negotiation between opposing parties, even if the content is the same, there may be subtle differences depending on which party's position and interests are represented.
It will be helpful to know what to include in a contract and how to include it, how it affects its performance, and which provisions will be advantageous to you in the event of a dispute.

While writing the book, I couldn't help but feel a sense of crisis due to the rapid advancement of science and technology.
This is because I intuitively felt that we were entering an era where big data would allow us to analyze vast amounts of information that individuals alone could not, and artificial intelligence would allow us to easily draft contracts by simply entering key terms and conditions.
I've often wondered whether books written by individuals are truly of high quality and can be of help to people, and whether relying on big data and artificial intelligence might be a more efficient option in keeping with the times.
Nevertheless, I was able to finish the book because I believed that computers cannot match the insight of a living person when it comes to drafting the finer details of a contract or making legal judgments on difficult issues on the borderline.

The sample contract clauses included in the book were newly created by compiling and referencing publicly available materials and are not contracts actually used.
Additionally, the contents of the book are entirely the author's personal opinions and have nothing to do with the opinions of the organization to which the author belongs or its attorneys.
However, I am infinitely grateful to the excellent lawyers in my organization and the lawyers I met as opposing counsel, who gave me the experience to write this book. Any errors in the content are entirely due to the author's insufficient research.
While M&A requires relevant theories and knowledge, the experience and expertise gained through handling various transactions over a long period of time cannot be ignored.
In that sense, the book can only be completed if the experiences and expertise of numerous experts who have performed M&A before the author are reflected in its contents.
We hope that the book will continue to evolve through collective intelligence, and please send your comments about the book to sm0215@gmail.com.

This book would not have been possible without the consideration of my loving family.
I would like to express my gratitude to my wife and two sons for their continued encouragement and support, which allowed me to write books during the golden years of my life in the United States.

August 2024
Kim Seong-min