How do you effectively assign loans or your rights to certain receivables under Korean laws?
Under the Civil Act of Korea (the “Civil Act”), any right to payment held by a party (the “Creditor”) can be assigned to a third party unless there is an agreement between the Creditor and the party who is obligated to make the payment (the “Debtor”) that prohibits assignment of the Creditor’s right. In the event, however, that the Creditor assigns the right to payment to a third party in violation of the agreement for non-assignment, such assignment would still be valid if the assignee was not aware of the non-assignment agreement and also was not grossly negligent when receiving the assignment.
Similarly, if there is an agreement between the Creditor and the Debtor requiring the Creditor to obtain a prior consent of the Debtor for assignment, and the Creditor has made an assignment without obtaining the required consent, the relevant assignment would not be rendered void, provided that the assignee was not aware of the agreement for requiring the prior consent and also was not grossly negligent when receiving the assignment.
As for the method of making an assignment by the Creditor, Korean laws do not prescribe any specific method or means. However, in order for an assignment by the Creditor to be effective as to the Debtor and any third party, it would be required to follow certain method prescribed by the Civil Act.
(i) For assignment to have effect as to the Debtor: The Creditor is required to send a notice to the Debtor for assignment of the Creditor’s right to payment, or obtain from the Debtor a consent to the relevant assignment.
(ii) For assignment to have effect as to any third party: The above notice by the Creditor or the consent by the Debtor must have a fixed-date stamp affixed thereon. This could be done by sending the Creditor’s notice or obtaining the Debtor’s consent by way of a contents-certified mail (i.e., a Korean post office certifying as to contents of a mail and placing a certification date thereon) or receiving the Debtor’s consent that has been notarized.
For any assignment of loans or certain receivables occurred in Korea, it would be advisable to retain advice of a qualified Korea law firm or Korean attorney to ensure that the intended assignment has met the requirements under Korean law.