Chapter 474: Transfer the Ownership of Dingding’s Sales Company in China (1) – Part 1

Gun-Ho tried to change the mood when he realized that President Song was focusing only on business.

“We all have empty glasses in front of us. Let’s drink together and talk about business later.”

Everyone at the table stopped talking for a second and drank liquor.

President Song filled up Attorney Kim’s empty glass with liquor and said, “You are very good at playing golf. You played like a professional golfer.”

“Thank you. I’m flattered, but I was just lucky today.”

“I was told that you are practicing international business law. After GH Mobile successfully goes public, we might issue convertible bonds. I guess we will need your help then.”

“I’m really hoping that GH Mobile succeeds in registering with KOSDAQ soon. It’s my friend’s company after all.”

Gun-Ho said to Attorney Kim while putting a piece of well-done meat on Attorney Kim’s plate, “President Song had used to work for S Group as a vice president before he joined us. I agreed to give him a 5% stock option taking into consideration his work performance. Ever since he joined our company last year, we are experiencing a large increase in our sales revenue already, and our debt ratio has been dramatically reduced.”

“Oh, really? Did you write a contract about it?”

“What contract?”

“I’m talking about the stock option agreement linked to the managerial performance measure.”

Gun-Ho and President Song looked at each other. They seemed to be surprised by the unexpected question.

“I know that you two trust each other, and a verbal agreement is legally binding. However, I always recommend making it in writing so both parties are clear on what they agree to.”

“Oh, we need to write a contract about it?”

“Of course. You want to clearly specify things like the number of shares to be issued, the exercise price payable per share, date of exercise, manner of exercising option, etc. There is a standard form of contract for it. You also want to stipulate the acceptable reasons to terminate the agreement.”

“Reasons to terminate the agreement?”

“Yes, for examples, you can terminate the agreement if the optionee incurred material damage to the company or if the optionee transferred the option to purchase the company shares to a third party.”

“Oh, so the person is not supposed to transfer the option to someone else.”

“Usually no, but they can bequeath to someone by will.”

“Hmm, you are highly knowledgeable, man.”

“Of course, I’m an attorney.”

Attorney Kim finished his glass of liquor before continuing to talk.

“President Goo, an appraisal right cannot be exercised for more than 10% in a regular company, 15% for a public company. For a start-up company, 50% can be done.”

“Is that so?”

“That’s why a small or medium-size company decides to transfer 5% of shares. The problem with it is that they have to give 5% even though the management performance is not good.”

“I think we are making Mr. Adam Castler feel bored by talking in Korean. Let’s talk about it more later.”

“Okay. Let’s drink.”

The next morning, when Gun-Ho went to work in Dyeon Korea, Director Kim called him to give him a report.

“We have received machine no. 13 and 14. They are installed and being tested right now. We sent a request to ship us machine no. 15 and 16.”

“Good work.”

“Ms. Dingding requested to send her more raw materials. We are now shipping 70 tons of raw materials to China on a monthly basis.”

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“Hmm, really?”

“But, there is a problem.”

“What is it?”

“Dingding’s business might be a violation of contract.”

“Who said that? Mr. Adam Castler said that?”

“Dyeon America stated that it is a violation of the joint venture contract to have a sales company in China without their explicit consent. Mr. Adam Castler has been reprimanded by them for it. They are saying that the sales company in China must have been a part of the joint venture with Dyeon America like 50:50. It applies to the entire Asia market according to them.”

“Hmm, really?”

“Therefore, any sales company whether it is in China or in India must be established as a subsidiary company of Dyeon Korea. It cannot be an independent business entity, which is a violation of the joint venture agreement.”

“Hmm, I see.”

Gun-Ho felt a headache. What they claimed about the sales company in China kind of made sense. Gun-Ho rushed into heading to Asan City to find out further.

As soon as he arrived at Dyeon Korea, Gun-Ho asked for Mr. Adam Castler.

Mr. Adam Castler entered Gun-Ho’s office accompanied by the interpreter— Mr. Lee.

“We had a very good time playing golf yesterday, and this morning, I’ve been reprimanded by the head office. I’m so baffled.”

“What did they say exactly?”

“Mr. Vice President Brandon Burke yelled at me over the phone this morning. He said I’ve ignored my duty to give them a notice on important matters, and he also questioned the purpose of my position here.”

“Hmm.”

“I’ve never doubted the legality of the sales company in China. So, I talked to the vice president— Mr. Brandon Burke— this morning, proudly about the possibility of opening a sales company in India since our sales company in China is successful; its sales volume of the products had increased to 70 tons per month. At that point, Mr. Vice President Brandon Burke learned about the sales company in China and started yelling at me. I thought I would become deafened.”

“Hmm. I see.”

“He said that if I don’t resolve the problem with the sales company in China, I would need to go back to the U.S.”

“Is there anything else he talked about?”

“He said that opening a subsidiary company for sales work in India is not a problem as long as it is a subsidiary company of Dyeon Korea. And he said that I should have known it without asking him about it.”

“Hmm, really?”

Gun-Ho and Mr. Adam Castler were sitting in Gun-Ho’s office without saying anything further for a while.

Gun-Ho broke the silence.

“I’ve already invested in China quite a lot. I purchased the storage in addition to the initial investment funds. Moreover, in order to procure customers there, GH Mobile’s workers and GH Parts Company in China have been working so hard. If Dyeon Korea compensates for the labor and investment funds, I will transfer the ownership of Dingding’s sales company to Dyeon Korea.”

“How much do you want to sell it for? I need an exact price, so I can discuss it with the head office.”

“Okay. Please write this down.”

“The current fair market price of the land that I purchased for the storage purpose is 450 million won. The initial investment fund that I put into that company was 100 million won. You can easily verify it by looking at its business license issued by the Chinese government. The price of the land is recorded lower than the price that I actually paid for, so I could save some taxes. I will get you the appraisal done by an independent appraisal organization with public confidence. Also, I want 300 million won for goodwill. That company already developed extensive clientele in China.”

“How much would it be in total then?”

“It’s 850 million won.”

“The prices for the land and the initial fund that you invested in seem to be reasonable and understandable. However, the price of goodwill seems to be overpriced.”

“The workers of my other companies devoted all of their time and energy to develop the market in China for quite a while solely for that sales company. If we get into the Indian market right now, and if we purchase land instead of leasing one, don’t you think it would cost that much?”