✔️ U.S. Investments: Why Does Due Diligence Come Before the Contract?

In recent years, investments in the U.S. market by Korean VCs and companies have increased significantly. However, investments in the United States differ greatly from domestic investments in terms of the legal environment and contract structures. As a result, they come with legal, tax, and regulatory risks alongside the potential for high returns.

In particular, the multi‑agreement structure (SPA, IRA, Voting Agreement, etc.) and the complex preferred stock terms require interpretation of provisions and negotiation strategies that are unfamiliar to Korean investors.

Decent Law Firm’s international practice group, composed of attorneys educated at institutions such as New York University and the University of Michigan, provides highly specialized and reliable advice throughout the entire U.S. investment process.

✔️ Contract Structures in U.S. Investments

Unlike typical transactions, which are usually executed under a single investment agreement, U.S. investments are generally structured as a package of multiple contracts.

• Stock Purchase Agreement (SPA): Sets out the basic terms and conditions of the share purchase.
• Investors’ Rights Agreement (IRA): Defines investors’ rights, such as information rights and rights of first refusal.
• Voting Agreement: Regulates voting matters, including the composition of the board of directors.
• Amended and Restated Certificate of Incorporation: Reflects changes to the company’s governance structure, including the rights of preferred stock.

Because these layered agreements require an integrated understanding of the rights and obligations across all documents, review by a specialist well‑versed in U.S. corporate law and market practice is essential.

In particular, preferred stock—the backbone of U.S. venture investments—includes sophisticated investor protection mechanisms rarely seen under Korean corporate law, such as liquidation preferences and anti‑dilution provisions.

✔️ The Power to Detect Risk: Due Diligence Checklist

The success or failure of an investment depends on how effectively you identify and manage hidden risks. Decent’s international practice group conducts systematic due diligence focusing on several key areas.

· Legal Due Diligence

1. 1. Corporate Governance : We review the company’s charter and bylaws under the governing law of incorporation (e.g., Delaware), the cap table, board minutes, and related documents to assess legal stability and transparency in decision‑making structures.
2. 2. Core Intellectual Property (IP) : We clarify the validity and ownership of patents, trademarks, and other IP that are directly tied to the company’s value, and review license agreements and employee invention agreements to preempt potential disputes.
3. 3. Regulatory Compliance : For bio/healthcare companies, we examine FDA approval status; for financial‑related businesses, SEC filing obligations; and for matters implicating national security, whether the transaction is subject to CFIUS (Committee on Foreign Investment in the United States) review, thereby addressing regulatory risks in advance.

· Financial Due Diligence

Based on a deep understanding of U.S. GAAP, we verify the reliability of the company’s financial statements. In particular, we focus on the appropriateness of revenue recognition, treatment of stock‑based compensation, and potential tax issues, all of which can significantly impact valuation.

✔️ Decent: Your Legal Partner for Successful Investments

Investing in U.S. companies is a highly specialized area where sophisticated legal strategy must be combined with meticulous negotiation.

A single provision in a contract can create a value gap of several million dollars, and one unexpected regulatory issue can derail the entire investment.

Decent Law Firm’s international practice team draws on the deep expertise of attorneys with substantial U.S. market experience to secure investor-friendly terms and effectively control latent legal risks.

U.S. investments may be complex and unfamiliar, but there is no need to hesitate. With highly qualified attorneys who possess extensive international experience and practical know‑how, you can open the door to safe and successful cross‑border investments.