Investigation

Investigation (수사/搜査, 조사/調査 as the case may be) means, among others, i) in criminal procedure, to arrest a culprit and examine with authority any wrong doings of the accused for the purpose of law enforcement, or ii) in business transactions, to examine the corporate value with due diligence.

All the year around in 2011, the investigative powers of the police and prosecutors have been a unprecedently hot issue because these two law inforcement authorities are eager to have an initiative and controlling power in the course of investigation of a crime.

Key words
investigation, criminal procedure, M&A, due diligence

In Criminal Procedure
On June 30, 2011, the National Assembly passed a bill to amend the Criminal Procedure Act that Police is entitled to start investigation of crime while the prosecutor can direct the police investigation subject to the Presidential Decree.

On December 27, 2011, the State Council deliberated and resolved the Presidential Decree of the newly amended Criminal Procedure Act. It establishes areas where the police will be under public prosecutors’ command in investigating cases while the police has rights to open investigations without orders from prosecutors.

Under the modified plan, all police investigations will be conducted according to written directives issued by public prosecutors. However, the police will be given the right to ask for new directives when deemed necessary. Regarding the police’s right to conduct investigations internally without orders from the public prosecutors, the new decree states that the police will be allowed to continue conducting such investigations, but will be required to submit documents and evidence to the prosecutors after the related procedures are closed.

In Business Transactions
Investigation is usually conducted in the course of such business transactions as mergers and acquisitions (M&A), privatisation or similar corporate finance transaction normally by a buyer.

In this connection, due diligence shall be committed by an independent accountant or other specialist for:
 * the examination of a potential target for M&A, etc.
 * a reasonable investigation focusing on material future matters.
 * an examination being achieved by asking certain key questions, including, do we buy, how do we structure the acquisition and how much do we pay?
 * An examination aiming to make an acquisition decision via the principles of valuation and shareholder value analysis.