Company Law of South Korea

Topics: Corporation, Stock, Types of business entity Pages: 27 (8700 words) Published: November 3, 2012
1. Jusik Hoesa (Stock Company)
Jusik Hoesa is the only form of corporate entity that is allowed to publicly issue shares. The vast majority of corporations in Korea chose the Jusik Hoesa corporate form. It is also the most common corporate form that foreign companies chose for their subsidiaries.

2. Yuhan Hoesa (Limited Liability Company)
Yunhan Hoesa is a closely held company that is prohibited from having more than 50 shareholders. In recent years a few foreign companies have chosen the Yuhan Hoesa, however, most foreign companies are advised and will form a Jusik Haesa. A few companies, recently, have chosen this form because of possible U.S. tax benefits.

3. Hapja Hoesa (Limited Partnership)
In a Hapja Hoesa one or more partners may have unlimited liability and one or more partners may maintain limited liability. The entity, as all incorporated entities, is responsible for corporate taxes.

4. Hapmyeong Hoesa (Partnership)
In a Hapmyeong Hoesa two or more partners form the partnership. The partners must maintain unlimited liability. The entity, as all incorporated entities, is responsible for corporate taxes.

1. What is the legal system (civil law, common law or a mixture of both)? Historically, the laws of South Korea were influenced by the European civil law system. US laws have influenced more recent legislation.

Registration formalities
The following activities, among others, must be completed to incorporate a joint stock company: * Draft the articles of incorporation (articles).
* Subscription of shares by the promoter(s) and other subscriber(s). * Payment of subscription money.
* Investigation by the directors and auditors into whether the incorporation has complied with applicable laws and the articles, and investigation by the appointed inspector or appraisers into whether any elements of abnormal incorporation, such as promoters' special benefits, contribution in kind and transferred property in advance, have been duly assessed and dealt with in accordance with the law. * Electing director(s) and corporate auditor(s).

* Registration of the incorporation at a competent commercial registry. A business registration certificate from the local tax office must then be obtained.

Rights attaching to shares
Restrictions on rights attaching to shares. Restrictions on rights attaching to shares will be detailed in the articles and can include restrictions on: * Voting rights.
* Rights to a dividend.
* Rights to receive a distribution of assets on liquidation. * Rights of redemption and conversion.
In addition, the voting rights of shares where the shareholder holds more than 3% of the total outstanding voting shares are restricted in the election of corporate auditor(s). The transfer of shares may be subject to an approval of the board of directors in accordance with the articles. Automatic rights attaching to shares. Unless otherwise provided by the articles, shares contain automatic rights to: * Receive a dividend.

* Vote at a meeting of shareholders.
* Receive remaining assets upon liquidation.
However, certain shareholder's rights may only be enforceable once a certain percentage of the share capital is owned, for example the right to: * Call a shareholders' meeting.
* Propose agenda items at a shareholders' meeting.
* File derivative claims against directors and corporate auditors. * Demand the removal of a director.
* Inspect accounts.

Management structure
A company must have at least three directors, including one representative director and an in-house statutory auditor, unless the company has a total capital of less than KRW1 billion (as at 1 November 2011, US$1 was about KRW1,109), in which case there only needs to be one or two directors (Commercial Code).

Management restrictions
There are no nationality restrictions on directors or managers. Directors' and officers' liability
Directors have a fiduciary duty to the...
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