Practice

Company Establishment in Korea

Company Establishment
in Korea

What we do:

We provide a full spectrum of legal services to foreign investors to establish and operate a company in Korea by:

  • Preparing legal documents for establishing a company: articles of association, employment handbook, employment contracts, notification of foreign investment, etc.
  • Providing guidelines on operating Korean companies under the Korean laws: shareholders’ meeting, Board of Directors’ meeting, shareholders’ agreements, increasing and decreasing share capital, etc.
  • Cooperating with accountants, corporate registry teammates to complete commercial register (court registration and business registration), giving advice on tax issues, receiving relevant visa and permits etc.

Brief Overview of
Foreign-invested Company
Establishment in Korea

Foreign Direct Investment Company (“FDI” Company)

  • The investment by foreigners should be amounting at least KRW 100 million (equivalent to USD 90,000) and either (1) own at least 10% of the total number of voting stocks issued by the Korean company or (2) a foreigner who owns stocks of the Korean company dispatches an executive officer to such Korean company.
  • Although this type of company is considered as a Korean domestic company, there are categories of business that totally exclude or restrict foreign investment under the Foreign Investment Promotion Act, Rules on Foreign Investment, etc.
  • Korean domestic company has five types of companies, such as:
Joint Stock Company
(called ‘Chusik Hoesa’ )		PartnershipLimited
General Partnership Company
(called ‘Hapmyung hoesa’)		Limited Partnership Company
(called ‘Hapja hoesa’)		Limited Company
(called ‘Yuhan hoesa’)		Limited Liability Company
(called ‘Yuhanchaekim hoesa’)
  • The most common type
  • Owned by shareholders
  • Operated by directors
  • all members hold unlimited liability.
  • at least 1 member should hold unlimited liability, the other member(s) can hold limited liability.
  • member’s liability limited to its capital contribution, but each member may jointly and severally be liable to pay the amount of shortfall at certain situations under the laws.
  • cannot be listed.
  • member’s liability limited to its capital contribution, but equal voting rights upon each member, despite the capital injection amount.

The process of establishing a Korean domestic company is as follows:

Foreign Direct Investment Notification at Kotra or Foreign exchange bank

Remittance of Investment Funds

Registration of Incorporation at Court Registry Office

Acquisition of Authorization and Permission

Notification of Incorporation and Business Registration at Tax Office

Opening a Corporate Account at foreign exchange bank

Registration of Foreign Invested Company

  • A branch office is considered as an extension of the parent company; therefore, the foreign parent company is fully liable for the Korean domestic branch’s business activities.
  • Allowed to engage in profit activities, and subject to be taxed on Korean sourced income.
  • Establishment Process: Report the establishment of the branch to a foreign exchange bank, and receive commercial registrations (court registration, business registration)
  • Only allowed for non-commercial activities such as research, preparation of the foreign company.
  • Should report the establishment of the office to a foreign exchange bank and receive business registration.