Title1
Foreign investors can establish joint venture in Korea through
acquisition of newly issued or outstanding stocks. Under Korean
commercial law, there are four types of joint venture according
to the scope (unlimited or limited) or the nature (direct
or indirect) of the liabilities borne by the investors.
| Partnership |
| Limited Partnership |
| Corporation (Stock Company) |
| Limited Liability Company |
More than 95% of joint ventures in Korea are corporation due
to its features of indirect and limited liabilities. |
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Title1
| A foreign company intending to
establish a subsidiary company in Korea (hereinafter
referred to as ¡°the foreign investor¡±) is required to
perform the following procedures: |
1. File an application for approval (acceptance of report)
of foreign investment with a head office of a bank operating
in Korea (¡°Bank Registration¡±).
This application should be filed with the Ministry of Knowledge
Economy (MKE) instead of a bank if the business to be performed
in Korea falls on the list of the business categories in which
a foreign investment is restricted.
2. Remit paid-in capital of the subsidiary company to a temporary
account at the bank that accepted the foreign investment report
(at any bank if the foreign investment is approved by the
MKE). The paid-in capital cannot be withdrawn from the aforementioned
bank account until the completion of the court registration
process (it normally takes a few days or more).
The total amount of the reported investment does not initially
have to be contributed to establish the company. However,
a minimum amount of Korean Won 100 million shall be contributed
at the time of incorporation.
Contribution of capital in addition to the initial paid-in
capital should be registered with a court through the procedure
of a capital increase at the time it is remitted to Korea.
3. Having completed above procedures (not including full contribution
of capital), the foreign investor shall establish a company
in accordance with the Korean Commercial Code, and register
the company with a local court (¡°Court Registration¡±).
Directors/Auditor
Under the Commercial Code, a company
should have at least one representative director, three
directors (including the representative director) and
a statutory auditor for a minimum capital in excess
of KRW 1 billion.
If the initial capital amount is less than that, one
or more directors (including the representative director)
and one statutory auditor (optional) is required. The
statutory auditor is an in-house auditor and distinct
from the independent CPA. There is no restriction on
the nationality of directors or the statutory auditor.
The maximum term of office for directors and auditor
is three years and two years, respectively, under the
Commercial Code. The term may be renewed later in accordance
with resolution of the shareholders¡¯ meeting. |
Articles
of Incorporation
Articles of Incorporation shall
be submitted at the time of applying for the court registration.
Once the proposal is accepted, we will provide you with
a standard form of Articles of Incorporation, which
is prepared in accordance with the Commercial Code of
Korea for your review or comments. |
Promoters
At the time of incorporation,
two or more promoters in addition to the foreign investor
shall be named as subscribers to purchase one or more
of the corporation¡¯s share. However, once the incorporation
is completed, the shares subscribed by the promoters
may be immediately transferred to other parties (say,
the foreign investor). Proposed directors of the Korean
subsidiary may also be the promoters. |
Registration
Taxes
For the court registration, taxes
(mainly registration tax and education surtax) and other
miscellaneous charges shall be paid at the time of application.
The registration tax and education surtax will be 0.4%
and 0.08% respectively of the paid-in capital to be
registered with the court. Where the head office is
to be located in a major city, however, the tax rates
are three times the normal rates under the government's
de-centralization program. In addition, a national treasury
bond equivalent to 0.01% of the paid-in capital shall
be purchased at the time the capital is initially registered
with the court. (It is required for the foreign investor
to provide advances amounting to 1.5% of the paid-in
capital for speedy proceeding). |
4. Register the foreign subsidiary with a tax office (¡°Tax
Registration¡±)
Upon completion of the court registration procedure, the foreign
investor shall report establishment of the Korea subsidiary
to and have it registered with the relevant tax office.
5. Register the Korean subsidiary as a foreign-invested company
with the bank (¡°Bank Registration¡±).
Upon completion of inducement of the capital fund, the Korean
subsidiary shall be registered with the bank as a foreign-invested
company. For the registration, a report on inducement of foreign
capital registered with a court should be filed together with
the Articles of Incorporation.
It takes about three weeks to complete the procedures once
we receive all of the necessary documents and information
as described in the following chapters. In order to avoid
any unintended delay, we also request the foreign investor
to fax the documents for our review prior to legalization.
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Each of the steps summarized in the foregoing chapter requires
various forms of documentation. Some of the documents shall
be submitted to several different authorities. These documents
will be reproduced by us and submitted to the relevant authorities.
Therefore, the foreign investor is only required to provide
us with one copy of each of the required documents.
All of the required documents and information should be prepared
in English by the foreign investor. We will be responsible
for translating all required materials into Korean for submission
to the concerned authorities in Korea.
The required documents may be classified into two categories,
i.e., documents that should be prepared by the foreign investor
and documents that should be prepared by our firm (¡°Lian¡±)
based on the information provided by the foreign investor
as listed below:
Documents to be prepared by
the foreign investor
| Power of Attorney (for Bank and
Tax Registration) |
| Power of Attorney (for Court Registration) |
| Certificate of Corporate Nationality
(for Court Registration) |
| Certificate of Resolution of the
Board of Directors (for Court Registration) |
| Certificate of Signature (for Court
Registration) |
| Acceptance of Election as a Representative
Director, director and an Auditor (for Court Registration) |
| Application for Registration of
Seal Impression (for Court Registration) |
| A certified copy of the resident
registration of the Representative Director, Directors
and a Statutory Auditor, if they are Korean or a copy
of passport and driver license (showing address) for
a foreign national (for Court Registration) |
| A copy of the lease agreement of
the Korean subsidiary office (for Tax Registration) |
Among the documents listed above, Items 1, 2, 3, 4, 5, 6,
7 and 8 should be duly notarized by a notary public. In the
case where any of the directors (including the Representative
Director) of the Korean subsidiary and the promoters is a
Korean, then the power of attorney executed by such person
should be notarized in Korea. All of the documents should
be carefully prepared and mailed to our office. The attached
exhibits (sample blank forms) demonstrate how to prepare the
documents. The foreign company should either re-type the exhibits
or use the enclosed disc containing electronic copies of the
exhibits. Simply filling in the blanks of the sample exhibits
will be unacceptable. Exhibits should be free of edits and
corrections.
Documents to be prepared by
Lian
| Articles of Incorporation (For Court
Registration); |
| Foreign investment report (for Bank
Registration); |
| A copy of a bank¡¯s acceptance of
the foreign investment report (for Court Registration); |
| A certificate of foreign exchange
purchase (for payment of paid-in capital) issued by
the bank which accepted the foreign investment report
(for Court Registration) |
| A certified copy of court registration
of the Korean subsidiary (for Tax Registration); |
| Beginning balance sheet of the Korean
subsidiary (for Tax Registration); |
| A sketch of Korean subsidiary location
(for Tax Registration); |
| A certificate of registered seal
impression (for Tax Registration); |
| Application for registration of
a foreign-invested company (with MKE) |
In addition to the above listed documents, various other kinds
of documentation will be prepared by Lian based on the information
to be provided by the foreign company as summarised in the
following chapter. Therefore, the foreign investor is required
to provide Lian with the information in a timely and precise
manner. |
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| Information to be provided by Foreign Investor
to Lian |
Information regarding the
foreign investor
| Corporate (or trade) name/nationality |
| Address |
| Major business objectives and major
products |
| Amount of shareholders¡¯ equity and
total assets |
| Sales volume for the most recent
year |
| Details of transactions made with
Korea, if any |
| Number of employees |
Information regarding the proposed
Korean subsidiary
| Trade Name (in Korean and English); |
| Proposed date of establishment and
fiscal year; |
| A broad definition of the scope
of business intended to be carried out in Korea; |
| Classification of the business under
the Korean Standard Industrial Classification |
| Total amount of paid-in capital |
Total Amount of Shares to be Subscribed
by the Foreign Investor:
(a) Kind of shares:
(b) Par value:
(c) Number of shares:
(d) Amount to be subscribed for the shares: |
| Address |
| Proposed number of employees (expatriate
and local) |
| Objectives of the Business Intended: |
| Description of Product of Service: |
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