Frequently Asked
Questions

Yes. Full foreign ownership is allowed unless the business is in a restricted industry.

There is no legal minimum. However, KRW 100 million is often recommended for visa or investment registration purposes.

Usually 1 to 3 weeks depending on completeness of documents and entity type.

No. Foreigners can be sole directors and shareholders.

Under Korean law, the key distinction lies in the legal independence and incorporation status of the business entity:

Local Corporation
A local corporation is a separate legal entity established under Korean law. It is incorporated in Korea by a foreign parent company but has independent legal personality, enjoys separate rights and obligations, and is treated as a domestic company for regulatory and tax purposes.

It is governed by the Korean Commercial Act (상법), particularly the provisions applicable to stock companies (주식회사), limited companies (유한회사), etc.

It must complete incorporation procedures, including filing articles of incorporation and registering with the Korean court registry.

It is subject to corporate tax as a resident entity under the Corporate Tax Act (법인세법).

It can enter into contracts in its own name and is liable for its own debts.

Branch (지점)
A branch is not a separate legal entity, but rather an extension of the foreign company operating within Korea.

The foreign parent remains directly liable for the branch’s obligations.

The branch must be registered in Korea under the procedures set out in the Commercial Act (상법 제171조, 제172조 등).

It is considered a non-resident business unit, and its activities are limited to the scope permitted for foreign entities under Korean law.

The branch is taxed only on income derived from Korean sources as a foreign entity with a domestic place of business, pursuant to Corporate Tax Act Article 6(3).

Thus, while both entities may conduct business in Korea, a local corporation operates independently, whereas a branch is legally part of the foreign company and lacks separate legal personality.

Yes. In order to register a business entity in Korea, you must provide a Korean address. This address can be:

A leased office space – such as a commercial office, co-working space, or serviced office. The lease agreement should be in the company’s name (or the representative’s name for certain entity types).

A virtual office – acceptable in some cases for certain business activities, provided it meets the Korean tax office’s requirements for registration.

The registered address will be used for:

Official government and tax correspondence

Business registration with the Korean tax office

Corporate bank account opening (banks generally require proof of a valid Korean address)

Without a valid Korean address, the authorities will not approve the business registration.

Companies in Korea are subject to both national and local taxes under various tax statutes. The main taxes are:

1. Corporate Income Tax (CIT)

Legal Basis: Corporate Tax Act (법인세법).

Scope: Levied on domestic corporations on worldwide income and on foreign corporations with a Korean permanent establishment (PE) for income attributable to the PE.

Rates (Progressive, per recent amendment):

Up to KRW 200 million: 10%

Over KRW 200 million – KRW 20 billion: 20%

Over KRW 20 billion – KRW 300 billion: 22% (recently increased)

Over KRW 300 billion: 25% (recently increased from 24%)

Notes: Business year (fiscal year) cannot exceed 12 months; changes require notification to the tax office.

2. Value-Added Tax (VAT)

Legal Basis: Value-Added Tax Act (부가가치세법).

Rate: Standard 10%.

Scope: Imposed on the supply of goods and services within Korea and the importation of goods. Certain transactions, such as exports, may be zero-rated; some sectors are exempt (e.g., certain financial and medical services).

3. Withholding Tax

Legal Basis: Income Tax Act (소득세법), Corporate Tax Act, National Tax Collection Act (국세징수법).

Scope: Applied to certain payments to foreign corporations, including dividends, interest, royalties, and some service fees.

Rates: Generally 20% national tax + 10% local income tax surcharge, resulting in an effective rate of 22%, unless reduced by an applicable double tax treaty.

4. Local Taxes

Legal Basis: Local Tax Act (지방세법), Framework Act on Local Taxes (지방세기본법).

Local Income Tax: Typically 10% of the national corporate income tax liability.

Other Local Taxes: May include acquisition tax, property tax, registration tax, automobile tax, and local consumption tax, depending on business activities and assets.

5. Other Relevant Taxes

Customs Duties: Levied on imports under the Customs Act (관세법).

Special Taxes or Surcharges: Such as special excise taxes, resource taxes, or industry-specific levies.

Tax Incentives / Special Provisions: Available for certain industries, regions, or investment activities under the Restriction of Special Taxation Act (조세특례제한법).

Practical Compliance Notes:

Corporations must meet filing obligations for annual returns, quarterly prepayments, and VAT filings.

Foreign companies should review Korea’s network of tax treaties to minimize withholding tax burdens and prevent double taxation.

Local income tax is calculated separately but based directly on national CIT amounts.

In Korean corporate law, the term “auditor” can refer to two distinct legal roles — internal auditor and external auditor — each with different application criteria.

Internal Auditor (Statutory Auditor) – Commercial Act

A stock company is, in principle, required to appoint a statutory auditor under the Commercial Act.

Exemption: If the company’s paid-in capital is KRW 1 billion or less, it is exempt from appointing an internal auditor, unless the articles of incorporation require it.

External Auditor – Act on External Audit of Stock Companies

An unlisted stock company is required to appoint an independent external auditor if, in the most recent fiscal year, it meets two or more of the following four thresholds:
① Total assets: KRW 12 billion or more
② Total liabilities: KRW 7 billion or more
③ Annual sales (revenue): KRW 10 billion or more
④ Number of employees: 100 or more (annual average)

Listed companies, public-interest entities, and certain large LLCs are subject to external audit regardless of these thresholds.

Summary:

Internal Auditor → Governed by the Commercial Act; generally required unless paid-in capital ≤ KRW 1 billion.

External Auditor → Governed by the Act on External Audit of Stock Companies; required if two or more size thresholds are met.

These are separate regimes; exemption from internal audit does not automatically mean exemption from external audit.

After a foreigner establishes a legal entity in Korea—whether as a subsidiary, branch, or liaison office—a corporate bank account can be opened to manage the company’s funds and conduct business transactions. The company must first complete its incorporation and obtain a business registration certificate. Required documents typically include:

Business registration certificate issued by the Korean tax office

Corporate registry extract

Articles of Incorporation

Corporate seal certificate

Identification of the company’s representative (passport, Alien Registration Card if applicable)

For foreign-invested companies, a foreign investment registration certificate from a designated foreign exchange bank or KOTRA

The corporate account opening is generally done at a bank designated for handling the company’s foreign exchange transactions. The process often takes place immediately after submitting all required documents, but the overall timeline from incorporation to account activation is typically 2–4 weeks, considering the time needed for company establishment and registration.

Corporate accounts must be used strictly for transactions related to the registered business scope and are subject to the Foreign Exchange Transactions Act. They also require compliance with annual accounting, corporate tax filing, and reporting obligations. While the setup involves more time and cost than a personal account, it is essential for receiving investment funds, making payments to suppliers or employees, and handling international business transactions in a compliant manner.

It is possible under certain conditions, but incorporation first is generally recommended for clarity in ownership and taxation.

Under Korean law, your right to be heard before being detained is a fundamental principle. A court cannot issue a warrant for your arrest unless it first follows a specific procedure. This is known as a pre-arrest hearing.

In this hearing, the judge must inform you of:

1. The basics of the crime you are accused of.

2. The reason for the proposed arrest.

3. Your right to hire a lawyer.

Most importantly, the court must give you an opportunity to explain your side of the story. If a court issues an arrest warrant without this hearing, the warrant is considered unlawful.

While a narrow exception exists—for example, if you've already had the full benefit of a trial with a lawyer where you could defend yourself—this is interpreted very strictly. The law strongly protects your right to be heard before a decision to issue an arrest warrant is made.

In a Korean criminal trial, you have a fundamental right to confront and question the witnesses against you in person. A written statement from a witness is generally not admissible as evidence on its own.

What if the witness is living abroad? The Supreme Court has established very strict rules for this situation. For their written statement to be used, the prosecution must prove that the witness is truly unavailable. It is not enough to simply state that the witness is overseas.

The prosecution must demonstrate that they have exhausted all reasonable means to get the witness to testify. This includes trying to use official international channels, such as a "Judicial Assistance Treaty," to formally summon the witness or have them questioned in that foreign country.

If the prosecution has not made these serious efforts, the court will not allow the written statement to be used as evidence. This rule strongly protects the defendant's right to a fair trial by challenging the evidence presented.

In Korea, the power of a search warrant is strictly limited. Police and prosecutors can only seize evidence that is related to the specific crime mentioned in the warrant.

If an officer finds and seizes evidence of a completely different and unrelated crime during a search, that evidence is considered illegally obtained. As a rule, it cannot be used against you in court.

What if the police realize their mistake, return the item to you, and then ask you to "voluntarily" submit it? The Supreme Court is very skeptical of this process. It recognizes the power imbalance between investigators and individuals.

In such cases, the burden is on the prosecutor to prove, beyond a reasonable doubt, that your submission was genuinely voluntary and not the result of pressure. If the prosecutor cannot meet this high standard of proof, the evidence remains illegal and cannot be used in your trial. This rule protects citizens from improper evidence collection.

Yes, a resolution of the general meeting of shareholders is required when a company intends to transfer its business in entirety. It must be adopted as a special resolution, requiring the presence of shareholders holding at least one-third of all issued shares and the approval of at least two-thirds of the voting rights of those present.

1. Legal Basis

Commercial Act Article 374(1) provides that certain significant transactions—including the transfer of the whole business—require a special resolution of the general meeting of shareholders.

The purpose of this provision is to protect shareholders by ensuring they have a say in decisions that fundamentally change the company’s business structure.

2. Requirements for Special Resolution
According to Commercial Act Article 434, a special resolution requires:

Presence: Shareholders holding at least one-third (1/3) of the total issued and outstanding shares must be present at the meeting.

Approval: The resolution must be passed by at least two-thirds (2/3) of the voting rights of the shareholders present.

3. Case Law
The Supreme Court has interpreted “transfer of the whole business” as a transfer where the transferee can continue the same business without adding any substantial investment or modification, meaning that the essential elements of the business are transferred. This includes not only the physical assets but also intangible assets, customer relationships, and goodwill. Where such a transfer materially changes the company’s purpose or operational core, a shareholder resolution is mandatory.

Yes. Under the Korean Commercial Act, if the transferee continues to use the trade name (상호) of the transferor after a business transfer, the transferee is jointly and severally liable with the transferor for obligations arising from the business of the transferor.

Legal Basis:
Article 42 of the Korean Commercial Act

“Where a person has transferred his business and the transferee continues to use the trade name of the transferor, the transferee shall be jointly and severally liable with the transferor for the obligations arising from the business.”


Judicial Commentary:
Korean courts have interpreted this provision strictly, emphasizing creditor protection where there is a risk of confusion due to trade name continuity.

Conclusion:
If the transferee continues to use the trade name of the transferor after a business transfer, the transferee is generally deemed jointly liable for business-related obligations, unless the creditor had specific knowledge to the contrary.

Under Article 39 of the Korean Commercial Act, if a matter that is required to be registered is either not registered or falsely registered, and a third party relies on the registry in good faith, the company cannot assert the unregistered or false information against such third party.

Legal Basis:
Article 39 of the Korean Commercial Act

“A company may not assert any matter that is required to be registered, but has not been registered, or any matter that has been registered but is false, against a third party acting in good faith.”

Judicial Commentary:
This provision is designed to protect third parties who rely on the commercial registry in transactions. Courts have emphasized that the burden of proper registration lies with the company, and any deficiency—intentional or negligent—cannot prejudice good-faith third parties.

Examples of Application:

If a director’s resignation is not properly registered, and a third party transacts with the company believing that the director is still in office, the company may be bound by the director’s acts.

If the registered representative is no longer authorized, but this change was not registered, the company may still be liable for acts done by the registered representative vis-à-vis third parties.

Conclusion:
Article 39 ensures transactional safety by preventing companies from using their own failure to register (or correct false registration) to the detriment of good-faith third parties who relied on the official records.Find out more and try it now: https://chatbyun.com/

The Korean Communication Secrets Protection Act provides strict rules for government surveillance, making a clear distinction between intercepting communications in real-time ("wiretapping" or "감청") and accessing stored data.

"Wiretapping" legally refers only to the live, real-time interception of communications like phone calls, emails, or instant messages as they are happening. Crucially, it does not include accessing messages or data that have already been received and are stored on a server.

Therefore, if a court issues a warrant specifically for "wiretapping," investigators must follow that method exactly. They cannot use that warrant to demand a service provider hand over past, stored data (e.g., old chat logs). If an investigator or a company collects stored data under a wiretapping warrant—even if it's because they lack the equipment for live interception—they have violated the law.

The Supreme Court has ruled that any evidence gathered this way is illegal and inadmissible in court. It cannot be used to find you guilty. This provides strong protection for your right to privacy.

This depends on the purpose of the inspection. Korean law makes a critical distinction between a routine customs check and a targeted criminal investigation.

1. Routine Customs Inspections:
For general administrative purposes, such as verifying contents for customs clearance or checking for prohibited items, customs officials can open, sample, and inspect the contents of international packages without a judicial warrant. This is considered a normal part of their administrative duties.

2. Criminal Investigations:
However, the situation is different if the action is part of a planned criminal investigation. For example, if police or prosecutors, suspecting a package contains narcotics, ask customs to intercept and open it as part of a "controlled delivery" to catch the criminals.

The Supreme Court has ruled that this type of targeted action is not a mere inspection; it is a "search and seizure" for a criminal case. As such, it is subject to constitutional rules and requires a warrant from a judge. This prevents investigative bodies from using customs procedures as a loophole to conduct warrantless searches.

While the fundamental rule in Korea is that police must obtain a warrant from a judge before conducting a search or seizure, there is a critical exception in cases of an emergency arrest (긴급체포, gingeup-chepo).

An emergency arrest is a warrantless arrest made when there is strong evidence of a serious crime and an urgent need to detain the suspect. In this specific situation, police are granted temporary special powers:

• Warrantless Seizure: They can search and seize items that the arrested person owns, possesses, or is storing, all without a warrant.

• Time Limit: This warrantless action must be conducted within 24 hours of the arrest.

• Broad Scope: Importantly, this search is not restricted to the immediate location of the arrest. It can extend to other places, such as the person's home or office, to secure evidence quickly.

However, this power is not unlimited. To keep the seized items, the police must apply for and receive a formal warrant from a judge without delay, and no later than 48 hours after the initial arrest. This rule is designed to prevent the destruction of evidence while still providing judicial oversight.

Not necessarily. In Korea, for scientific evidence like a drug test to be used for a conviction, the court demands an unbroken and verifiable "chain of custody." A positive lab result is not enough on its own if the evidence-handling process was flawed.

The Supreme Court has ruled that for evidence to be reliable, the prosecution must prove:

1. The sample (e.g., urine or hair) was collected, stored, and analyzed without any contamination or tampering.

2. The sample's identity was maintained throughout the entire process.

3. There is a clear record of every person who handled the sample from the moment of collection to its analysis at the lab.

This means that if there is any doubt about the integrity of the sample collection and handling process, the lab results may be considered insufficient to prove your guilt.

The Korean Supreme Court has established clear and important rules regarding the search and seizure of digital evidence from devices like computers, hard drives, and USBs. Here are three key protections:

1. Your Right to Participate in the Seizure

You have the right to be present while investigators search your device and select the specific files to be copied as evidence.

2. You Must Receive a Detailed List

After seizing digital files, the police must provide you with a detailed list of what was taken. It is not enough for the list to say "one hard drive image." It must specify the names of the individual files that were copied. This ensures you know exactly what evidence the police have. This list can be provided as a paper printout or as a digital file.

3. The Prosecutor Must Prove Authenticity

For a digital file to be used as evidence in court, its integrity is paramount. The prosecutor has the burden to prove that any copy or printout presented is an exact, unaltered replica of the original file. They must demonstrate that the evidence has not been edited or tampered with in any way. If they cannot prove its authenticity, it may not be admitted as evidence.

Yes, but only under very strict conditions. The Supreme Court has ruled that forcibly collecting a urine sample (using a catheter against a person's will) is a significant violation of bodily integrity and is only permitted as a last resort.

Here are the key principles:

1. Strict Requirements:
This procedure is only allowed if:

• The crime being investigated is serious (e.g., illegal drug use/trafficking).

• There is strong, objective evidence of guilt.

• A urine test is essential to prove the crime, and there are no other reasonable ways to get the evidence.

• A judge has issued a specific warrant (like a search & seizure warrant for urine).

2. Use of Force:
What if police have a warrant, but the suspect refuses to cooperate and go to a hospital? The Court ruled that police may use the minimum necessary force to take the person to a proper medical facility. This action is considered a "necessary measure" to execute the judge's warrant, which would otherwise be useless.

3. Medical Safeguards:
The collection itself must be performed by a qualified medical professional (like a doctor or nurse) in a hospital or clinic. This is required to ensure the person's health and safety and to minimize any sense of humiliation.

In short, while police cannot routinely force a urine test, they can do so in serious cases with a valid warrant, even if it requires using minimal force to take a resisting suspect to a hospital for a medically supervised procedure.

In a Korean criminal trial, you have a fundamental right to confront and question witnesses against you (the right to cross-examination). But what happens if a witness who already gave a statement to the police shows up to court and then refuses to speak?

The General Rule:
The Supreme Court ruled that if a witness refuses to testify in court, their previous written statement to the police cannot be used as evidence. This is true even if the witness is refusing to testify for an improper reason. The court prioritizes the defendant's right to challenge live testimony over using a written statement that cannot be cross-examined.

The Major Exception:
There is one critical exception to this rule. The witness's prior statement can be used as evidence if it is proven that the defendant themself caused the witness's refusal to testify. For example, if the defendant threatened, intimidated, or paid the witness to remain silent, they forfeit their right to cross-examination.

In short, this ruling protects your right to a fair trial by ensuring you can challenge your accusers, but it also prevents defendants from obstructing justice by silencing witnesses.

This Supreme Court ruling reinforces and clarifies your rights—and your lawyer's rights—when police handle digital evidence.

1. Right to Be Present (Even at the Police Station)
When police seize a device or a digital copy (like a clone of your hard drive) and take it back to their station for analysis, you and your lawyer have the right to be present while they search through the files. This is a crucial safeguard to ensure they only look at evidence related to the charges and do not tamper with the data. If you are not given this opportunity, any evidence found may be deemed illegal.

2. Your Lawyer's Right is Independent
This is a key point. Your lawyer's right to attend the search is their own independent right. Even if you, the suspect, tell the police you waive your right and don't want to be there, the police must still separately notify your lawyer and give them the opportunity to attend. Your waiver does not eliminate your lawyer's right to be present.

3. When Can Illegally Obtained Evidence Be Used?
As a rule, evidence collected illegally (and any further evidence found because of it) cannot be used in court. However, the Court allows for rare exceptions. If a police error was minor, did not substantially harm your rights, and throwing out the evidence would be more counterproductive to justice than allowing it, a judge may permit its use after a careful and comprehensive balancing of all factors.

This can be a complex issue, but a key Supreme Court ruling provides some clarity. The answer depends on two main factors: whether the other crimes are "related" and whether your procedural rights were "substantially" protected.

The Scenario: Imagine you are caught for an illegal act (Crime A) and you hand your phone over to the police. While searching it, they find evidence of other, similar illegal acts (Crime B) that they didn't know about before.

1. Is the New Evidence "Related"?
First, a court will determine if Crime B is sufficiently related to Crime A. For example, if it's the same type of offense, occurred around the same time, or shows a similar method or pattern of behavior, the court may consider it "related" circumstantial evidence and allow it to be used.

2. Were Your Rights Substantially Protected?
Even when you voluntarily submit your phone, you normally have the right to be present when police search it at their station and the right to receive a detailed list of the evidence they seize.

However, this ruling states that minor procedural mistakes by the police might not automatically make the evidence illegal. The crucial question a court will ask is: Were your rights substantially violated?

For instance, in the case this ruling is based on, the court decided the suspect's rights were not substantially violated because:

• He was present when the officer did an initial search of the phone at the scene.

• During questioning, the police showed him all the evidence of the other crimes they found, so he clearly knew what they had, even without a formal written list.

In short, while police should follow proper procedure, evidence of other related crimes found on a voluntarily submitted device may be considered legal if it's clear the suspect's fundamental defense rights were not seriously harmed.

Costs for Establishing a Company in South Korea
When setting up a company in South Korea, particularly a stock company (주식회사, Jusikhoesa), several types of costs must be considered. These include government fees, professional service fees, and optional costs depending on the company’s structure and business needs.

1. Capital Requirements
Minimum Capital: There is no mandatory minimum capital for most types of companies, including stock companies, unless special licenses are required (e.g., in finance or logistics).

However, a minimum capital of KRW 100 million (approximately USD 75,000) is generally required if you wish to sponsor a D-8 investor visa.

2. Government Fees
Registration Tax: 0.4% of the capital (but minimum tax applies in some cases).

Education Tax: 20% of the registration tax.

Stamp Tax: KRW 20,000 for capital of KRW 100 million or more.

Notarization Fees: Required only if the company has more than one incorporator; fees vary but typically start at around KRW 100,000.

3. Professional Fees
Legal & Accounting Services: Incorporation support from law firms or accountants usually ranges from KRW 5million to KRW 10 million (USD 4000–10,000), depending on the complexity and whether English service is required.

Tax Consulting: Optional but recommended, especially for foreign-invested companies.

4. Office & Operational Setup
Registered Address: A commercial office address is required. Virtual offices are allowed for some business types.

Bank Account Opening: Usually done post-registration with documents verifying incorporation.

5. Foreign-Invested Company (FIC) Costs
If a foreigner invests more than KRW 100 million, they may register as a Foreign-Invested Company, which provides additional legal benefits and visa options but includes extra reporting and registration steps.

Estimated Government‑Mandated Costs for Incorporating a Korean Stock Company
(Paid‑in capital: KRW 100 million, professional fees excluded)

Local Registration Tax – KRW 400,000 (0.4 % of capital).
If the head office is registered in a “large city” such as Seoul, the Local Tax Act triples this to KRW 1,200,000.

Local Education Tax – 20 % of the Registration Tax:
 • KRW 80,000 outside large cities
 • KRW 240,000 inside large cities

Supreme Court Revenue Stamp (Stamp Tax) – KRW 30,000 for an incorporation document covering capital of KRW 100 million.

Corporate Seal & Certificate Issuance – about KRW 30,000.


Notarisation of Articles/Inaugural Minutes – about KRW 200,000 (required when there is more than one promoter or when the capital is KRW 100 million or more and the subscription method is used).


Approximate Cash Outlay at the Registry (professional fees not included)
Registration Location Estimated Total
Outside a “large city” ≈ KRW 740,000 (≈ USD 570)
Within a “large city” (e.g., Seoul) ≈ KRW 1,700,000 (≈ USD 1,300)

Figures may vary slightly by local court office or exchange rate.

Additional professional fees
Attorney or judicial scrivener (법무사) services for drafting documents, electronic filing, and attending at the registry are not included above.

Yes, but with important limitations. Under the Korean Commercial Act, particularly Article 4 and Article 46, a person is deemed a “merchant” (상인) when they engage in a commercial activity independently and on a continuous basis. While Korean law does not require a formal "merchant registration" separate from corporate or business registration, failure to comply with related legal obligations may trigger liabilities.

For example, if a foreign investor continuously conducts commercial acts (e.g., buying and selling goods, running an online platform, or leasing real estate for profit), they may be considered a de facto merchant and become subject to duties such as bookkeeping, registration of a trade name, and use of standard terms.

Notably, Korean law emphasizes substance over form. Thus, even without a formal registration as a "merchant", the actual conduct of business can impose all merchant-related responsibilities under Korean law, including liability for commercial customs and accounting duties (see Commercial Act Article 48 and Article 66).

It is therefore strongly recommended that foreign investors register a legal entity in Korea (e.g., a corporation or branch office), not only for compliance purposes but also to limit personal liability and ensure proper tax and visa status.

Legal Basis:

Commercial Act Article 4 (Definition of Merchant)

Commercial Act Article 46–66 (Duties of Merchants including Bookkeeping, Trade Name, and Commercial Customs)

Related visa regulation: Foreign Investment Promotion Act and Immigration Control Act

Yes, a foreign investor may technically use a business name in Korea without registering it. However, without registration, the name does not enjoy legal protection under the Korean Commercial Act. This means:

You cannot prevent others from registering or using the same or a confusingly similar name for similar types of business in the same region.

Even if you have used the name first, priority is not recognized unless you register it.

If someone else registers the same or similar name, they acquire exclusive rights within the jurisdiction of registration under Commercial Act Article 22.

Furthermore, if your unregistered business name becomes widely recognized (secondary meaning), you may seek limited protection under unfair competition law, but such cases are fact-intensive, uncertain, and involve high legal costs.

Key Risks for Foreign Investors:
Loss of name rights to a later registrant.

Legal disputes or forced name change, even if you used the name earlier.

Inability to claim damages for confusion or loss of business due to a similar name.

Best Practice:
Always register your trade name (상호) during company formation to secure legal protection. If nationwide protection is required, also consider trademark registration under the Trademark Act.

Legal Basis:

Commercial Act Article 22: A person who registers a trade name has the exclusive right to use it for the same type of business in the registered area.

Relevant case law affirms that registration, not mere use, is the condition for asserting rights over a trade name in Korea.

When police get a warrant to search your private data stored on a company's server (e.g., your KakaoTalk chat history), they must follow very strict rules to protect your privacy. As the user, you are the real subject of the search and have fundamental rights.

A key Supreme Court case highlighted several police failures that, when combined, made a search and seizure illegal. The police must:

1. Present the Original Warrant: They must show the original, physical warrant to the company (like Kakao), not just send a fax or a digital copy.

2. Seize Only Relevant Data: Police cannot seize your entire chat history. They must make an effort to filter and take only the messages that are directly related to the crime they are investigating. Seizing all conversations, including private, unrelated ones, is a violation.

3. Guarantee Your Right to Participate: Police must notify you of the search and give you an opportunity to be present—both when they get the data from the company and when they examine it later. You have a right to watch over the process.

4. Provide a List of Seized Items: After the seizure, they must give you a detailed list of the specific data (messages, photos, etc.) that was taken.

In the case this ruling is based on, the police failed on all these points. The Supreme Court decided that while one minor mistake might be overlooked, the combination of these serious procedural violations was so significant that it made the entire search and seizure illegal and ordered it to be cancelled.

When police seize your digital device (or a copy of it) and take it to their station to search for evidence, you have fundamental rights that must be protected.

Your Core Rights:

• Right to Participate: You and/or your lawyer have the right to be present while the police search through your digital files.

• Right to a List: You must be given a detailed list of the specific files that were seized as evidence.

The "No Cure" Rule for Illegal Searches
This Supreme Court ruling establishes a very strict consequence if police violate these rights.

If police fail to guarantee your right to participate or provide a list, the search is illegal, and any evidence found is inadmissible in court. Most importantly, the court declared that this illegality cannot be fixed or "cured" after the fact.

This means:

1. Getting a warrant after the illegal search does not make the evidence legal.

2. Even if you or your lawyer later agree in court to use the illegally obtained evidence, that consent does not heal the original procedural violation.

In short, the violation of your procedural rights during a digital search permanently taints the evidence. This ruling ensures that your rights are taken seriously and cannot be bypassed or corrected after a mistake has been made.

Yes. Under Commercial Act Article 42(1), if a foreign investor acquires a Korean business and continues using the same trade name, they are presumed to have assumed all debts related to that business. This is known as presumed debt succession due to trade name continuation (상호속용).

Even if the business transfer contract states that the investor does not assume the seller’s debts, this presumption still applies unless the investor takes specific legal actions.

How to Avoid This Legal Risk:
To avoid liability, the foreign investor must fulfill both of the following requirements:

Clearly disclaim debt assumption in the business transfer contract, and

Register the disclaimer and publish public notice as required under Commercial Act Article 42(2).

Specifically:

The disclaimer must be registered in the commercial registry (등기, not just a private agreement), and

A public notice must be published in the Korean Official Gazette or at least two daily newspapers.

Without both registration and public notice, creditors may legally claim repayment from the investor, regardless of the contract terms.

Legal Basis:

Commercial Act Article 42(1): Presumption of debt succession if trade name is continued.

Commercial Act Article 42(2): Presumption can be rebutted only if disclaimer is registered and publicly noticed.

Practical Tip for Foreign Investors:
When acquiring a Korean business and using its existing trade name:

Insert a no-liability clause in the contract.

Register the disclaimer at the commercial registry.

Publish notice in the Official Gazette or two newspapers.

Yes, and they are very strict. For a written statement from a witness (someone other than the defendant) to be used as evidence in a Korean trial, the police must follow specific procedural rules designed to ensure fairness and transparency.

The Key Procedural Rule:
When police interview a witness or ask them to write a statement, they must officially document the process. This includes creating a record of:

• The exact time the witness arrived for the interview.

• The time the interview or statement-writing started.

• The time it ended.

• Any other important details about how the investigation proceeded.

This record must be attached to the official case file.

The Consequence of Breaking the Rule:
The Supreme Court has ruled that if the police fail to create this official record of the investigation process, the witness's written statement is considered to have been obtained through an "unlawful procedure."

As a result, that written statement will generally be inadmissible as evidence. It cannot be used in court to prove guilt.

The purpose of this strict rule is to guarantee that the process of collecting evidence is transparent and to prevent any possibility of off-the-record coercion or improper influence on witnesses by investigators.

When registering a trademark in Korea, a foreign investor must understand that mere business registration or trade name use does not confer trademark rights. Trademark protection arises only through registration with the Korean Intellectual Property Office (KIPO) under the Trademark Act.

Under Trademark Act Article 3, only persons intending to use a mark in connection with their goods or services may apply. While foreign applicants are permitted, they must appoint a local representative (trademark manager) if they do not reside or have a business office in Korea (Article 6).

Moreover, under Article 34, there are various absolute and relative grounds for refusal, which foreign investors often overlook. These include:

???? Key Issues to Watch:
Similarity to prior trademarks
If your mark is similar to an already registered or applied-for mark in the same or related class of goods/services, your application will be rejected (Article 34(1)⑷,⑸).

Lack of distinctiveness
Generic, descriptive, or commonly used terms (e.g., “BEST FOOD” for a restaurant) cannot be registered (Article 33(1)).

Use without intent
If the applicant does not intend to actually use the mark in Korea, it may be subject to non-use cancellation after 3 years (Article 119).

Bad faith filings
If the foreign investor files a mark similar to a Korean company's well-known name or prior mark in bad faith, registration may be refused or invalidated (Article 34(1)⑭,⑲).

Reputation of others' names
Registering a mark similar to another’s personal name, well-known brand, or domain may violate rights of personality or unfair competition law, even if not previously registered (Article 34(1)⑮).

✅ Best Practices for Foreign Investors:
Conduct a trademark clearance search before filing.

Ensure the mark is distinctive and not descriptive in Korean.

Appoint a local trademark representative (if no Korean address).

Be prepared to submit evidence of use or intention to use.

Consider also registering the corresponding domain name to prevent cybersquatting.

Legal Basis:

Trademark Act Articles 3, 6, 33, 34, and 119

Supporting practice from the Korean Intellectual Property Office (KIPO) and major court precedents

Additional Note:
Trademark and trade name rights are legally distinct in Korea. Registering a trade name does not protect a brand, and vice versa. Foreign investors should register both if necessary.

Foreign investors in Korea typically choose from the following three forms of business presence, each with distinct legal and operational characteristics:

1. Joint Stock Company (JSC / “Chusik Hoesa” / 주식회사)
✅ Best for scalable and investor-friendly operations

Separate legal entity under Korean law

No minimum capital requirement (but adequate initial capital recommended)

Ownership through shares, which are transferable and can be issued to raise funds

Preferred structure for venture capital or institutional investment

Subject to external audit and public disclosure if certain size thresholds are met (e.g., assets, sales, employee count)

Can list on KOSDAQ or KRX if conditions are met

Key Consideration: Requires more formalities, such as board meetings, shareholder resolutions, and articles of incorporation.

2. Limited Liability Company (LLC / “Yuhan Hoesa” / 유한회사)
✅ Ideal for small-scale or privately held businesses

Also a separate legal entity, but more flexible than JSC

No shares issued; ownership is via capital contributions of members

Limited disclosure and audit obligations

Often used by family-owned businesses or local subsidiaries of foreign companies not seeking outside investment

Key Limitation: Not suitable for equity investment, as there are no shares to transfer or offer to third parties.

3. Branch Office
✅ A cost-effective extension of a foreign parent company

Not a separate legal entity; it operates as an arm of the foreign head office

No minimum capital or Korean director requirement

Must register with the Korean Foreign Exchange Bank and the Commercial Registry

Cannot issue shares or accept direct investment from Korean investors

Taxed similarly to domestic corporations but cannot engage in business outside the scope of the parent

???? Key Risk: The foreign parent is fully liable for the branch’s debts and obligations in Korea.

✅ How to Choose?
Choose JSC if you plan to scale, seek external funding, or engage in public trust businesses.

Choose LLC for closely held operations with minimal compliance.

Choose a Branch Office if your goal is to extend existing foreign business into Korea without creating a new company.

Under the Korean Commercial Act, the general statute of limitations (called "commercial prescription") is 5 years, which applies to claims arising from commercial activities (상행위), unless otherwise specified (Commercial Act Article 64). This is significantly shorter than the general 10-year civil statute of limitations under the Korean Civil Act (Civil Act Article 162(1)).

Key differences between commercial and civil prescription include:

Shorter Period:
Commercial claims generally expire after 5 years, compared to 10 years for civil claims, reflecting the principle of legal certainty and speed in commercial transactions.

Automatic Application:
Commercial prescription applies automatically to both parties if the underlying transaction is considered a commercial act for at least one party.

Examples:

Claims for sales of goods between merchants: 5 years

Civil loan claims between individuals: 10 years

Interruption of Prescription:
Both civil and commercial prescriptions can be interrupted by acknowledgment, demand for performance, or legal action, but in practice, commercial parties must be more vigilant due to the shorter period.

Special Prescriptive Periods:
Certain commercial claims (e.g., freight, warehousing, commission) have even shorter prescriptive periods (e.g., 1 year or 6 months), which are strictly applied unless properly tolled or interrupted.

Under the Korean Commercial Act, commercial extinctive prescription refers to a shortened period of time after which a creditor's right to claim based on a commercial act is automatically extinguished if not exercised. This reflects the commercial law principle of expedited transactions and legal certainty in business.

Legal Basis:

Commercial Act Article 64:
"Unless otherwise prescribed, the extinctive prescription of claims arising from commercial activities shall be completed after five years."

Suppose Company A (a wholesaler) delivers goods to Company B (a retailer) under a commercial sales contract, and Company B fails to pay the purchase price.

This transaction is considered a commercial act for both parties.

Under the Commercial Act, the claim for payment is subject to a 5-year statute of limitations, not the 10-year period under the Civil Act.

If Company A does not file a claim within 5 years of the due date, the right to collect the debt is extinguished by prescription, regardless of the validity of the underlying contract.

Comparison of Statute of Limitation: Commercial vs. Civil (under Korean Law)

1. Legal Basis

Commercial: Commercial Act Article 64

Civil: Civil Act Article 162(1)

2. General Duration

Commercial: 5 years

Civil: 10 years

3. Applicable Scope

Commercial: Claims arising from commercial transactions (e.g., sale of goods between merchants, commission, freight)

Civil: Claims arising from general civil obligations (e.g., personal loan, rent, tort)

4. Purpose

Commercial: Promote speed and certainty in business transactions

Civil: Ensure long-term protection of private rights

5. Special Shorter Periods

Commercial: Yes – some claims (e.g., freight charges, hotel bills) expire in 1 year

Civil: Rare – most claims uniformly expire in 10 years

6. Commencement Point

Commercial: From the time the claim becomes enforceable

Civil: Same as commercial

7. Interruption Rules

Commercial: Interrupted by acknowledgment, demand, or legal action

Civil: Same interruption rules apply

Summary
If the claim arises from a commercial act, the shorter 5-year limitation applies, not the civil 10-year rule. Businesses must monitor deadlines closely to avoid loss of rights.

Basic Q&A on Corporate Registration (등기) in Korea

Q1: Is registration (등기) mandatory when establishing a company in Korea?

A:
Yes. Under the Korean Commercial Act, a company (법인) is not considered legally established until its incorporation is registered with the competent registry office (법원 등기소).

Legal basis: Commercial Act Article 172 (Establishment of a Company)

Q2: What types of companies must register?

A:
All types of corporations must register, including:

Stock companies (주식회사)

Limited liability companies (유한회사)

Limited partnerships (합자회사)

Unlimited partnerships (합명회사)

Q3: What information must be included in the registration?

A:
The application must contain key information such as:

Company name and address (상호 및 본점 소재지)

Business purpose (사업 목적)

Capital amount (자본금)

Name and address of directors, auditors, and incorporators (임원 및 발기인 인적사항)

Date of incorporation (설립일)

Articles of incorporation (정관)

Q4: Where is the registration filed?

A:
With the Registry Department of the District Court (지방법원 등기소) having jurisdiction over the company's principal office.

Q5: When must registration be completed?

A:
The company must file for registration within two weeks from the date of its incorporation resolution (설립등기 기간은 원칙적으로 2주 이내).

Q6: What happens if registration is delayed or omitted?

A:

The company is not recognized as a legal entity, meaning it cannot enter into contracts or own property in its own name.

Incorporators and directors may become personally liable for any acts made in the name of the company before registration.

Q7: Is registration required only at the time of establishment?

A:
No. Companies must also file amendment registrations for changes such as:

Change of address, capital, or business purpose

Appointment or resignation of directors

Merger, dissolution, or liquidation

Q8: Can a foreign investor register a company in Korea?

A:
Yes. Foreign individuals or corporations can establish a local corporation and complete registration. A local address and a designated representative (or director) in Korea are generally required. Foreign Investment Promotion Act and commercial regulations both apply.

Summary:
In Korea, corporate registration is a legal requirement and a prerequisite for a company to be recognized as a legal entity. Failure to properly register can result in serious legal and financial risks.

1. Trade Name (상호)
Under the Commercial Act, a trade name refers to the official business name of a company, registered at the court registry (등기소). It is used to identify the legal entity in contracts, business dealings, and government filings. Registration of a trade name is mandatory for legal incorporation. Its primary function is to indicate the existence and identity of the corporation. Legal protection against similar trade names is provided mainly within the jurisdiction where the company is registered, unless unfair competition is involved. However, a trade name does not guarantee exclusive rights over its use in commerce unless also protected under trademark or unfair competition laws.

2. Trademark (상표)
In contrast, under the Trademark Act, a trademark is a distinctive sign, such as a word, symbol, logo, or design, used to identify and distinguish goods or services of one business from those of others. It is registered at the Korean Intellectual Property Office (KIPO). Unlike a trade name, a trademark is not required by law but is essential for brand protection. Once registered, it grants the owner an exclusive nationwide right to use the mark for specific goods/services and to prevent others from using confusingly similar marks. It serves the purpose of protecting consumer trust and preventing market confusion.

Summary:
While both serve identification functions, a trade name identifies the legal entity itself, whereas a trademark identifies the source of products or services. They operate under different laws, have separate registration systems, and provide distinct scopes of protection.

Under Korean Commercial Law, when a person transfers a business, the transferor is subject to a statutory duty not to engage in competing business activities. This obligation is stipulated in Commercial Act Article 41(1), which provides that, unless otherwise agreed, the transferor shall not conduct the same kind of business within the same city or county (시·군) for a period of ten years from the date of the business transfer.

The primary purpose of this provision is to protect the business goodwill and customer base acquired by the transferee, ensuring that the transferor does not immediately open a competing business in the same area and undermine the value of the transaction.

This non-compete obligation is:

Geographically limited: It applies only to the same city or county where the transferred business was operated.

Time-limited: It lasts for ten years unless a shorter or longer period is agreed upon.

Waivable or modifiable by contract: The parties may agree to exclude, shorten, or extend the restriction in the business transfer agreement.

If the transferor violates this obligation, the transferee may seek legal remedies such as an injunction to prevent the competing activity and/or monetary damages under general civil or contract law principles, depending on the extent of the harm caused.

In practice, business transfer agreements often include a customized non-compete clause to reflect the specific commercial and geographic scope of the business.

Concept of “Business Transfer” under Korean Law – Supreme Court Standard
(Based on Supreme Court Decision 91Da15225, August 9, 1991)

Under Korean law, the Supreme Court has defined a business transfer (영업양도) as:

“A business transfer means the comprehensive transfer of all or a substantial and essential part of a business, organized under a certain structure, for the purpose of generating profit through continuous and repetitive economic activity, in such a way that the transferee can continue the same kind of business with the transferred organization.”
— Supreme Court Decision 91Da15225, decided August 9, 1991

✅ Key Legal Criteria from the Court
Structured Business Organization
The transferred object must be an organic and functional enterprise, not just assets. It includes the necessary personnel, equipment, know-how, and business systems capable of commercial operation.

Substantive Transfer
Even if the whole business is not transferred, the transfer must include the core or essential functions necessary to carry out the same business purpose.

Continuity of Operations
The transferee must be able to continue the same business in substance, preserving the economic and organizational identity of the transferred unit.

❌ Not Considered a Business Transfer
The following are not regarded as business transfers under this standard:

Mere sale of individual assets (e.g., real estate, inventory)

Assignment of rights without operational infrastructure

Transfer that lacks economic and functional continuity

⚖️ Legal and Practical Implications
Recognizing a transaction as a business transfer has major legal consequences:

Non-compete obligation of the transferor (Commercial Act Article 41)

Potential labor and tax liabilities following the business

Creditor notice and protection requirements

Application of successor liability doctrines in certain contexts

Summary
According to the Korean Supreme Court, a business transfer involves more than property—it refers to the functional transfer of a going concern, enabling continued commercial activity. Legal analysis focuses on substance over form, particularly the continuity and identity of the business operation.

(Reflecting Supreme Court Decision 2002Da70822, June 9, 2005)

Under Korean law, when a comprehensive business transfer occurs—meaning the entire business organization, including both human and material resources, is transferred as a functionally identical and continuous unit—then, as a general rule, the employment contracts between the transferor and its employees are succeeded by the transferee.

This principle is grounded in the Korean Supreme Court’s decision (2002Da70822, June 9, 2005), which held that employment relationships are, in principle, transferred along with the business itself when its organizational and operational identity is preserved.

However, the Court also made clear that:

If an employee expressly refuses to consent to the transfer of their employment, the employment relationship is not succeeded by the transferee.

✅ Key Legal Takeaways
Presumption of Succession in Business Transfer

In a full-scale transfer of business operations, the transferee is presumed to inherit employment relationships.

This applies even in the absence of explicit consent, unless the employee objects.

Employee’s Right to Refuse

Employment is based on personal and consensual relationships.

Thus, an employee who clearly indicates non-consent cannot be forced into an employment relationship with the transferee.

Effect of Refusal

In such a case, the employee remains under the legal employment of the transferor.

If the transferor no longer operates the business, proper termination procedures (e.g., dismissal with cause, severance pay) must follow.

⚖️ Summary
In Korea, when a business is wholly transferred as an ongoing enterprise, the default legal position is that employment relationships are succeeded by the transferee.
However, this presumption is not absolute—if an employee expressly refuses to consent, the employment contract is not transferred, and the transferee does not acquire the employee's legal status.

This framework balances business continuity with employee autonomy, in line with the Supreme Court’s reasoning.

(Based on Korean Commercial Act Article 42)

Under Article 42(1) of the Korean Commercial Act, when a person acquires a business and continues to use the trade name (상호) of the former owner, the transferee is presumed to have assumed the obligations arising from the transferred business. As a result, the transferor and transferee become jointly and severally liable to the business’s creditors.

This legal presumption serves to protect creditors who may reasonably rely on the appearance of business continuity. By using the same trade name, the transferee benefits from the commercial reputation and trust built by the transferor, and the law imposes a corresponding duty to honor past business obligations.

However, this liability is not absolute. The transferee may avoid such joint liability if one of the following conditions is met:

The transferee does not continue to use the trade name of the transferor; or

Public notice is given to creditors at the time of the transfer that the transferee does not assume the transferor’s obligations.

Furthermore, under Article 42(2), this public notice requirement may also be satisfied by registering the non-assumption of liability in the commercial registry (등기).
In other words, if the parties register the disclaimer of liability, that registration serves as constructive notice to third parties, thereby relieving the transferee of joint liability.

It is important to note that the assumed obligations under Article 42 are limited to those related to the transferred business. The transferee does not assume unrelated personal debts of the transferor.

✅ Summary
Default rule: If the transferee uses the same trade name, joint and several liability arises by law.

Exception: Liability may be avoided if:

The trade name is not used; or

Proper notice is given to creditors, either publicly or by commercial registry filing.

Thus, while the use of a prior trade name may attract automatic legal liability, such liability can be excluded through advance registration or notification, offering legal certainty to both parties.

1. Stock Company (주식회사)
???? Limited liability: Shareholders are liable only up to the amount of their investment

Capital is divided into shares, which are freely transferable

Corporate governance: Includes board of directors, shareholders’ meeting, auditor(s)

Suitable for large-scale capital raising and widely used in practice

Most common company form in Korea

2. Limited Company (유한회사)
???? Private, small-scale entity

Capital is divided into equity interests, not shares

Members have limited liability

Simplified governance structure, typically with a managing member

Transfer of equity is restricted

Common for family-owned or closely held businesses

3. Limited Liability Company (유한책임회사, LLC)
???? Introduced in 2012, modeled after U.S. LLCs

All members have limited liability

Offers flexible internal structure, governed by the articles of incorporation

No mandatory board or auditor

Often used by startups, joint ventures, or investment firms

Not pass-through for tax purposes under Korean law

4. General Partnership Company (합명회사)
???? All partners have unlimited joint and several liability

Each partner may manage the business directly

Legal entity, but partners are personally liable

Based on mutual trust among partners

Rarely used in modern commercial practice due to liability risk

5. Limited Partnership Company (합자회사)
???? Hybrid structure: at least one general partner (unlimited liability) and one limited partner (limited liability)

General partners manage the company

Limited partners cannot engage in management

Combines investment flexibility with traditional partnership risks

Also rarely used in current practice

Based on the official Ministry of Justice document regarding D-8 visas for foreigners establishing a business in Korea, here is a detailed explanation Q&A format:

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Q1: What is a D-8 visa in Korea?

A:
A D-8 visa is a "Business Investment Visa" issued to foreigners who wish to **establish, operate, or manage a company in Korea. It allows foreign investors to reside in Korea for business purposes, under the conditions specified in the **Immigration Control Act.

---

Q2: What types of D-8 visas are available?

A:
There are several subcategories of the D-8 visa. The most relevant for entrepreneurs who establish a company in Korea is:

D-8-1: For foreigners who invest directly in a Korean corporation or establish their own company.

---

Q3: What are the basic requirements for obtaining a D-8-1 visa after company formation?

A:
To qualify for a D-8-1 visa, the following core requirements must be met:

1. Company Establishment

A Korean corporation must be legally incorporated (usually as a stock company (주식회사)).
The company must be registered with the commercial registry at the court and have a business registration certificate from the tax office.

2. Minimum Investment Requirement

The **foreign investor must invest at least KRW 100 million** (\~USD 75,000).
This amount must be transferred from overseas, and the funds must be used as paid-in capital for the Korean company.

3. Registration as a Foreign-Invested Company

The company must be registered as a foreign-invested enterprise (FIE) under the Foreign Investment Promotion Act.
This is done through KOTRA or the local foreign investment support center.

4. Physical Office Space

The company must have a **dedicated business office** (not a co-working or virtual address).

5. Business Viability**

The immigration office may assess whether the company has **realistic business plans**, **contracted transactions**, or **employee hiring plans**.

---

Q4: Does the investor need to be an executive officer of the company?**

A:
Yes. The applicant must be a **registered director or executive** of the company in the commercial register. Passive investors (non-executive shareholders) are **not eligible** for the D-8-1 visa.

---

Q5: How long is the D-8-1 visa valid?**
A:
The D-8-1 visa is typically issued for **1 year (or less on first application)** and may be **renewed** if the business remains active and in compliance with investment requirements.

---

Q6: Can family members accompany the investor?**
A:
Yes. **Spouse and children** of the D-8-1 visa holder may apply for **F-3 dependent visas**, allowing them to reside in Korea during the investor’s stay.

---

Q7: What documents are required for the application?**

A:
Key documents include:

* Business registration certificate
* Commercial register (with investor as director)
* Certificate of foreign investment declaration
* Proof of KRW 100 million capital investment
* Office lease agreement
* Business plan
* Passport and application forms

---

Summary

A D-8-1 visa allows a foreign national to live and operate a company in Korea, provided they **establish a legal entity**, **invest at least KRW 100 million**, and **serve as an executive officer**. Compliance with immigration and investment laws is essential for visa approval and renewal.

Yes. When a foreign investor—either a non-resident individual or a foreign corporation—receives dividends from a Korean company, the dividend is classified as Korean-source income and is subject to withholding tax at source.

The applicable legal provisions are:

For non-resident individuals: Article 156(1) of the Income Tax Act

For foreign corporations: Article 98(1) of the Corporate Tax Act

Under both provisions, the standard withholding tax rate is 20%, and a local surtax of 10% is imposed on the withholding amount. Therefore, the effective tax rate becomes 22% (20% × 110%).

However, if the foreign investor resides in a country that has concluded a tax treaty with Korea, a reduced treaty rate may apply—typically 5% or 10%, depending on the specific treaty and the investor’s shareholding ratio. To claim the reduced rate, the investor must submit a Certificate of Tax Residence and relevant documents to the Korean company before the dividend is paid, in accordance with the International Tax Coordination Law.

The Korean company (dividend payer) is responsible for:

Withholding the tax at the time of dividend distribution

Filing and remitting the tax to the National Tax Service (NTS) by the 10th of the following month

Failure to comply with the withholding obligation may result in the company being secondarily liable for the unpaid tax and subject to penalties.

In summary, dividends paid to foreign shareholders are subject to 22% withholding tax by default, but the rate may be reduced under an applicable tax treaty, provided that proper documentation is submitted in advance.

No, a Korean partner is not legally required to establish a business in Korea. Under the Foreign Investment Promotion Act and the Korean Commercial Act, a foreign national or foreign company may wholly own a Korean entity, including a 100% foreign-owned stock company (주식회사) or limited liability company (유한책임회사).

Foreigners are permitted to:

Incorporate a new Korean company as the sole shareholder; and

Serve as the sole director or representative of the company, subject to general corporate governance requirements.

There are no mandatory joint venture or ownership-sharing obligations in most industries. However, some regulated sectors (such as media, defense, telecommunications, and shipping) may have foreign ownership caps or approval requirements under separate laws. For example, broadcasting and certain financial services are restricted or partially closed to full foreign ownership.

Additionally, while a Korean partner is not required by law, having a local partner may be practically helpful for:

Navigating local regulations

Securing permits or licenses in regulated sectors

Building market networks or distribution channels

In summary, foreign investors may independently establish and fully own a business in Korea, unless the business falls within a restricted industry under applicable Korean laws.

Company Formation in Korea: General Procedure for Establishing a Stock Company (주식회사)
Establishing a stock company (주식회사) in Korea involves the following key steps. This form is the most common legal entity used by both domestic and foreign investors due to its flexibility and shareholder liability limitation.

✅ Step 1: Decide on Key Corporate Structure
Company name (subject to name availability check)

Business purpose(s)

Total capital and number of shares issued

Shareholder(s) and their ownership ratio

Directors and statutory auditor (if applicable)

✅ Step 2: Prepare Incorporation Documents
Key documents include:

Articles of Incorporation

Promoter/shareholder agreement (if any)

Director and auditor acceptance letters

Consent for office lease

Certificate of investment (for foreign capital)

✅ Step 3: Deposit Paid-in Capital
Shareholders must deposit the capital into a temporary bank account under the name of the representative director or promoter.

A certificate of capital deposit is issued by the bank, which is required for registration.

✅ Step 4: Apply for Court Registration
Submit required documents to the Commercial Registry of the competent District Court.

The company acquires juridical personality upon registration.

Registration usually takes 3–5 business days.

✅ Step 5: Tax & Business Registration
Within 20 days of incorporation, the company must apply for:

Business registration certificate at the local tax office

Corporate seal registration

Notification of foreign investment (if applicable)

✅ Step 6: Open Permanent Corporate Bank Account
After receiving the business registration certificate, the company may open an official corporate bank account for ongoing operations.

✅ Step 7: Other Required Registrations (if applicable)
Value-added tax (VAT) registration

Industry-specific licenses or permits

Employee insurance enrollment (if hiring staff)

Summary:
A foreigner can independently establish a stock company in Korea without a Korean partner. Once the commercial registration is completed, the company becomes a legal entity, and can carry out business, sign contracts, hire employees, and remit dividends or profits in accordance with Korean law.

The Korean Commercial Act (KCA) recognizes five types of companies, each with distinct legal characteristics, liability structures, and governance requirements.

1. Stock Company (주식회사)
Most common and widely used form

Shareholders have limited liability

Capital is divided into shares, freely transferable

Requires board of directors, shareholders’ meetings, and statutory auditors (under certain conditions)

Suitable for large-scale or public enterprises

2. Limited Company (유한회사)
Private company with limited liability members

Capital is divided into equity interests (not shares)

Equity transfers are restricted

Governance is simpler, typically with a managing member

Common among small and medium-sized businesses

3. Limited Liability Company (유한책임회사)
Introduced in 2012 based on U.S.-style LLCs

All members have limited liability

Very flexible internal governance; no mandatory board or auditor

Especially favored by startups and joint ventures

Taxed as a corporation under Korean law (no pass-through taxation)

4. General Partnership Company (합명회사)
All partners have unlimited joint and several liability

Each partner may participate in management

Based on mutual trust among partners

Rarely used in modern practice due to high personal risk

5. Limited Partnership Company (합자회사)
Composed of at least one general partner (unlimited liability) and one limited partner (limited liability)

General partners manage the company

Limited partners may not participate in day-to-day management

Also rarely chosen in practice

Yes. While the Articles of Incorporation (정관) govern the company’s official structure, they are often insufficient to regulate internal arrangements between shareholders, especially in joint ventures involving a foreign investor and a Korean partner.

A Shareholders’ Agreement (SHA) is a private contract that supplements the Articles and governs the rights, obligations, and expectations of the parties in more detail.

✅ Why is a Shareholders’ Agreement Important?
The Articles of Incorporation are limited in scope and formality.

Korean Commercial Act provisions are mostly default rules unless otherwise agreed.

SHA allows customized governance, investor protections, and dispute mechanisms.

SHA is enforceable as a contract between the parties, even if not registered.

✅ Key Clauses to Consider in a SHA (for foreign-Korean joint ventures)
Capital Contributions & Ownership Structure

Details on who contributes what, when, and how much

Equity split, reserve capital, or future funding arrangements

Board Composition & Voting Rights

How directors are nominated or replaced

Reserved matters requiring unanimous or supermajority consent

Share Transfer Restrictions

Lock-up periods

Right of first refusal (ROFR)

Tag-along / drag-along rights

Dividend Policy & Profit Distribution

Formula or conditions for distributing profits

Retained earnings policies

Non-Compete & Confidentiality

Restrictions on competitive activity by shareholders

Handling of proprietary information

Deadlock Resolution Mechanism

Arbitration, buy-sell clauses, or third-party mediation

"Russian Roulette" or "Texas Shoot-out" methods

Exit Strategy & IPO Rights

Conditions under which a party can exit the venture

Rights to force sale, IPO support, or valuation mechanism

Governing Law & Dispute Resolution

Whether Korean law applies

Jurisdiction or arbitration venue (e.g., KCAB, SIAC, ICC)

Summary
Entering into a well-drafted Shareholders’ Agreement is critical for foreign investors working with Korean partners. It provides clarity, control, and legal protection beyond what the Articles of Incorporation offer. Ideally, it should be prepared or reviewed by a lawyer familiar with both Korean commercial practice and cross-border joint ventures.

Yes. Under Article 290 and related provisions of the Korean Commercial Act, a shareholder may make a contribution in kind when establishing a stock company (주식회사) or increasing capital. However, strict procedures must be followed to ensure transparency and protect creditors.

✅ 1. Permissible Objects of Contribution in Kind
The contributed asset must be specific, transferable, and valuable, such as:

Real estate

Equipment or machinery

Intellectual property rights (e.g., patents, trademarks)

Shares of another company

Claims or receivables that are definite and collectible

※ Services, labor, goodwill, or future profits cannot be contributed, as they do not meet the criteria of transferrable assets with reliable value .

✅ 2. Mandatory Disclosure in Articles of Incorporation
According to Article 290, the following must be stated:

Description of the asset

Name of the contributor

Value to be credited

Number and class of shares to be issued in return

Omission or falsity may render the incorporation null and void, or lead to civil liability for misrepresentation .

✅ 3. Court-Appointed Inspector’s Examination (Article 299)
In principle, the court appoints an inspector to verify the value and transferability of the contributed asset. However, this requirement may be exempted if:

The asset is marketable securities listed on the exchange

The asset has been appraised by a certified public appraiser

It is clear from the nature and transaction price that the valuation is not overestimated

These exceptions are narrowly interpreted and require careful documentation .

✅ 4. Risk of Overvaluation
If the asset is overvalued, the contributor is jointly and severally liable to the company and third parties for the shortfall. This includes possible criminal liability under the Act on External Audit and Commercial Code .

✅ 5. Registration & Legal Effect
After the contribution is made and the inspection (if any) is completed, the incorporation or capital increase is registered with the Commercial Registry. Legal ownership must be transferred to the company for the contribution to be effective.

Summary:
A contribution in kind is legally permitted when forming a Korean company but is subject to strict statutory procedures, including disclosure, valuation, and in some cases judicial oversight. Accurate valuation and compliance are critical to avoid personal liability and invalidation of the incorporation.

When registering a stock company (주식회사) with the Commercial Registry, the following matters must be entered in accordance with the Korean Commercial Act (Article 317) and related rules:

✅ Mandatory Registration Items upon Incorporation
Company Name (상호)
– Must be unique within the jurisdiction of the registry office.

Main Office Location (본점 소재지)
– City/district level address; later transfer requires separate registration.

Business Purpose (목적)
– Specific description of business activities.

Total Number of Shares Authorized (발행예정주식총수)

Number of Shares Issued at Incorporation (설립 시 발행주식수)

Par Value per Share (액면금액)
– Or a statement that shares are no-par.

Total Paid-in Capital (자본금)
– The total amount contributed by the initial shareholders.

Method of Capital Contribution (출자의 이행방법)
– Cash or in-kind; in the case of contribution in kind, full details must be registered.

Names and Resident Registration Numbers (or Passport Numbers) of Directors and Auditors
– If a statutory auditor is appointed.

Name of the Representative Director (대표이사)
– And the scope of representation if limited.

Incorporation Method (설립의 방식)
– Promoter-based or subscription-based incorporation.

Date of Incorporation (설립 연월일)

Articles of Incorporation Amendments (if any)
– Registered if changes occur after incorporation.

Other Statutorily Required Matters
– e.g., classes of shares, transfer restrictions, etc.

✅ Registration Is Required to:
Acquire juridical personality (법인격)

Enable the company to act as a legal subject (e.g., contract signing, asset holding)

Fulfill public disclosure and third-party protection functions

Non-compliance with registration obligations may result in administrative penalties, unenforceability against third parties, or even invalidity of corporate actions in some cases.

Yes, but only under specific circumstances. While the Korean Civil Code prohibits pactum commissorium, the Korean Commercial Act (KCA) provides a statutory exception in Article 58, permitting it in commercial pledge contracts under certain conditions.

✅ 1. General Rule under Civil Law
Under Article 339 of the Korean Civil Code, a prior agreement that entitles a pledgee to automatically acquire pledged property upon default is null and void, as it may enable unfair exploitation of the debtor and bypass judicial procedures.

✅ 2. Exception under Commercial Law – Article 58 KCA
Article 58 of the Korean Commercial Act states:

“The parties to a commercial pledge may agree that the pledgee shall acquire ownership of the pledged property upon the debtor’s default.”

This means that in commercial pledge agreements, parties may validly agree in advance that the creditor may directly acquire the collateral in case of non-performance.

✅ 3. Conditions for Validity (Based on Annotated Commentary)
The pledge must be commercial in nature, not merely civil.

The intention to transfer ownership upon default must be explicitly stated in the agreement.

The property must be lawfully transferable and independently valued.

The agreement must not violate public order or morality (공서양속) — e.g., the forfeiture of a disproportionately valuable asset for a minor default may still be invalidated.

The Korean Supreme Court has also noted that even if Article 58 applies, the agreement could be struck down if it results in gross inequity or contradicts the principle of good faith.

✅ 4. Legal and Practical Implications
The pact must be expressly drafted and commercially justified.

Automatic appropriation without judicial process is allowed only within the bounds of commercial fairness.

If the agreement appears usurious or coercive, a court may declare it unenforceable, despite Article 58.

Conclusion:
Unlike the Civil Code, the Commercial Act permits pactum commissorium in commercial pledges, allowing creditors to acquire collateral without court enforcement. However, such agreements are strictly construed and must not breach public policy or fairness standards.

Yes. Under Article 335 of the Korean Commercial Act (KCA), a stock company (주식회사) may impose restrictions on the transfer of shares. This is particularly relevant in closely held companies, such as joint ventures or family-owned entities, where controlling share ownership is crucial.

1. Legal Basis
Article 335(1) of the KCA provides that:

"The Articles of Incorporation may provide that the transfer of shares requires the approval of the board of directors."

Thus, a company may validly restrict share transfers by including such a clause in its Articles of Incorporation (정관).

✅ 2. How Is the Restriction Implemented?
The Articles must clearly stipulate that share transfers require the board’s approval.

Without such provision in the Articles, the company cannot refuse a transfer.

The board has discretion to refuse approval, unless the denial violates the principle of good faith (i.e., is arbitrary or discriminatory).

✅ 3. Scope of Restriction
The restriction applies only to registered shares of non-listed companies.

In the case of listed companies, shares are generally freely transferable under the Capital Markets Act.

The restriction must be stated at the time of share issuance, otherwise, it may not bind third-party transferees.

✅ 4. Judicial Oversight
If the board unjustifiably refuses to approve a share transfer, the transferor may seek a court ruling under the principle of abuse of right (신의칙 위반) or claim damages if refusal caused harm.

✅ 5. Practical Usage
This mechanism is commonly used to:

Maintain management control

Prevent entry of undesirable shareholders

Stabilize shareholder structure in joint ventures or start-ups

Summary:
Under Article 335 KCA, a Korean company may legally restrict share transfers through its Articles of Incorporation by requiring board approval. However, such restrictions must be clearly drafted and applied in good faith, or they may be challenged.

Yes, under Article 335-3 of the Korean Commercial Act, if the board refuses to approve a transfer of shares (in accordance with a restriction stated in the Articles of Incorporation), the shareholder (transferor) may demand that the company designate another purchaser. If the company fails to designate such a purchaser within 2 weeks, the shareholder may lawfully proceed with the original transfer.

✅ Legal Basis – Article 335-3 KCA
Paragraph (1): If the board refuses to approve a transfer, the shareholder may demand that the company designate another transferee.

Paragraph (2): If the company fails to designate a transferee within 2 weeks, the shareholder may transfer the shares to the originally intended transferee without further approval.

✅ Step-by-Step Legal Process
Board Refusal
– The company declines to approve a proposed share transfer under Article 335(1).

Demand for Alternative Transferee
– The shareholder makes a formal request to the company to designate a new purchaser for the shares.

Waiting Period of 2 Weeks
– The company must respond and designate a transferee within 2 weeks of receiving the demand.

Failure to Designate = Implied Approval
– If no transferee is designated within this 2-week period, the shareholder may proceed with the original transfer without company consent.

✅ Summary of Legal Effect
This provision protects shareholders against arbitrary or indefinite refusal by the board.

After the 2-week deadline, the company loses its right to object to the transfer.

The transfer becomes valid and effective, even without board approval.

✅ Practical Tip
The 2-week period is strictly applied. A written demand with evidence of delivery (e.g., registered mail) is recommended.

If the company does designate a buyer within 2 weeks, but that buyer refuses or fails to purchase, the original transfer may still be completed thereafter.

Conclusion:
Under Article 335-3 of the Korean Commercial Act, a company that refuses a share transfer must designate another buyer within 2 weeks. If it fails to do so, the shareholder gains the right to complete the transfer to the original transferee, without further board approval.

As confirmed by the Supreme Court En Banc Decision 2015Da248342, rendered on March 23, 2017, only persons whose names are duly recorded in the shareholder register may exercise shareholder rights vis-à-vis the company, regardless of whether they have substantively acquired the shares.

✅ Key Holdings of the Supreme Court (2017. 3. 23. 선고 2015다248342)
Purpose of the Shareholder Register System
The Korean Commercial Act requires companies to maintain a shareholder register in order to ensure legal certainty and administrative efficiency in managing relationships with a potentially large and constantly changing body of shareholders.
It provides a uniform and objective basis for identifying who can exercise shareholder rights.

Binding Effect of the Shareholder Register
The shareholder register has constitutive effect:

Only the person whose name is entered in the register is deemed a shareholder in relation to the company.

The company cannot recognize anyone else, even if that person acquired the shares in substance.

This applies to both share transfers and new share subscriptions.

Cases Involving Nominee Registration
Even if someone acquires shares through a nominee and the nominee is listed in the shareholder register, only the nominee may exercise shareholder rights.
The beneficial owner cannot assert shareholder rights against the company.

Exceptions – Limited Circumstances
Shareholder rights may be recognized for someone not listed in the register only in exceptional cases, such as when:

The company unjustifiably refuses to record the transfer, or

There is bad faith or procedural abuse on the part of the company.

Company's Obligation
A company must treat the registered shareholder as the sole legitimate shareholder, and may not deny rights to such person, nor recognize rights of an unregistered beneficial owner.

✅ Summary
Under Korean law, and particularly following the 2017 Supreme Court en banc decision, the shareholder register defines who is a shareholder for purposes of asserting rights against the company. This rule serves not only administrative convenience but also promotes legal stability and consistency in corporate governance.

The shareholder register plays a central and formal role in determining who may exercise shareholder rights under Korean corporate law. As clarified by the Supreme Court Decision 2015Da248342 (March 23, 2017), the Korean Commercial Act adopts a registration-based system, whereby only persons recorded in the shareholder register are recognized as shareholders in relation to the company.

✅ Key Concepts
Legal Function of the Shareholder Register
The shareholder register serves as a definitive and uniform standard for identifying shareholders, especially in joint stock companies where shareholding frequently changes.
This allows the company to handle shareholder-related affairs (e.g., voting, dividends, notifications) in a clear and administratively efficient manner.

Constitutive Effect (형성적 효력)
The shareholder register has constitutive legal effect—meaning, even if someone has substantively acquired shares (through transfer or subscription), they cannot exercise shareholder rights unless they are registered in the shareholder list.

Binding Effect on the Company
The company must recognize only the registered shareholder as the legitimate rights holder, regardless of whether another person is the actual beneficial owner.
This applies not only to share transfers but also to new share issuances.

Legal Stability and Predictability
The system ensures legal certainty and avoids disputes by preventing the company from being exposed to conflicting claims.
It is not merely for the company’s convenience, but reflects a structural need to stabilize corporate legal relations among numerous parties.

✅ Supreme Court’s Viewpoint
The Supreme Court emphasized that:

“The shareholder register system is designed not merely for administrative convenience, but to ensure legal stability in shareholder relations and to allow the company to uniformly determine who may exercise rights, regardless of the underlying substantive relationship.”

✅ Summary
Under Korean law, the shareholder register is essential to corporate governance. It acts as a formal and authoritative basis for shareholder identity, and the company is legally bound to treat only those listed in the register as legitimate shareholders.

In Korea, the representative director (대표이사) is responsible for the preparation, maintenance, and certification of the shareholder register. For the register to have legal effect, it must bear the signature or seal of the representative director and be properly retained at the company's head office, in accordance with the Korean Commercial Act.

✅ Legal and Practical Basis
Commercial Act Article 352(1):

“The company shall prepare a shareholder register stating the names and addresses of shareholders, and the type and number of shares held by each shareholder, and retain it at the head office.”

Practice:
– Although the Commercial Act does not explicitly designate the representative director as the drafter, it is firmly established in practice—and supported by legal commentary—that the representative director is the person who prepares, certifies, and manages the register.
– The representative director’s name seal (직인) or signature is usually affixed to verify the authenticity of the entries.

✅ Key Points
Representative Director as Register Authority
– The representative director exercises the power to certify entries, including for new share subscriptions, share transfers, and name changes.

Legal Effect Through Signature
– The register gains legal authenticity only when it is signed or stamped by the representative director.
– A register without such authentication lacks formal validity and may not be recognized in legal disputes.

No Legal Effect for Third-Party Records
– Registers created by shareholders or unauthorized personnel are not legally effective, even if accurate.

Binding Effect on the Company
– Once a shareholder is listed with proper authentication, the company must recognize that person as the legitimate shareholder, and cannot deny shareholder rights based on substantive ownership disputes.

✅ Summary
In Korean joint stock companies, the representative director is the official authority who prepares and certifies the shareholder register. For legal validity, the register must include the representative director’s signature or seal, and be retained at the company’s head office. This ensures that shareholder status can be confirmed in a formally consistent and legally binding manner.

Under Article 352(1) of the Korean Commercial Act, a Korean stock company (주식회사) is required to include the following information in its shareholder register (jujumyeongbu):

✅ Required Entries in the Shareholder Register
Name of the Shareholder
– Full legal name of each shareholder

Address of the Shareholder
– Domicile or business address

Number of Shares Held
– Total number of shares owned by the shareholder

Class or Type of Shares (if applicable)
– For example: common shares, preferred shares, non-voting shares, etc.

✅ Legal Basis
Commercial Act Article 352(1):

“A company shall prepare a shareholder register stating the names and addresses of shareholders, the class and number of shares held by each shareholder, and retain it at its head office.”

✅ Additional Notes
The shareholder register must be retained at the company’s head office.

The entries must be certified with the representative director’s signature or seal.

Any updates (e.g., transfers, issuance, inheritance) must be promptly reflected in the register.

✅ Practical Significance
Accurate and timely entry in the shareholder register is crucial because:

Only registered shareholders can exercise shareholder rights (e.g., voting, dividend claims).

The company relies exclusively on this register to determine the identity and rights of shareholders.

Conclusion:
To ensure the legal recognition of shareholder status in Korea, the shareholder register must contain the name, address, number of shares, and type of shares for each shareholder, as provided in Article 352(1) of the Korean Commercial Act.

According to Article 354(1) of the Korean Commercial Act, a company may determine which shareholders are entitled to exercise rights (e.g., voting at a general meeting) by either:

Temporarily closing the shareholder register, or

Designating a specific record date.

Both methods are legally valid and provided under the same clause (Article 354(1)).

✅ Legal Basis
Commercial Act Article 354(1):

“A company may suspend alterations to the shareholder register for a period not exceeding three months by resolution of the board of directors, or it may determine the shareholders who shall exercise rights as of a specific date by a resolution of the board and by giving prior public notice.”

✅ Two Options to Fix Shareholder Rights
Book Closure (주주명부 폐쇄)

The shareholder register is temporarily closed (no updates allowed) for up to 3 months.

Requires a board resolution.

Shareholders listed during that period are eligible to exercise rights.

Record Date Designation (기준일 지정)

Instead of closing the register, the board may set a specific date as the reference point.

This date determines which shareholders are entitled to vote or receive dividends.

Public notice must be given at least 2 weeks in advance.

✅ Practical Considerations
These mechanisms prevent confusion over shareholder eligibility.

The record date system is more flexible and commonly used, especially for listed companies.

✅ Summary
Under Article 354(1) of the Korean Commercial Act, a company may choose to either:

Close the shareholder register for a limited time, or

Set a record date, with proper notice,
to determine which shareholders may exercise rights at a general meeting.

Both methods are equally valid and serve to stabilize shareholder relations in connection with shareholder rights.

Yes, foreign shareholders can be validly registered in the shareholder register (jujumyeongbu) of a Korean company. There is no legal restriction based on nationality. The key requirement is that the shareholder's identity must be clearly identifiable, whether the shareholder is Korean or foreign.

✅ Legal Basis
Commercial Act Article 352(1):

“A company shall prepare a shareholder register stating the names and addresses of shareholders, the class and number of shares held by each shareholder, and retain it at its head office.”

✅ Required Information for Foreign Shareholders
To be registered, a foreign shareholder typically provides:

Full Legal Name (as per passport)

Passport Number (used in lieu of Korean resident registration number)

Overseas Residential Address

Nationality (if needed for clarity)

This information enables the company to clearly identify and distinguish the shareholder in accordance with Article 352.


✅ Practical Notes
The shareholder register is not a public record, but must be accurately maintained by the company to ensure proper exercise of rights.

In case of corporate foreign shareholders, additional information such as business registration certificate (if available) and legal representative’s details may be requested.

✅ Summary
Foreign shareholders are fully eligible to be registered in a Korean company’s shareholder register. As long as the identity is clearly verifiable, typically by passport number and foreign address, the registration is valid and effective under Korean law.

Foreign investors in Korea may establish a business presence through one of the following primary legal structures:

1. Joint Stock Company (JSC / “Chusik Hoesa”)
Legal Status: A JSC is a separate legal entity under Korean Commercial Code (KCC), with shareholders liable only to the extent of their capital contributions.

Incorporation:

Incorporation requires registration with the court registry.

Shares must be subscribed and capital paid in, but there is no statutory minimum capital.

Ownership & Transfer:

Capital is divided into shares, which are freely transferable unless restricted by articles of incorporation.

Ideal for businesses seeking external investors or potential public offerings.

Governance:

Requires at least one director; three or more directors are needed to form a board.

Statutory audit obligations apply if certain thresholds (e.g., capital, assets, revenue) are met.

Regulatory Compliance:

Subject to more rigorous disclosure, recordkeeping, and audit requirements.

Suitable for: Medium to large businesses, or those planning to raise capital from multiple investors.

2. Limited Liability Company (LLC / “Yuhan Hoesa”)
Legal Status: Also a separate legal entity. Introduced by the 2011 amendment to the KCC to resemble U.S.-style LLCs.

Ownership & Structure:

No shares; ownership is based on member equity interest.

Members may agree on flexible rules regarding profit distribution and governance.

Governance:

No requirement for a board of directors.

Management is usually conducted by designated managers or by members directly.

Transfer of Equity:

Transfer of interests generally requires approval of other members, promoting a more closed structure.

Regulatory Burden:

Fewer formalities and less public disclosure than a JSC.

Statutory audit may be exempt depending on size.

Suitable for: Closely held or family-run businesses, joint ventures with limited external investor participation.

3. Branch Office of a Foreign Corporation
Legal Status: Not a separate legal entity; considered an extension of the foreign parent company.

Registration:

Must register as a branch with the Korean court registry and tax office.

Capital Requirements:

No minimum capital requirement.

Operational Limits:

Cannot issue shares or raise capital from Korean investors.

The parent company remains liable for the branch’s obligations.

Accounting & Taxation:

Subject to Korean taxation on Korea-sourced income.

Required to maintain separate books for Korean operations.

Suitable for: Foreign companies expanding operations into Korea without setting up a new legal entity.

No. The Supreme Court has made a clear distinction between a statement you give to a tax official and one you give to the police. This has major implications for how that statement can be used in a criminal trial.

1. Tax Officials Are Not Police Officers
The Court ruled that officials from the National Tax Service (NTS) conducting a tax crime investigation are not considered "judicial police." Their investigation is considered an administrative procedure, not a criminal one, even though it may feel similar.

2. A Stricter Test for Evidence
Because of this distinction, a report or record of your statement made to a tax official is not automatically admissible as evidence in a criminal court. It must pass a much stricter, two-part test:

Confirmation in Court: The person who gave the statement must testify in court that the report is true and accurate.

"Especially Reliable" Circumstances: A judge must be convinced that the statement was made under highly trustworthy conditions, with almost no chance of falsehood.

3. How is "Reliability" Judged?
To determine if a statement is "especially reliable," the court will examine whether the tax officials protected your fundamental rights during their investigation. Specifically, they will check if the tax officials properly informed you of:

Your right to remain silent.

Your right to have a lawyer's assistance.

If the tax officials failed to protect these key rights, the court will likely find the circumstances were not "especially reliable," and your statement cannot be used as evidence against you in the criminal trial.

[The Rule for Warrantless Filming]
Police may be able to film without a warrant if three conditions are met:

1. A crime is currently in progress or has just ended.

2. There is an urgent need to preserve evidence.

3. The filming is done in a "generally acceptable and reasonable manner."

[What is a "Reasonable Manner"? The Nightclub Case]
The Court ruled on a case where police entered a nightclub as regular customers and filmed an illegal lewd performance on stage. The Court found this warrantless filming was legal and the video was admissible evidence.

The reasoning was based on these key factors:

• Publicly Accessible Space: The nightclub was open to any paying adult customer; it was not a private space like a home.

• Normal Entry: The police entered through the main door during business hours, just like any other patron. They did not use force or stealth.

• No Expectation of Privacy: The performance was on a stage, openly displayed to a large audience. The performers could not have a reasonable expectation of privacy for an act they were performing for hundreds of strangers.

In short, if a business is open to the public and an illegal act is occurring in plain sight of all customers, police can likely enter as regular customers and record the act as evidence without a warrant.

This ruling highlights two fundamental rights that protect defendants: the right to a specific indictment and strict new rules on using a defendant's statements as evidence.

1. Your Right to a Specific Charge
When a prosecutor formally charges you with a crime, the indictment document cannot be vague. It must clearly state the time, place, and method of the alleged offense.

• Why is this important? This is a fundamental right that allows you to know exactly what you are being accused of so you can prepare a proper defense (for example, by providing an alibi for a specific date).

• What if the charge is too vague? If a prosecutor provides an overly broad charge (e.g., "sometime between January and June") without a good reason, and refuses a judge's request to be more specific, the judge must dismiss the charge.

2. Your Statement to the Prosecutor Cannot Be Used if You Plead "Not Guilty"
This is a critical change in Korean law (effective from 2022).

• The New Rule: A record of the statement you gave to a prosecutor during the investigation can only be used as evidence against you in court if you "acknowledge its content."

• The Meaning: The Supreme Court has clarified that "acknowledging its content" means you must admit in court that what you said in that statement is the actual truth.

• The Practical Effect: If you plead "not guilty" at trial, you are, by definition, stating that any confession in the prosecutor's record is not the true story. Therefore, that statement cannot be used as evidence against you. The prosecutor must prove their case using other evidence, not your previous confession.

✅ Yes, foreigners are permitted to own 100% of a Korean company, including full equity ownership, as long as the business is not in a restricted industry.

???? Legal Background
Korea follows a generally open approach to foreign direct investment (FDI):

Under the Foreign Investment Promotion Act (FIPA) and the Foreign Exchange Transactions Act, foreign individuals or corporations may establish and own 100% of the shares in most types of companies, including joint stock companies (Chusik Hoesa) and limited liability companies (Yuhan Hoesa).

There are exceptions in specific regulated sectors, such as telecommunications, broadcasting, electricity, and defense-related industries, where foreign ownership may be capped (e.g., 49%).

???? Key Steps for Foreign Investment
To establish a company as a foreign investor, the following general procedures apply:

Incorporation of a company under the Commercial Act.

Foreign investment registration with the Korean government (if intending to qualify under FIPA).

Minimum investment requirement: KRW 100 million (roughly USD 75,000) per foreign investor for eligibility under FIPA.

Fund remittance from abroad via foreign currency, and deposit into a Korean bank account.

Business registration and tax registration.

Report under the Foreign Exchange Transactions Act, for inbound and outbound capital flows.

???? Visa & Residency Note
Foreign investors may qualify for a D-8 (Business Investment) visa, which allows long-term residence in Korea for business management.

D-8 visa holders enjoy certain immigration benefits and may sponsor family members.

⚠️ What about regulated industries?
Foreigners can generally engage in any lawful business. However, Korea restricts FDI in a small number of sectors for national security or public interest reasons. For example:

Broadcasting and telecom industries may require Korean majority ownership.

Military manufacturing is typically restricted altogether.

A full list is maintained and regularly updated by Korea's Ministry of Trade, Industry and Energy.

✅ Summary
Foreigners can freely establish and fully own a company in Korea, enjoy favorable immigration status (D-8 visa), and remit profits abroad, provided the business is not restricted by law. Korea offers one of the most structured and investor-friendly legal frameworks in Asia for foreign entrepreneurs.

Pursuant to Article 340-2 of the Korean Commercial Act, an unlisted stock company may grant stock options to its directors, officers, employees, or persons who have contributed to the incorporation or technological innovation of the company. The grant must be approved by a special resolution of the general shareholders’ meeting.

In the case of an unlisted company, the aggregate number of shares to be issued or transferred upon exercise of stock options shall not exceed 10% of the total number of issued shares. The exercise price must not be less than the fair market value of the shares at the time of the shareholder resolution.

As a general rule, stock options cannot be exercised within two years from the date of the resolution. However, if the grantee dies or retires, the options may be exercised earlier. Also, if the grantee is no longer affiliated with the company due to reasons not attributable to their fault, the company may still permit the exercise of vested options.

The purpose of this provision is to allow companies to use stock options as an incentive mechanism, while ensuring shareholder oversight and limitation of potential dilution.

Under Article 340-2 of the Korean Commercial Act, a non-listed stock company must satisfy the following requirements to legally grant stock options:

Shareholders’ Resolution
A special resolution must be passed at the general meeting of shareholders. This requires:

At least two-thirds of the voting rights of the shareholders present.

Presence of shareholders holding at least one-third of the total issued shares.

Eligibility of Recipients
Stock options may only be granted to:

Directors and employees of the company.

Individuals who have contributed to the company’s incorporation or technological innovation.

Limit on Quantity
The number of shares subject to stock options must not exceed 10% of the total number of issued shares.

Exercise Price
The exercise price must not be lower than the fair market value of the company’s shares at the time of the shareholder resolution.

Vesting Period
In principle, stock options cannot be exercised until two years have passed since the date of the resolution.

Additional Conditions

Stock options must be granted under the company’s articles of incorporation or an amendment thereof.

Any amendments to the terms or recipients of granted options also require shareholder approval.

These requirements aim to ensure fairness, transparency, and accountability in the granting of stock options, particularly in closely held corporations where dilution risks are significant.

Under Article 340-4 of the Korean Commercial Act, the exercise of a stock option is valid only when the grantee makes a written request for the issuance or transfer of shares and pays the exercise price.

The essential conditions for exercising stock options are as follows:

Written Request
The grantee must submit a written application to the company requesting the issuance or transfer of shares based on the granted option. This request must be made within the exercise period stipulated in the stock option agreement or shareholder resolution.

Payment of Exercise Price
The grantee must fully pay the exercise price as determined at the time of the grant. The payment must be completed at the time of exercising the option; partial or deferred payments are not permitted unless otherwise allowed by law.

No Separate Board Resolution Required
Once the stock option has been validly granted under Article 340-2 and the grantee complies with the requirements above, the company is obliged to issue or transfer the shares—a separate board resolution for issuance is not necessary at the time of exercise.

Issuance vs. Transfer
The company may satisfy the option by issuing new shares or transferring treasury shares, depending on how the option was structured at the time of grant.

Failure to comply with the formal requirements—such as omission of a written request or non-payment of the exercise price—renders the exercise invalid.

Under Article 340 of the Korean Commercial Act, a pledge on shares of a stock company is valid only if certain formalities are met. The requirements differ depending on whether share certificates (stock certificates) have been issued.

If Share Certificates Are Issued (Bearer or Registered Shares):

A pledge is perfected by delivering the share certificate to the pledgee.

If the shares are registered, the name and address of the pledgee must be recorded on the share certificate or in the company’s shareholder register to establish effectiveness against third parties.

If Share Certificates Are Not Issued (e.g., in most unlisted companies):

The pledge is established by recording the pledge in the shareholder register.

This entry must include the name and address of the pledgee, the number of shares pledged, and the date of the pledge.

Effect Against Third Parties:

In order for the pledge to be effective against the company and third parties, the pledge must be properly recorded in the shareholder register (non-certificated shares) or notified to the company (certificated shares with endorsement or delivery).

Right to Exercise Shareholder Rights:

The pledgee does not automatically acquire voting rights or rights to dividends unless otherwise agreed.

The pledgee may, however, take necessary steps to preserve the pledged rights, such as opposing capital reductions or mergers.

This provision ensures clarity in the creation of security interests over shares and protects third parties and the company from undisclosed encumbrances.

According to Article 337 of the Korean Commercial Act, in order for the transfer of shares to be effective against the issuing company, certain requirements must be satisfied depending on whether the shares are certificated or non-certificated:

If Share Certificates Are Issued:

The endorsement and delivery of the share certificate to the transferee are necessary to complete the transfer.

However, to assert the transfer against the issuing company, the transferee must request a name transfer (registration of transfer) in the shareholder register maintained by the company.

If Share Certificates Are Not Issued (as is common in unlisted companies):

The transfer is perfected between the parties upon agreement, but to assert it against the company, the transferee’s name must be recorded in the shareholder register.

Without such registration, the transferee cannot exercise shareholder rights such as voting or receiving dividends.

Legal Effect:

Even if the transfer has been validly executed between the parties, the company may treat only the person listed in the shareholder register as the shareholder.

This rule provides legal certainty for the company in identifying shareholders and administering corporate actions.

Under the Korean Commercial Act, the method of transferring shares differs based on whether share certificates (“주권”) have been issued. The key distinction lies in the formal requirements and the means of perfection and enforceability.

???? 1. If Share Certificates Have Been Issued (상법 제335조 제1항)
Transfer Method:

The transfer is completed by endorsement of the share certificate by the transferor and delivery of the certificate to the transferee.

Assertion Against the Company (상법 제337조):

To be effective against the issuing company, the transferee must request and complete registration of the transfer in the shareholder register.

Without such registration, the company may continue to recognize the previous shareholder as the rightful owner.

Legal Effect:

Endorsement + delivery perfects the transfer between the parties and vis-à-vis third parties in general,

But only registration in the shareholder register confers shareholder rights against the company.

???? 2. If Share Certificates Have Not Been Issued
Transfer Method:

The transfer is effected by a simple agreement between the transferor and the transferee. No physical endorsement or delivery is required.

Assertion Against the Company:

To exercise shareholder rights, the transferee must be recorded in the shareholder register.

Registration is the only means of asserting the transfer against the company.

Legal Effect:

The transfer is valid between the parties upon contract.

However, without shareholder register entry, the transferee cannot claim rights such as voting or dividends.

Under Article 331 of the Korean Commercial Act, shareholders of a stock company (주식회사) are liable only to the extent of their capital contribution. This principle is known as the “limited liability” of shareholders.

Key Points:
Limited Liability Principle

A shareholder is not personally liable for the company’s debts or obligations.

Their financial exposure is limited to the amount they have subscribed for or paid for the shares.

No Additional Liability

Even if the company becomes insolvent, shareholders have no further duty to contribute assets beyond the value of their shares, whether or not the company has satisfied its obligations to creditors.

Policy Rationale

This rule ensures the separation of corporate and personal assets, encouraging capital investment without risk of unlimited personal liability.

Exception – Piercing the Corporate Veil (Not under Article 331, but by case law)

In exceptional cases of abuse (e.g., fraud or undercapitalization), courts may hold shareholders liable beyond their investment under the piercing the corporate veil doctrine.

However, this is not the general rule and does not affect the basic limited liability under Article 331.

In Supreme Court Decision 2009Da73400, rendered on January 28, 2010, the Korean Supreme Court elaborated the conditions under which the doctrine of piercing the corporate veil may apply. Even if a company maintains the formal structure of a corporation, its separate legal personality may be disregarded when the company is used as a mere façade for an individual or to abuse the corporate form.

???? Key Legal Principle:
“If a company, although formally incorporated, is in essence merely an individual’s business and is used arbitrarily as a vehicle to avoid legal obligations or to circumvent the law, then denying the liability of the controlling person solely on the basis of corporate separateness constitutes an abuse of the corporate form that violates the principle of good faith. In such cases, both the company and the person behind it may be held liable for the company’s acts.”

✅ Criteria for Piercing the Veil (as stated in the ruling):
When the Corporation Is a Mere Shell (형해화 상태)

The company exists in name only and operates in substance as the individual's private business.

This is evaluated based on:

Commingling of assets and business between company and controller.

Absence of lawful procedures (e.g., no shareholder or board meetings).

Undercapitalization or financial unreliability.

Minimal scale of operations or lack of employees.

Even Without Shell Status – Abuse of Corporate Form

Even if the company retains legal structure, if the controller dominates and misuses the company for improper purposes (e.g., fraud or debt evasion), liability may still be imposed.

Assessment includes:

Degree of control by the behind-the-scenes person.

Extent of abuse of the corporate form.

Good faith and reliance of the counterparty.

⚖️ Legal Effect:
In such cases, the Court may disregard the corporate entity and allow creditors to hold both the company and its controller jointly liable for the company’s obligations, in order to prevent injustice.

Under the Korean Commercial Code (KCC), there is no legal minimum capital requirement to establish a joint stock company (Chusik Hoesa) in Korea. Technically, a company may be incorporated with as little as KRW 1 in paid-in capital, as long as the statutory incorporation procedures are properly followed—this includes preparing the articles of incorporation, subscribing to shares, paying in capital, and completing registration with the court.

However, despite the absence of a legal threshold, KRW 100 million (approximately USD 75,000) is widely recommended in practice for the following reasons:

Foreign Investment Registration
According to the Foreign Investment Promotion Act, a foreign investor must invest at least KRW 100 million in equity capital in order to qualify as a foreign-invested enterprise. This registration is often required for obtaining foreign investor privileges and protections.

D-8 Business Investment Visa
A foreign individual who intends to establish and operate a business in Korea under a D-8 (Business Investment) visa is generally required by immigration authorities to contribute at least KRW 100 million as paid-in capital in the company.

Practical Business Considerations

Companies with insufficient capital may face obstacles in opening corporate bank accounts, hiring employees, or signing lease contracts.

Under-capitalized companies may be viewed by tax authorities as potential paper companies created for improper purposes.

Lack of sufficient capital may undermine the company’s credibility with potential partners, suppliers, or investors.

In summary, although the KCC does not impose a minimum capital requirement for establishing a joint stock company, KRW 100 million is effectively treated as the practical minimum—especially in cases involving foreign investment, immigration, or meaningful business activity.

Legal Basis:

Korean Commercial Code (no minimum capital required for Chusik Hoesa)

Foreign Investment Promotion Act and Immigration Control Act (KRW 100 million threshold for regulatory purposes)

Under the Korean Commercial Code (KCC), a restriction on the transfer of shares is only binding on the company if it is explicitly stated in the company’s articles of incorporation.

Article 335(1) of the KCC provides that shares of a joint stock company are freely transferable, unless the articles of incorporation provide otherwise.

Therefore, even if the shareholders enter into a private shareholders’ agreement restricting the transfer of shares, such a restriction does not have binding force against the company itself unless it is reflected in the articles.

As a result:

A shareholder who transfers shares in violation of such an agreement may be liable to other shareholders for breach of contract,

But the company must still recognize the transferee as a shareholder if the transfer otherwise complies with legal requirements (e.g., registration in the shareholder registry),

The company cannot refuse to register the transfer based solely on the shareholders’ agreement unless the restriction is included in the articles.

This principle has been consistently upheld by Korean courts. The legal effect of a transfer restriction is limited to the parties to the agreement, and not opposable to the company unless formally incorporated into its governing documents.

Legal Basis:

Korean Commercial Code Article 335(1): Share transfer restrictions must be prescribed in the articles of incorporation to be valid against the company.

Case Law: Korean courts have held that purely contractual share transfer restrictions (i.e., outside the articles) do not bind the company.

No. Under Korean Commercial Law, a company may acquire its own shares (treasury stock) only within the limits of its distributable profits, unless otherwise specifically allowed by law.

According to Article 341 of the Korean Commercial Code (KCC), a joint stock company is generally prohibited from acquiring its own shares, except in certain cases (e.g., capital reduction, merger, employee allocation, dissenters’ rights). Even in those cases, the acquisition must not impair the company’s capital base.

In principle, the purchase of treasury stock is permitted only to the extent of the company’s distributable profits, which are calculated under the following criteria:

Net assets must exceed stated capital and statutory reserves

Distributable profits must be available after accounting for losses and legal reserves

This rule is designed to protect creditors and shareholders by preserving the company’s capital integrity. A company that acquires its own shares beyond this limit violates the capital maintenance principle, and such transactions may be declared invalid or unlawful.

Key Takeaways:

Treasury stock acquisition must be funded from distributable profits

No reduction of capital or unlawful depletion of net assets is allowed

Violation may result in legal liability for directors and nullification of the transaction

Exceptions exist for cases like mergers or statutory repurchase obligations, but even then, financial prudence is required

Legal Basis:

Korean Commercial Code Article 341

Capital maintenance doctrine under Korean corporate law

Supporting commentary from company law treatises and annotations

Under Article 341(1) of the Korean Commercial Code (KCC), a joint stock company may acquire its own shares (treasury stock) only to the extent of its distributable profit.

The law provides a specific formula to determine this limit, which aims to protect the company’s capital integrity and the interests of creditors and shareholders.

➤ Statutory Formula for Distributable Profit:
Distributable Profit = Net Assets − ( Stated Capital + Capital Reserves + Earned Surplus Reserves accumulated until that fiscal year-end + Legal Reserve to be appropriated for the fiscal year + Unrealized Gains as prescribed by Presidential Decree )

In other words, treasury stock may only be acquired if the company’s net assets exceed the total of the following:

Stated capital (paid-in capital)

Capital reserves (e.g., share premium, asset revaluation reserves)

Retained earnings reserves accumulated up to the closing of that fiscal year

Legal reserve (i.e., earnings reserve required to be set aside for the year under Article 459)

Unrealized profits, such as asset revaluation gains, as designated by Presidential Decree

This calculation must be based on the company’s most recent financial statements approved at the general shareholders’ meeting.

➤ Important Notes:
The restriction exists to preserve the capital base and avoid unlawful depletion of company assets.

If treasury shares are acquired beyond this limit, the transaction may be voidable and directors may incur liability.

The board of directors must approve the acquisition, and in some cases, shareholder approval may also be required.

Legal Basis:

Korean Commercial Code Article 341(1)

Enforcement Decree of the KCC (for definition of unrealized gains)

Related provisions on reserves and capital maintenance

No. According to the Supreme Court of Korea (2021.10.28, Case No. 2020Da208058),
even if a company enters into a contractual agreement with a specific shareholder to purchase its own shares, such an acquisition is only valid if it satisfies the legal requirements—most importantly, the existence of distributable profit under Article 341 of the Korean Commercial Code (KCC).

➤ Key Legal Principles from the Supreme Court Decision:
The 2012 amendment to the KCC (effective April 15, 2012) relaxed the prohibition on treasury stock acquisition.

Article 341 permits a company to acquire its own shares within the limits of distributable profit, including through exchange-traded purchases.

Article 341-2 allows exceptions without the distributable profit restriction, but only for certain specific statutory purposes, such as exercise of appraisal rights under Articles 360-5(1), 374-2(1), or 522-3(1).

However, the Court held that:

If a company privately agrees with a shareholder to repurchase shares at a pre-agreed price, and such arrangement effectively grants a right akin to an appraisal right,
this does not fall under Article 341-2(4) (which permits unrestricted acquisition upon legitimate exercise of statutory appraisal rights).
Instead, the acquisition must comply with Article 341, including the requirement of distributable profit and proper procedural safeguards.

Therefore, any agreement for a company to acquire its own shares outside the scope of the law—even if consensual—is invalid if it fails to meet the statutory conditions.

➤ Conclusion:
Even after the 2012 amendment easing restrictions on treasury stock, the principle remains unchanged:
A company may only acquire its own shares in the cases and under the conditions strictly defined by law.

Thus:

A contractual share repurchase is valid only if it complies with Article 341 (i.e., within distributable profit, with proper procedures).

If the acquisition is not based on a statutory appraisal right but rather on a private right created by agreement, the exemption under Article 341-2(4) does not apply.

Violations render the repurchase agreement invalid.

Legal Basis:

Korean Commercial Code Article 341, Article 341-2(4), Article 462

Supreme Court Decision 2020Da208058, dated October 28, 2021

2012 amendment by Act No. 10600 (effective April 15, 2012)

In Korea, a prosecutor's indictment (the formal charging document) must be specific to be legally valid. This is a fundamental right that ensures a defendant knows exactly what they are accused of and can prepare a proper defense.

The Rule: Specify Time, Place, and Method
The law requires that every charge must clearly state the time, place, and method of the alleged crime.

This Ruling's Focus: The Importance of the Date
This Supreme Court ruling specifically addresses the "time" requirement. The date of the offense must be stated with enough clarity to determine if the charge is legal. In particular, it must be possible to check if the statute of limitations (공소시효)—the legal time limit for bringing a charge—has expired.

If the date in the indictment is so vague or broad that it's impossible to tell whether the statute of limitations has run out, the charge is considered legally flawed.

What Happens if a Charge is Too Vague?

1. First, the judge will ask the prosecutor to provide a more specific date or time frame.

2. If the prosecutor fails to do so, the judge must dismiss the charge.

In short, a prosecutor cannot charge you with a crime that allegedly happened at some unspecified time in the distant past. The charges must be precise enough for you and the court to verify that they are brought within the legally allowed time frame.

Under Article 341(1) of the Korean Commercial Code (KCC), a company may acquire its own shares (treasury stock) within the limits of its distributable profit,
but such acquisition is subject to strict procedural and substantive requirements, including approval by the general meeting of shareholders.

➤ Legal Requirements and Process:
Approval by the General Meeting of Shareholders (Shareholders’ Resolution)

As a general rule, the company must obtain a resolution of the general shareholders’ meeting before acquiring treasury stock using distributable profits.

The resolution must specify:

The class and number of shares to be acquired

The maximum and minimum acquisition price

The acquisition period

The method of acquisition

Sufficient Distributable Profit

The company must have distributable profit calculated as:

Net Assets − (Stated Capital + Capital Reserves + Earned Surplus Reserves + Legal Reserve + Unrealized Gains)

Based on the most recent approved financial statements.

Board Implementation

Once shareholder approval is obtained, the board of directors executes the acquisition in accordance with the resolution’s terms.

Fairness and Equal Treatment

The acquisition must not unfairly disadvantage any shareholder.

Listed companies must comply with additional disclosure and procedural rules under securities regulations.

Treasury Shares Must Be Properly Accounted For

Treasury shares carry no voting or dividend rights while held by the company.

They must be reported separately on the balance sheet.

➤ Exception to Shareholder Resolution Requirement:
In certain narrow cases (e.g., acquisition for employee stock compensation if authorized by the articles),
acquisition may proceed with only a board resolution.

However, such exceptions are strictly limited, and general acquisitions under Article 341(1) still require shareholder approval.

Legal Basis:

Korean Commercial Code Article 341(1) (shareholder resolution requirement and use of distributable profits)

Article 462 (definition of distributable profit)

Commentary from Korean corporate law treatises

Under Article 342 of the Korean Commercial Code (KCC), a company may dispose of its own shares (treasury stock) either in accordance with the articles of incorporation or, if there is no such provision, by a resolution of the board of directors.

➤ Legal Framework:
If the Articles of Incorporation Contain Specific Provisions

The disposal of treasury shares must be conducted in accordance with the articles.

The articles may specify:

The authorized body (e.g., shareholders’ meeting or board)

Procedures or conditions for disposal

Price or method restrictions

If No Such Provision Exists in the Articles

The company may dispose of treasury shares by obtaining a board resolution.

The board determines:

The type and number of shares

The minimum disposal price

The disposal period

The method of sale or allocation

➤ Purpose and Fairness:
Treasury shares may be disposed of for purposes such as:

Raising capital

Allocating shares to employees or third parties

Strategic partnerships

The disposal must not unfairly prejudice shareholders or violate capital maintenance and governance principles.

Yes. Under Article 341-2 of the Korean Commercial Code (KCC), a company is permitted to acquire its own shares (treasury stock) even in the absence of distributable profit,
but only in specific, narrowly defined statutory cases.

These exceptions are designed to accommodate structural or legal necessities, not discretionary business purposes.

➤ Exceptions under KCC Article 341-2:
A company may acquire treasury stock regardless of distributable profit in the following four cases:

Merger, Division, or Transfer of Business

Where the company acquires its own shares incidentally through a merger, company division, or business transfer.

Judicial Sale due to Enforcement (Pledge, Compulsory Execution)

Where the company acquires its own shares as a result of court-enforced sales, including enforcement of pledges or other judicial execution procedures.

Disposition of Fractional Shares (단주 처리)

When fractional shares (단주) arise due to stock splits, reverse splits, or other corporate actions, the company may acquire such fractional shares for the purpose of rounding or disposal.

Exercise of Appraisal Rights by Shareholders

If a shareholder exercises a statutory appraisal right under provisions such as:

Article 360-5(1): Short-form merger

Article 374-2(1): Transfer of entire business or major assets

Article 522-3(1): Merger involving joint stock companies

In this case, the company is legally obligated to repurchase shares at a fair value, regardless of its profit status.

➤ Important Notes:
These exceptions are interpreted strictly and exhaustively.

Contractual share repurchase agreements not grounded in statutory provisions do not qualify.

The acquisition of treasury stock outside these four exceptions still requires compliance with Article 341, including the existence of distributable profit and, in principle, a shareholder resolution.

If you believe an investigator (police or prosecutor) has conducted an illegal search or seizure of your property, you have the right to challenge it in court. This special, expedited procedure is called a "Jun-hang-go" (준항고).

What is a "Jun-hang-go"?
It is a formal written request asking a court to review an investigator's action and, if it was illegal, to cancel the seizure or return your property.

This Ruling's Key Point: Courts Should Be Helpful, Not Overly Strict
The Supreme Court has clarified that the purpose of this procedure is to quickly protect people's rights. Therefore, a court should not easily dismiss your challenge due to minor technical errors in your application.

Specifically, the Court ruled that:

• If you have difficulty identifying the exact details of the seizure in your written request, the judge should help you clarify the information rather than simply dismissing your case.

• Your challenge should not be rejected just because you failed to correctly name the specific police station or officer who conducted the seizure.

In essence, this ruling ensures that courts focus on the substance of your complaint—that your rights may have been violated—rather than dismissing your case on a procedural technicality. It makes this important remedy more accessible to individuals seeking to challenge the actions of an investigator.

Yes, but only under strict and limited conditions.
According to Article 341-2(2) of the Korean Commercial Code (KCC), a company may acquire its own shares (treasury stock) without distributable profit
if such acquisition is necessary for the enforcement of a right held by the company.

However, this exception is narrowly interpreted by the courts.
In a landmark ruling, the Supreme Court of Korea (1977. 3. 8., Case No. 76Da1292) clarified the scope and requirements of this provision.

➤ Supreme Court Interpretation (Case No. 76Da1292):
The Court held that:

The phrase “when enforcing its rights” under Article 341-2(2) means that a company may acquire its own shares only if:

The enforcement is by means of compulsory execution, realization of a security right, or similar legal procedures; and

The debtor/shareholder possesses no other assets besides the company’s own shares.

In other words:

The company may acquire its own shares as payment in kind (in lieu of money)
or through judicial auction, but only if the debtor is insolvent and has no alternative means to satisfy the debt.

➤ Burden of Proof:
The company must prove the debtor’s insolvency (lack of other assets)
in order to lawfully claim the exception under Article 341-2(2).

Without such proof, the acquisition may be considered a violation of the capital maintenance principle
and therefore invalid under Korean corporate law.

Yes. When a court orders a person to forfeit the proceeds of a crime, this is called a "collection" sentence (Chujing or 추징). There is a legal time limit for the government to collect this money, known as the statute of limitations.

However, the government can "interrupt" this time limit, effectively stopping the clock from running out. This Supreme Court ruling explains exactly when that happens.

When does the clock stop?
The statute of limitations is interrupted the moment a prosecutor files an application with a court to seize your assets. This could be an application to freeze your bank account or other monetary assets. The interruption happens at the time of the application, not when the seizure is completed or successful.

Even if enforcement becomes impossible, the effect of the suspension of the statute of limitations that has already occurred does not disappear.
This is the most important point of the ruling. Once the prosecutor has applied for the seizure, the statute of limitations clock is considered stopped, and this effect does not get cancelled later, even if:

• The targeted bank account turns out to have no money.

• The seizure order is later cancelled for any reason.

• The asset seized was later found to be legally protected from seizure.

In all these situations, the court considers the initial act of applying for the seizure to be a formal collection effort that has interrupted the statute of limitations for that sentence.

According to Article 342-2, subparagraph 4 of the Korean Commercial Act, a company may lawfully acquire its own shares when a shareholder exercises their appraisal right (also referred to as a “buyout right” or “dissenting shareholder’s right to demand share repurchase”). This constitutes a statutory exception to the general prohibition on a company acquiring its own shares under Article 341.

✅ Conditions for Valid Acquisition of Treasury Shares:
Triggering Corporate Actions
The appraisal right arises when the company resolves to carry out certain fundamental changes, such as:

Mergers, divisions, or transfers of the entire or significant portion of its business;

Amendments to the articles of incorporation that materially affect shareholder rights (e.g., restrictions on share transferability or changes to the company’s business purpose).

Exercise of the Appraisal Right
A dissenting shareholder may submit a written request to the company demanding that it purchase their shares at a fair price.

The request must be made within the statutory period following the shareholders’ resolution on the relevant corporate action.

Company’s Authority to Acquire Its Own Shares
In such cases, the company is legally permitted to acquire its own shares for the purpose of honoring the appraisal right, and such acquisition does not violate the general restriction on treasury share acquisition.

Procedural and Financial Requirements

The company must have distributable profits or lawful financial resources to fund the repurchase.

The acquisition must be approved through proper corporate procedures, including board resolution and necessary disclosures.

Post-Acquisition Effect
Shares acquired pursuant to the appraisal right become treasury shares and, as such, do not carry voting rights or dividend entitlements.

This provision balances the company’s need to execute major corporate actions with the protection of minority shareholders who dissent from such decisions.

Under Korean corporate law, a company may acquire its own shares either based on:

A statutory appraisal right, granted by law to protect dissenting shareholders in certain corporate actions, or

A contractual right, based on a private agreement between the company and a shareholder (e.g., exit rights in investment contracts).

These two types of rights are fundamentally different in their legal basis, conditions, and limitations.

✅ 1. Statutory Appraisal Right
(Legal basis: Commercial Act Article 341-2(4) and related provisions)

Definition:
A right granted to dissenting shareholders when the company undertakes major corporate changes such as:

Mergers (Articles 360-5, 522-3)

Divisions

Transfers of all or significant part of the business

Amendments to the articles of incorporation (Article 374-2)

Purpose:
Protects minority shareholders by providing an exit mechanism when their rights are significantly affected.

Company’s Obligation:
The company must purchase the dissenting shareholder’s shares at a fair price upon valid exercise.

Regulatory Treatment:

Exempt from the general restrictions on treasury share acquisition.

No requirement for distributable profits.

No restriction on acquisition method (Article 341-2(4)).

Judicial Support:
Supported by Supreme Court Decision 2020다208058, which confirmed that this exception applies only to legally defined appraisal rights.

❌ 2. Contractual Buyback Right
(Falls under Commercial Act Article 341)

Definition:
A right created by private agreement, such as:

Investment contracts

Shareholders’ agreements

Put option clauses

Purpose:
Commercial arrangement for liquidity, exit, or investment protection.

Company’s Obligation:
Contractual—based on agreed terms. But such repurchase is not permitted unless legal conditions are met.

Regulatory Treatment:

Treated as voluntary acquisition of treasury shares.

Subject to Article 341 requirements, including:

Must be within the limit of distributable profits

Must follow permitted acquisition methods

Requires board resolution and proper corporate procedures

Legal Consequence of Noncompliance:
According to 2020다208058, any share repurchase outside statutory authorization is void.

✅Answer:
1. Legal Provision – Article 342-2 (Prohibition of Subsidiary’s Acquisition of Parent’s Shares)
“A subsidiary shall not acquire shares issued by its parent company or accept them as a pledge.
This shall not apply where the shares are acquired through merger, inheritance, enforcement, court decision, or other legal grounds.”

2. Definition and Determination of "Subsidiary" and "Parent Company"
While Article 342-2 does not define the terms directly, interpretation is based on Article 2(3) and Article 542-8(1) & (2) of the Commercial Act, as well as authoritative legal commentaries.

✅ A “subsidiary” is a company that:

Is controlled by another company (parent) through:

Ownership of more than 50% of total issued shares with voting rights, or

Actual control over important decisions (e.g., by contract, shareholder agreements, or dispatching executive officers), even if the shareholding is less than 50%.

✅ A “parent company” is one that:

Has the ability to control decision-making in another company (subsidiary), usually through shareholding or management rights.

Key Factors for Determination:

Shareholding ratio (majority shareholding = presumption of control)

Board composition control (e.g., appointment of directors)

Voting rights agreements, or delegation of management authority

Indirect control through other subsidiaries or affiliates

Commentary Notes (based on Korean annotations):

Even if a company holds only 30–40% of shares, if it exercises de facto control (e.g., controls board appointments, holds golden shares, or others abstain from voting), it may still be a parent company.

The test is substance over form: formal ownership is not always decisive.

3. Rationale for the Prohibition
The core concern is that a subsidiary acquiring parent company shares creates a situation where a company indirectly holds its own shares.

This could result in:

Distortion of voting rights in shareholders' meetings

Manipulation of corporate control

Artificial strengthening of control by majority shareholders

Conflict of interest between parent and subsidiary

➡️ Thus, to preserve transparency and integrity of corporate governance, the law bans subsidiaries from acquiring parent stock, except in involuntary situations (e.g., legal enforcement or mergers).

4. ⚠️ Legal Consequences of Violation
The acquisition is not automatically void, but:

The subsidiary cannot exercise voting rights for those shares.

May be subject to regulatory penalties.

Civil or shareholder actions (e.g., derivative suits) may be triggered.

In some cases, authorities may require disposal of the shares or reverse the transaction.

✅Answer:
1. Legal Basis – Article 342-2 of the Korean Commercial Act
“A subsidiary shall not acquire or pledge shares issued by its parent company.
This does not apply if such acquisition arises from a merger, inheritance, other legal provisions, court decisions, or compulsory execution.”

This provision was introduced in 1998 and reflects the legislative intent to prohibit indirect self-ownership, which can distort the corporate governance structure.

2. Legal Effects of Violation (as per the annotated commentary)
(1) ✅ Validity of the Acquisition
The acquisition itself is not per se void under Korean law.

This is because there is no express nullification clause in Article 342-2.

However, the acquisition is treated as restricted in legal effect, especially concerning voting rights.

(2) ❌ Restriction of Voting Rights
The subsidiary is not allowed to exercise voting rights attached to the acquired shares.

This reflects the intent to prevent indirect control of the parent by itself.

Even if the parent company attempts to use those shares for voting, such exercise would be deemed invalid.

(3) ⚠️ Possible Sanctions or Regulatory Measures
Even though the transaction is not void, it may trigger:

Administrative sanctions under commercial or financial law (e.g., Financial Investment Services and Capital Markets Act).

Order to dispose of the shares within a specified period.

Civil liability, such as a derivative suit if shareholder value is harmed.

(4) Exclusion from Voting Share Capital
The shares held by the subsidiary:

Count toward total issued shares, but

Do not count toward total voting shares.

This impacts quorum calculations and resolution thresholds at shareholder meetings.

3. Why Is This Strictly Regulated?
According to the commentary:

The prohibition is based on the principle of separation between ownership and control.

It aims to prevent control illusion, where the parent appears to have stronger support than actually exists.

This avoids circular shareholding that might undermine shareholder equality and market fairness.

Because under most circumstances, a parent company owns 50% or more of its subsidiary’s shares, this ownership structure automatically satisfies the 10% threshold set out in Article 369(3) of the Korean Commercial Act. As a result, if a subsidiary acquires shares in its parent company, the voting rights attached to those shares must be suspended by law.

✅ Legal Rule:
“If a company holds 10% or more of another company’s total issued shares, the latter cannot exercise voting rights on the shares it holds in the former.”
(Commercial Act Article 369(3))

???? Application to Parent–Subsidiary Relationship:
Parent Company (A Co.)

Owns 50% or more of the issued shares of Subsidiary (B Co.)

Clearly exceeds the 10% threshold required under Article 369(3)

Subsidiary (B Co.)

Acquires shares in Parent (A Co.)

Legal Effect

Because A Co. owns ≥10% of B Co., B Co. is prohibited from exercising voting rights for the A Co. shares it holds

Even if A Co. attempts to exercise those voting rights indirectly or based on control, such exercise is invalid under the statute

Conclusion:
Since a parent company, by definition, holds at least 50% of its subsidiary’s shares,
the 10% rule in Article 369(3) is always met in a parent–subsidiary relationship,
and therefore, the subsidiary is barred from exercising voting rights on any parent shares it acquires.

✅Answer:
1. General Rule – No Requirement for a Korean Director or Shareholder
Under the Korean Commercial Act, there is no legal requirement that a foreign national must include a Korean partner, shareholder, or director in order to establish a company in Korea.

✅ Foreigners may:

Be the sole founder of a company;

Be the sole shareholder of a stock company (주식회사); and

Act as the sole director (or sole executive director in a limited company, 유한회사).

This applies to both joint-stock companies (주식회사) and limited liability companies (유한회사).

2. ⚖️ Legal Commentary and Practice
According to leading commentaries on the Commercial Act, including judicial interpretations:

The law does not impose any nationality requirement for directors, executives, or shareholders.

The status of “resident” or “non-resident” is not, by itself, a barrier to acting as a director, so long as the individual complies with registration and visa-related rules under separate laws (e.g., immigration law).

The Commercial Act is nationality-neutral regarding company formation and internal governance.

For example, the annotations confirm:

“There is no restriction in the Commercial Act preventing a foreign national from serving as the sole director or shareholder of a Korean company.”
“Foreign investment may be subject to separate notification under the Foreign Investment Promotion Act, but that does not require a Korean to be included as a director or partner.”

3. Immigration and Investment Law Considerations
While the Commercial Act imposes no Korean participation requirement, other laws may impose practical conditions, such as:

Foreign Investment Promotion Act (FIPA): Minimum investment amount (KRW 100 million) for D-8 visa eligibility.

Immigration Act: A non-Korean national who wishes to reside in Korea as a director or executive will require an appropriate visa (e.g., D-8, F-2, etc.).

Tax law and business registration law may also require a registered local address or business office in Korea.

However, these are administrative or regulatory requirements, not legal barriers to foreign ownership or control.

When police obtain a court permit to access "communication data" from a telecom company, there are strict rules on how that information can be used. This data doesn't include the content of your conversations but rather the metadata: call logs, text message logs, location data, etc.

The Rule: Use is Limited to the Original Crime and "Related" Crimes
The law states that this data can only be used to investigate the specific crime mentioned in the court permit or a crime that is closely related to it. The purpose is to protect privacy and prevent police from using data obtained for one case to conduct a "fishing expedition" for unrelated offenses.

What is a "Related" Crime?
The Supreme Court has clarified that for another crime to be considered "related," it must meet a two-part test:

1. Objective Connection: The new crime must be directly and specifically linked to the original crime. The data might be relevant to proving the motive, method, or circumstances of the original crime. It is not enough for the new crime to simply be of a similar type (e.g., data from one fraud case cannot automatically be used for a completely separate fraud case).

2. Personal Connection: The data can be used against people connected to the original suspect, such as accomplices, co-conspirators, or others involved in the same criminal act.

In short, police cannot use your communication data obtained for one investigation to look into other, unrelated aspects of your life. Its use is tightly restricted to the original case and crimes that are demonstrably connected to it.

In Korea, the government has a limited time to prosecute a crime, which is known as the statute of limitations (공소시효). For a completed crime, this time limit starts when the criminal act is finished.

But what about an "attempted" crime (미수범)—a crime that was started but not successfully completed?

The Supreme Court has clarified that for an attempted crime, the statute of limitations clock starts at the moment the attempt is over. This is the point in time when the criminal action can no longer proceed, for example:

• When the person is stopped or interrupted while committing the act.

• When the person has done everything they intended to do, but the criminal result fails to happen.

In short, the government's time to prosecute you for an attempted crime begins as soon as your attempt has concluded, either because it was stopped or because it failed.

In Korea, domestic violence incidents can be handled in two different ways: as a formal criminal case or as a special "domestic protection case" in Family Court. The outcome of the Family Court case is crucial in determining whether criminal charges can be filed later.

Understanding the "Domestic Protection Case"
This process is handled by the Family Court and is not a criminal trial. Its goal is to protect the victim and correct the offender's behavior through measures called "protective dispositions" (보호처분), such as restraining orders or counseling mandates. These are not considered criminal punishments.

The Family Court can issue two main types of decisions:

1. If the Court Issues a "Protective Disposition" (보호처분):
If the court orders a protective measure and the case is finalized, the law states that, as a general rule, a prosecutor cannot file a criminal charge against you later for the same incident. The matter is considered resolved through this special procedure.

2. If the Court Issues a "Decision of No Disposition" (불처분결정):
This is a very different outcome. A "decision of no disposition" means the judge looked at the case and decided that no protective measures were necessary.

The Supreme Court has clarified that this decision does not prevent a prosecutor from filing criminal charges later. In fact, the law states that the statute of limitations (the time limit for prosecution) for the criminal offense begins on the day this "no disposition" decision is made.

In short: Receiving a protective order from the Family Court usually means the case is closed. However, if the Family Court decides to issue no order at all, the door remains open for a full criminal investigation and prosecution.

When police execute a search and seizure, the law requires them to "present" (제시) the warrant to the person being searched. This Supreme Court ruling clarifies exactly what this means.

"Presenting" the Warrant Means More Than Just Showing It
The Court ruled that it is not enough for police to simply show you that they have a warrant. You have the right to read and understand its specific contents.

If you ask to see the details of the warrant—especially the section describing the crime you are suspected of—the police must show it to you. Refusing to do so makes the search illegal from the start.

What if my lawyer sees the warrant later?
This ruling makes it clear that a procedural violation at the beginning of the search cannot be fixed later.

Even if your lawyer arrives after the search has begun and is shown the full warrant, this does not "cure" the initial illegality. The right to be properly shown the warrant belongs to the person being searched at the time the search begins.

In short, you have a right to read the contents of the warrant before a search and seizure begins. If the police deny you this right, the entire procedure can be deemed illegal.

In Korea, a defendant's presence is generally required at their criminal trial, including during the appeal stage. However, if you fail to attend your appeal hearing, a specific two-step procedure applies.

The "Two Strikes" Rule for Appeal Hearings

The Supreme Court has confirmed the following process:

1. First Absence: If you do not show up for your scheduled appeal court date, the court cannot proceed with the case that day. It is required to reschedule and set a new hearing date.

2. Second Absence: If you fail to appear at the second scheduled hearing date as well, and you do not have a valid reason for your absence, the court is then permitted to proceed with the trial and deliver a verdict in your absence.

In short, the court must give you a second chance if you miss one hearing. However, if you miss two consecutive appeal hearings without a justifiable reason, the court can make a final decision on your case without you being present.

In the Korean criminal justice system, the first-instance trial (1심) is the most critical stage, largely due to the "Principle of Direct Examination" (직접심리주의). This Supreme Court ruling reinforces why this is so important.

The "Principle of Direct Examination"
This principle means that the judge who decides a case should be the one who personally sees the evidence and hears the witnesses testify in the courtroom. This allows the judge to assess a witness's credibility not just from their words, but also from their demeanor, tone of voice, and body language—details that cannot be captured in a written transcript.

The Role of the Appeal Court
In contrast, the higher appeal court (항소심) typically does not re-hear all the witnesses. Instead, it reviews the written record from the first trial. This means the appeal judges do not have the same direct impression of the witnesses.

The Supreme Court's Ruling: Respect for the First Court's Judgment
Because the first trial judge has the best opportunity to determine if a witness is being truthful, the Supreme Court has ruled that the appeal court must give great respect and deference to the first court's assessment of witness credibility.

An appeal court cannot easily overturn the first court's decision on whether to believe a witness's testimony, even if the appeal judges might have a different opinion from reading the transcript.

This can only be done in exceptional circumstances, such as when the first judge's decision was clearly wrong based on the evidence, or when significant new evidence is introduced during the appeal.

In short: The first trial is your most important opportunity to present and challenge witness testimony. The first judge's opinion of who is telling the truth is given enormous weight and is very difficult to change on appeal.

Article 343 of the Korean Commercial Act provides that a company may retire (cancel) its own shares only in cases permitted by law or by the articles of incorporation. Retirement (cancellation) of shares means that the issued shares are extinguished, which, in principle, results in a reduction of the company’s stated capital in proportion to the par value of the retired (cancelled) shares.

The main types are:

Without consideration (“gratuitous retirement (cancellation)”) if expressly authorized by the articles of incorporation.

With consideration when the company lawfully acquires treasury shares under Articles 341 and 342 and subsequently resolves to retire (cancel) them.

Because retirement (cancellation) normally entails a capital reduction, the procedures for capital reduction under the Commercial Act—such as a special resolution of the general meeting of shareholders and creditor protection measures—must generally be followed, unless otherwise provided (e.g., in the case of retirement out of distributable profits under Article 343-2, which does not reduce stated capital).

The legal effects are as follows:

All rights and obligations attached to the retired (cancelled) shares are extinguished.

The total number of issued shares decreases, and the company’s capital is reduced accordingly.

Once lawfully completed and recorded in the shareholder register, the retirement (cancellation) is effective against all shareholders and third parties.

The Supreme Court has emphasized that because retirement (cancellation) directly affects shareholder rights and the company’s capital structure, strict compliance with statutory procedures and the articles of incorporation is required.

Relevant provision:

Commercial Act Article 343 (Retirement (Cancellation) of Shares): A company may retire (cancel) its shares to the extent permitted by this Act or the articles of incorporation, in accordance with the procedures prescribed by this Act.

Under the Korean Commercial Act, retirement (cancellation) of a company’s treasury shares—shares the company has previously acquired in compliance with Articles 341 and 342—does not, in principle, reduce the company’s stated capital. This is because treasury shares have already been fully paid for at the time of issuance, and their retirement simply eliminates those shares from the total number of issued shares without affecting the paid-in capital recorded in the capital account.

Key points from Article 343 and related provisions are:

Acquisition first, then retirement: Treasury shares must be lawfully acquired under the statutory rules on acquisition limits and procedures.

No capital reduction effect: Since the subscription price of the shares was already paid at issuance, retiring them only reduces the number of issued shares, not the amount of capital on the balance sheet.

Purpose and effect: Retirement of treasury shares is often used to improve capital efficiency, increase earnings per share, and adjust shareholder composition without the procedural burdens of a formal capital reduction.

Procedures: Unless otherwise provided in the articles of incorporation, a resolution of the board of directors is required for the retirement (cancellation) of treasury shares. Unlike a formal capital reduction, creditor protection procedures are not necessary.

The Supreme Court has confirmed that retirement (cancellation) of treasury shares is legally distinct from a capital reduction and does not trigger the statutory procedures for capital reduction, since the capital account remains unchanged.

Relevant provision:

Commercial Act Article 343 (Retirement (Cancellation) of Shares) and Articles 341–342 (Acquisition of Treasury Shares)

Under the Korean Commercial Act, a stock corporation (chusik hoesa) may, in addition to common shares, issue class shares (jongryu jusik) with rights and obligations different from those of common shares, if the articles of incorporation provide for them (Articles 344–346).

The main types include:

Preferred shares (uyu jusik):

Provide preferential rights regarding dividends or distribution of residual assets.

May be cumulative or non-cumulative, participating or non-participating.

Voting rights may be restricted or excluded, subject to statutory safeguards.

Redeemable shares (sanghwan jusik):

Allow the company to redeem the shares under conditions stated in the articles of incorporation.

Redemption price and procedure must be predetermined.

Convertible shares (jeonhwan jusik):

Give the holder the right to convert the shares into another class of shares (e.g., preferred to common) under conditions in the articles of incorporation.

Other specially designed shares:

The Act permits various combinations (e.g., redeemable preferred shares, convertible preferred shares) as long as the rights are clearly stated in the articles of incorporation.

Key principles:

The articles of incorporation must clearly define the type, number, rights, obligations, and issuance conditions of each class.

The purpose is to provide flexibility in corporate financing and governance while protecting shareholder equality within each class.

Any alteration of class rights requires approval by a special resolution of both the general meeting of shareholders and a separate meeting of the class shareholders concerned (Article 346).

Relevant provisions:

Commercial Act Articles 344–346 (Class Shares and Alteration of Class Rights)

Yes. Under the Korean Commercial Act, a company may issue preferred shares with voting rights (uikwolkwon inneun uyu jusik) if this is expressly provided for in the articles of incorporation (Article 344).

Key points:

Basic rule:

Preferred shares usually grant priority in dividends or distribution of residual assets and may, under certain structures, restrict or exclude voting rights.

However, the Act does not prohibit preferred shares from having voting rights.

Voting rights permitted:

The articles of incorporation may provide that preferred shares enjoy the same voting rights as common shares in addition to their economic preferences.

Voting rights may also be conditional—for example, restored only when certain dividend conditions are unmet for a specified period.

Purpose of such issuance:

Often used in strategic investment or joint ventures where the investor desires both priority returns and influence over corporate decisions.

Procedural requirements:

The rights, number, and issuance conditions of such shares must be clearly defined in the articles of incorporation.

Any change in class rights (including voting rights) after issuance requires both a special resolution of the general meeting of shareholders and the approval of the relevant class shareholders’ meeting (Article 346).

Relevant provisions:

Commercial Act Article 344 (Issuance of Class Shares)

Commercial Act Article 346 (Alteration of Class Rights)

Yes. Article 344-3(2) of the Korean Commercial Act provides that the total number of non-voting shares—including all classes of shares whose voting rights are restricted or excluded—may not exceed one-fourth (25%) of the total issued shares of the company.

Key points:

Purpose of the limit:

This restriction ensures that voting control remains with shareholders holding voting rights, thereby preventing excessive dilution of voting power through large-scale issuance of non-voting shares.

Scope:

The 25% cap applies to the total number of issued shares, not just the number of outstanding shares after treasury share adjustments.

All classes of shares with no voting rights, regardless of dividend preferences or redemption rights, are included in the calculation.

Exceptions:

Certain conditional voting rights (e.g., voting rights restored when preferred dividends are unpaid for a specified period) do not exempt the shares from being counted toward the limit while they are non-voting.

Procedural compliance:

Issuance of non-voting shares must be authorized in the articles of incorporation.

If issuance would exceed the 25% limit, the company must either amend the articles of incorporation to change class rights (requiring special resolutions and class shareholder approval) or refrain from the issuance.

Relevant provision:

Commercial Act Article 344-3(2): “The total number of shares without voting rights shall not exceed one-fourth of the total issued shares.”

A convertible share is a class of share that grants its holder the right to convert it into another class of share—commonly from preferred shares into common shares—under conditions specified in the articles of incorporation (Commercial Act Article 345).

Key points:

Issuance requirements:

Convertible shares may be issued only if expressly authorized in the articles of incorporation.

The articles must specify:

The classes of shares eligible for conversion.

The conversion period.

The conversion ratio or method of calculation.

Any adjustments to the conversion terms (e.g., in case of stock splits).

Conversion mechanics:

A shareholder exercises the conversion right by making a request within the specified period.

The company may also be given the right to demand conversion under certain conditions, if stated in the articles.

Effect of conversion:

Upon conversion, the original shares are extinguished, and the new shares are issued in accordance with the conversion terms.

The shareholder’s rights and obligations are thereafter governed by the terms of the new class of shares.

Purpose and use cases:

Convertible shares are often used to attract investment by offering preferential economic rights with the option to participate more fully in management later through conversion to voting common shares.

Procedural safeguards:

Any change to conversion rights after issuance requires approval by both the general meeting of shareholders (special resolution) and a meeting of the relevant class shareholders (Article 346).

Relevant provision:

Commercial Act Article 345 (Convertible Shares)

Commercial Act Article 346 (Alteration of Class Rights)

Yes. Under the Korean Commercial Act, it is permissible to issue redeemable convertible preferred shares (sanghwan jeonhwan uyeo jusik) with voting rights, provided that the articles of incorporation expressly authorize such issuance (Articles 344, 345, and 347).

Reasons Korean venture capital firms prefer voting RCPS:

Economic priority:

As preferred shares, RCPS grant priority in receiving dividends and distribution of residual assets in the event of liquidation.

Redemption right:

Allows the investor to require the company to repurchase the shares under agreed conditions (e.g., after a certain period or upon failure to achieve IPO/exit milestones), thus offering downside protection.

Conversion option:

Gives the investor the right to convert the preferred shares into common shares, typically to secure greater participation in upside scenarios (e.g., IPO, M&A).

Voting rights:

Venture capitalists often negotiate for voting rights equivalent to those of common shares, enabling them to influence corporate governance and protect their investment.

This is especially important in early-stage companies where strategic decisions can significantly affect investment value.

Legal permissibility:

The Korean Commercial Act does not prohibit combining preferences (economic, redemption, conversion) with voting rights in a single class of shares.

The rights, terms, and conditions of RCPS must be explicitly stated in the articles of incorporation and in the share subscription agreement.

Relevant provisions:

Commercial Act Article 344 (Issuance of Class Shares)

Commercial Act Article 345 (Convertible Shares)

Commercial Act Article 347 (Redeemable Shares)

Q1: What is the general rule if I don't show up for my appeal hearing?

A: As a rule, the court cannot proceed with your case without you being present. If you miss a scheduled hearing, the court is required to set a new date and notify you again. This gives you a second chance to appear.

Q2: Can the court ever make a decision without me if I keep missing the dates?

A: Yes. There is a "two strikes" rule. If you fail to appear at the second scheduled hearing without a valid, justifiable reason, the court is then legally permitted to hold the trial and deliver a verdict in your absence.

Q3: What exactly does "two consecutive hearings" mean? Does attending a hearing "reset the clock"?

A: Yes, exactly. This is the key point clarified by the Supreme Court. The two absences must be consecutive and uninterrupted. If you attend a hearing, the count resets to zero.

For example, if you miss your third hearing but then attend the fourth hearing, the streak is broken. If you then miss the fifth hearing, that counts as your first consecutive absence, not your second. The court cannot make a decision without you and must reschedule.

A judge considers many factors when deciding a sentence, but there are strict limits. The Supreme Court has ruled that it is illegal for a judge to increase your sentence based on a separate crime for which you were never formally charged. Using an uncharged crime as a "core aggravating factor" in sentencing is considered a serious legal error, as it's like being punished for a crime without a trial.

Generally, no. You cannot appeal to the Supreme Court just because you believe your sentence is too harsh. The Supreme Court only reviews specific legal errors made by the lower courts.

However, if you can prove that the judge illegally increased your sentence by treating an uncharged crime as a key reason for the punishment, this is considered a major legal error. In this specific situation, you can appeal to the Supreme Court to challenge the fairness of the sentencing process itself.

In the case this ruling was based on, the defendant was charged with using drugs, but the judge mentioned drug selling (an uncharged crime) in the written judgment. The Supreme Court reviewed the case and found that the sentence hadn't actually been increased because of this mention, so the sentence was upheld. This shows that while the principle is strong, you must demonstrate that the uncharged crime was actually used as a key factor to increase the punishment.

Q1: What is my responsibility if I have an ongoing criminal case and I move to a new address?

A: You have a legal duty to keep the court updated with your current address. If you move and fail to notify the court, and as a result, you do not receive court documents, miss your trial, and miss the deadline to file an appeal, it is generally considered your own fault. In such cases, you will likely lose your right to appeal the conviction.

Q2: What if the court can't reach me at my old address? Can it immediately hold the trial without me?

A: No, not immediately. The Supreme Court has ruled that the court has its own duty to make a reasonable effort to contact you before proceeding. If court documents are undeliverable, the court staff must check the case file for any other contact information you may have provided.

If the file contains an alternative address, a home phone number, or a mobile phone number, the court must attempt to contact you using this information to find your current location for service.

Q3: What happens if the court doesn't try to call me and I miss the appeal deadline because I never knew about the trial?

A: This is a critical protection for defendants. If the court fails to make this reasonable effort (e.g., doesn't try to call a phone number listed in the file) and instead proceeds with a "service by public notice" (공시송달), that service is considered illegal.

If you were then convicted in a trial you knew nothing about and missed the appeal deadline, the law considers this a failure for "reasons for which you are not responsible." In this situation, your right to appeal must be restored.

Q1: Is there a rule that helps all co-defendants if one person wins an appeal?

A: Yes. Korean law has a rule to ensure fairness among co-defendants (people tried together for the same or related crimes). The rule states: If the appeal court overturns the conviction for a co-defendant who appealed, and the legal reason for overturning the conviction is also common to another co-defendant in the appeal, the court must also overturn the conviction for that other co-defendant.

Q2: Does this rule apply to me even if I didn't file an appeal myself?

A: Yes, it can. This is the key point of the Supreme Court's ruling. For the rule to apply to you, your case must also be active before the appeal court. This can happen in two ways:

1. You filed an appeal yourself.

2. You did not appeal, but the prosecutor filed an appeal against you (for instance, to argue for a harsher sentence).

Q3: So, if only the prosecutor appealed my case, can I still benefit from my co-defendant's successful appeal?

A: Yes. The Supreme Court has clarified that even if you did not personally appeal, you are still considered a "co-defendant in the appeal" if the prosecutor has brought your case to the higher court.

Therefore, if your co-defendant wins their appeal for a reason that is common to both of you (for example, evidence was ruled illegal), that favorable decision must be applied to your case as well, even if you didn't file the appeal yourself.

Q1: Is there a special rule for inmates who need to meet court filing deadlines?

A: Yes. Korean law has a very important "special rule for inmates" (재소자 특칙) to ensure their right to appeal is protected from delays outside of their control.

Q2: How does this special rule work?

A: To meet a court deadline for filing an appeal, an inmate does not need to worry about the document reaching the court on time. Instead, they can simply submit their appeal documents directly to the warden of the prison or detention center.

The law considers the appeal to be officially filed on the date the warden receives the document, not the date it arrives at the court.

Q3: Does this rule apply to all types of court appeals, including urgent ones?

A: Yes. This Supreme Court ruling confirms that the special rule applies broadly. It covers regular appeals, requests to restore the right to appeal, and also "immediate appeals" (즉시항고), which are urgent appeals against certain court decisions, such as the cancellation of a suspended sentence (probation).

In short: If you are incarcerated, the most important step to meet a court deadline for any type of appeal is to ensure you submit your documents to the prison authorities before the deadline expires. This action legally satisfies the court's filing deadline.

Q1: What is a "suspended prison sentence" (집행유예) in Korea?

A: A suspended sentence is when a court sentences you to a period of imprisonment (e.g., 1 year in prison) but then "suspends" the execution of that sentence for a longer period (e.g., a 2-year suspension period).

If you do not commit another crime during this suspension period, you will not have to serve the prison time. This is similar to what is often called "probation" in other countries.

Q2: When does this suspension period (or probation) officially start?

A: The Supreme Court has clarified this important point. The suspension period does not begin on the day the judge announces the sentence in court.

Instead, the suspension period officially begins on the date the court's judgment becomes "final and conclusive" (판결 확정일).

Q3: When does a judgment become "final and conclusive"?

A: A judgment becomes final and conclusive after the time limit for filing an appeal has passed (and no appeal has been filed), or after the highest court has made a final ruling on any appeals.

In short, the clock on your probation period only starts ticking once the entire legal case is completely over and no more appeals are possible.

Q1: What does Korean law say about disclosing personal information I handle for my job?

A: The Personal Information Protection Act (PIPA) is very strict. If you handle personal information as part of your work (e.g., customer or employee data), you are prohibited from "leaking" it or providing it to others without proper authority. A "leak" is defined as any act of showing personal information to someone who does not already know it.

Q2: But isn't filing a police report a valid reason? Is it still considered an illegal "leak" if I provide personal data as evidence in a criminal complaint?

A: Yes, the Supreme Court has ruled that it is still considered an illegal leak.

Even if your intention is to report a crime, you cannot freely disclose someone else's personal data that you have access to through your work. Submitting a criminal complaint to the police that contains another person's personal information, without that person's consent or other specific legal justification, is a violation of the Personal Information Protection Act.

Q3: Does my motive matter? What if I'm trying to do the right thing?

A: Your motive does not change the act itself. The current law is stricter than previous laws and does not require an "improper purpose" for a disclosure to be illegal. The focus is on the act of unauthorized disclosure itself.

In short: If you handle personal data as part of your job, you have a strict duty to protect it. You cannot provide it to third parties—even to law enforcement as part of a complaint—unless you have the individual's consent or a clear legal basis to do so.

Q1: What is the legal definition of self-defense in Korea?

A: Self-defense (정당방위, jeongdang-bangwi) is the right to use force to protect yourself or another person from a "present and unjust attack." If your actions are deemed to be legitimate self-defense, you will not be punished for them. For your actions to be justified, the attack must be "present" and your response must be "reasonable."

Q2: When is an attack considered "present" or "ongoing"? Can I still defend myself after I've already been hit?

A: Yes. The Supreme Court has clarified that an attack is still considered "present" even after an initial assault has occurred (e.g., you have already been punched). The threat is considered ongoing as long as the dangerous situation has not ended. This includes:

• A continuous series of attacks.

• A brief pause where it is objectively clear that the attacker is about to strike again immediately.

You do not have to wait for the next blow to fall before you are legally allowed to defend yourself.

Q3: What kind of defensive action is allowed? Can I fight back?

A: Yes. The Court confirms that self-defense is not limited to purely defensive actions like blocking or dodging. It can legally include an active counterattack to stop the aggressor.

Q4: How much force can I use? What makes a defensive act "reasonable"?

A: Your defensive action must be "reasonable" in relation to the threat you are facing. There is no simple formula; a judge will evaluate all the circumstances of the situation, including:

• The type and severity of the initial attack.

• The method and urgency of the attack.

• The type and degree of harm you caused with your defensive action.

Using force that is excessive and clearly goes beyond what was necessary to neutralize the threat may not be considered reasonable self-defense.

Yes. Article 341-3 of the Korean Commercial Act provides that a company may acquire its own shares for the purpose of pledge. However, such acquisition is subject to important limitations.

General Rule (Permitted within a Limit):
The company may acquire treasury shares for pledge purposes only up to one-twentieth (1/20) of the total number of issued shares. This limitation is designed to protect corporate capital and safeguard creditor interests.

Exceptions (Beyond the 1/20 Limit):
The restriction does not apply when the pledge arises from:

Legal causes such as merger or transfer of business, or

Enforcement of rights, such as compulsory execution of a security interest.

Therefore, while a company may generally establish a pledge over its own shares, it must comply with the 1/20 limit, unless the acquisition results from a legal cause like a merger or from the enforcement of rights, in which case the limit may be exceeded.

Legal Basis: Korean Commercial Act, Article 341-3.
???? Judicial Interpretation: Korean case law has affirmed that transactions within the statutory limit are valid, whereas any transaction exceeding the limit (without falling under the exceptions) is void. Find out more and try it now: https://chatbyun.com/

No. While the Korean Commercial Act (Article 342) allows a company to dispose of treasury shares, such disposal is restricted by the principles of shareholder equality and corporate fairness.

Judicial Analogy to Convertible Bonds:
In cases concerning convertible bonds, the courts have held that issuance of such bonds is substantially similar to issuing new shares, as it affects the company’s capital base and the interests of existing shareholders. Accordingly, the rules on invalidity of new share issuance (Article 429 of the Commercial Act) have been analogically applied. A convertible bond issuance may be declared invalid only where there is a serious violation of law or articles of incorporation, or a manifest unfairness that fundamentally undermines corporate principles or causes serious harm to shareholder interests (Supreme Court, June 25, 2004, 2000Da37326).

Application to Disposal of Treasury Shares:
Following this reasoning, the Seoul Western District Court (June 29, 2006, 2005Gahap8262) ruled that if a company disposes of treasury shares to a particular shareholder without giving other shareholders the opportunity to purchase them, and such disposal has a significant impact on existing shareholders’ interests or on the control of the company, then the disposal may be invalid. This is particularly the case where the unfairness is so serious that, even considering transactional stability and the interests of other stakeholders, it cannot be tolerated.

Conclusion:
Therefore, a company may not arbitrarily dispose of treasury shares by favoring certain shareholders. If such selective disposal seriously harms existing shareholders or distorts corporate control, the transaction is considered invalid under Korean law.

Legal Basis:

Korean Commercial Act, Article 342 (disposal of treasury shares).

Supreme Court Decision, June 25, 2004, 2000Da37326.

Seoul Western District Court Decision, June 29, 2006, 2005Gahap8262. Find out more and try it now: https://chatbyun.com/

The disclosure rule under Article 342-3 is designed to work together with the voting rights restriction under Article 369(3) in order to prevent abuses of cross-shareholding.

Disclosure Requirement (Article 342-3):
When Company A acquires 10% or more of Company B’s shares, it must immediately disclose the acquisition. This ensures transparency because such a holding can significantly affect corporate governance and shareholder interests.

Voting Rights Restriction in Cross-Shareholding (Article 369(3)):
If Company A holds more than 10% of Company B’s shares, then any shares of Company A acquired by Company B will carry no voting rights at all. In other words, once the 10% threshold is crossed, the reciprocal shares held by the other company are entirely disenfranchised.

Purpose:

To prevent companies from engaging in reciprocal shareholding arrangements that artificially strengthen or entrench management control.

To preserve the principle of shareholder equality by ensuring that corporate voting power cannot be manipulated through cross-ownership structures.

To maintain market transparency and protect both shareholders and creditors from hidden shifts in control.

Conclusion:
The rule under Article 342-3 is not only about disclosing significant shareholdings, but also functions as the trigger for Article 369(3). Once a company acquires more than 10% of another company’s shares, the reciprocal shares held by the other company are completely deprived of voting rights, thereby preventing cross-shareholding from distorting corporate governance.

Legal Basis:

Korean Commercial Act, Article 342-3 (Disclosure of large share acquisitions).

Korean Commercial Act, Article 369(3) (Complete loss of voting rights for reciprocal shares when cross-shareholding exceeds 10%). Find out more and try it now: https://chatbyun.com/

Voting rights may be restricted under both the Commercial Act (corporate governance rules) and the Capital Markets Act (market transparency rules). The two systems work together to ensure fair governance and protect shareholder equality.

1. Under the Korean Commercial Act (Corporate Governance Focus)

Treasury Shares (Article 369(2)):
Shares held by the company itself have no voting rights.

Cross-Shareholding (Article 369(3)):
If Company A holds more than 10% of Company B’s shares, then any shares of Company A acquired by Company B lose all voting rights.

Conflict of Interest (Article 368(3)):
A shareholder cannot exercise voting rights where doing so would create a conflict of interest with the company (e.g., voting on transactions in which the shareholder has a personal interest).

Subsidiary Holding Parent’s Shares:
Shares of a parent company held by its subsidiary are disenfranchised to prevent circular control and maintain fairness.

2. Under the Capital Markets Act (Market Transparency Focus)

5% Rule (Large Shareholding Disclosure):
Any person acquiring more than 5% of a listed company’s issued shares must report this to the Financial Supervisory Service within 5 business days, stating the purpose of acquisition.

Voting Rights Restriction for Violation:
If the reporting obligation is violated (failure to report, delay, or false disclosure), the regulator (Financial Services Commission) may suspend the voting rights attached to those shares.

Purpose:
To prevent hidden accumulations of control, ensure transparency in corporate ownership, and protect minority shareholders and market fairness.

Conclusion:

The Commercial Act removes voting rights primarily to maintain internal fairness in governance (e.g., treasury shares, cross-shareholding, conflict of interest).

The Capital Markets Act restricts voting rights to maintain market transparency (via the 5% Rule).

Together, these rules prevent both internal abuse of control and external manipulation of the market, thereby safeguarding shareholders, creditors, and the integrity of the corporate system.

Legal Basis:

Korean Commercial Act: Articles 368(3), 369(2), 369(3).

Financial Investment Services and Capital Markets Act: Provisions on the 5% large shareholding reporting obligation. Find out more and try it now: https://chatbyun.com/

Ordinary Resolutions (Article 371(1)):

Quorum: A resolution requires the presence of shareholders holding at least one-fourth (1/4) of the total issued and outstanding shares.

Voting Requirement: Among those present, the resolution passes with approval of a majority of the voting rights represented at the meeting.

Example: If a company has 1,000,000 shares issued, at least 250,000 shares must be represented at the meeting. A resolution is then adopted if more than half of the voting rights represented approve it.

Extraordinary Resolutions (Article 434):
While not in Article 371 itself, extraordinary resolutions—such as amendments to the articles of incorporation, mergers, or dissolution—require stricter requirements:

Quorum: At least one-third (1/3) of the total issued shares must be present.

Voting Requirement: At least two-thirds (2/3) of the votes represented must approve.

Purpose of the Rule:
These requirements balance corporate efficiency (by allowing resolutions to pass without unanimous consent) with protection of minority shareholders (by requiring a meaningful quorum and supermajority for fundamental corporate changes).

Conclusion:

Ordinary resolutions (Article 371): Majority of votes at a meeting with 25% minimum attendance.

Extraordinary resolutions (Article 434): Two-thirds majority at a meeting with 33% minimum attendance.

Legal Basis:

Korean Commercial Act, Article 371 (ordinary resolutions).

Korean Commercial Act, Article 434 (extraordinary resolutions). Find out more and try it now: https://chatbyun.com/

Continuation or Adjournment of Meeting:
Under the Korean Commercial Act, a shareholders’ meeting may be continued (adjourned and reconvened) when all agenda items cannot be completed at once, or when circumstances require additional time for deliberation.

Requirements:

Resolution of the Meeting:
The decision to continue or adjourn the meeting must generally be made by a resolution of the shareholders present at the meeting, rather than unilaterally by the chairperson.

Notice to Shareholders:
If the continuation involves a new date, place, or agenda, appropriate notice procedures must be followed unless all shareholders consent to waive notice.

Effect on Quorum and Voting Requirements:

Once properly convened, the quorum requirement under Article 371 is satisfied at the initial meeting.

For the continued session, the quorum is deemed maintained, meaning the company does not need to re-satisfy the attendance requirement, provided the continuation is legitimate and connected to the original meeting agenda.

Purpose:

To ensure that shareholder deliberations are not rushed.

To allow flexibility in addressing complex matters while still protecting shareholders’ rights and procedural fairness.

Conclusion:
A shareholders’ meeting under the Korean Commercial Act may be continued or adjourned by resolution of the meeting itself. The quorum established at the initial session is carried over, but notice requirements and shareholder rights must still be respected.

Legal Basis:

Korean Commercial Act, Article 368 (procedures of shareholders’ meetings).

Korean Commercial Act, Article 371 (quorum and voting). Find out more and try it now: https://chatbyun.com/

General Rule (Article 434):
A special resolution requires:

Presence of shareholders holding at least one-third (1/3) of the total issued and outstanding shares; and

Approval by at least two-thirds (2/3) of the votes represented at the meeting.

Cases Requiring a Special Resolution:
The Korean Commercial Act explicitly requires a special resolution for major corporate changes, including:

Amendment of the Articles of Incorporation (Article 434).

Transfer or acquisition of the whole or an important part of the company’s business (Article 374).

Leasing the whole business, entrusting its management, or sharing all profits/losses with another party (Article 374).

Merger of companies (Article 522).

Spin-off (division of company) (Article 530-2).

Continuation of the company after dissolution resolution (Article 519).

Dissolution of the company (Article 517).

Reduction of stated capital (Article 438).

Issuance of new shares at an especially favorable price (Article 418(2)).

Purpose:
Special resolutions are required for matters that fundamentally affect the company’s structure, shareholder rights, or control. The higher quorum and voting threshold ensure greater shareholder protection and prevent drastic changes without broad consensus.

Conclusion:
Under the Korean Commercial Act, a special resolution (Article 434) is required for fundamental decisions such as amendments to the articles, mergers, business transfers, spin-offs, dissolution, and capital reduction. This mechanism safeguards shareholders by requiring both a higher attendance and a supermajority vote.

Legal Basis:

Korean Commercial Act: Articles 374, 418(2), 434, 438, 517, 519, 522, 530-2. Find out more and try it now: https://chatbyun.com/

Q1: What are "forfeiture" and "collection" in a Korean criminal case?

A: In certain criminal cases, particularly those involving illegal profits like drug offenses, a court can order you to give up assets connected to the crime. This is done in two ways:

• Forfeiture (몰수, mol-su): The government physically takes the specific asset (e.g., the drugs, the equipment used, or the cash from a sale).

• Collection (추징, chu-jing): If the asset cannot be taken (e.g., the drugs were consumed or the money was spent), the court orders you to pay its equivalent monetary value.

Q2: Are there limits on what assets a court can order me to forfeit?

A: Yes. The Supreme Court has established a very clear and strict limit.

A court can only order the forfeiture or collection of assets that are directly connected to the specific crime for which you were formally charged and convicted in that trial.

In other words, if a particular illegal act was not included in the prosecutor's official indictment, the judge cannot order you to forfeit assets related to that uncharged act. The forfeiture must be based only on the criminal facts that were proven in your court case.

Q1: Can a judge give a sentence that is lower than the standard range set by law?

A: Yes, under specific circumstances defined by law, a judge can reduce a sentence. This is called a "legal reduction" (법률상 감경), and it comes in two types: "mandatory" and "discretionary."

Q2: What is a "mandatory reduction" (필요적 감경)?

A: This is when the law requires a sentence reduction. If certain legal conditions are met, the judge must reduce the sentence according to the legal formula. The judge has no choice in the matter.

Q3: What is a "discretionary reduction" (임의적 감경)?

A: This is when the law gives the judge a choice. If certain legal conditions are met (for example, if the defendant turns themselves in), the judge can reduce the sentence but is not required to. The judge will decide whether or not to grant the reduction based on the circumstances of the case.

Q4: If a judge decides to reduce a prison sentence, how is the reduction calculated?

A: This is the key point of the Supreme Court's ruling. Once a judge decides to apply a legal reduction (whether mandatory or discretionary), they must follow a strict formula:

Both the maximum and minimum length of the possible sentence are cut in half.

For example, if the standard prison term for a crime is 3 to 10 years, a legal reduction changes the possible sentencing range to 1.5 to 5 years. The judge cannot apply the reduction in any other way, such as only reducing the maximum term.

Q1: What kinds of assets can be forfeited under the general criminal law?

A: This is the key point of this Supreme Court ruling. The general rule for forfeiture, found in Article 48 of the Criminal Code, applies only to tangible "things" or "objects" (물건). This refers to physical assets you can touch.

Q2: Does this general rule apply to intangible assets, like a website or intellectual property?

A: No. The Supreme Court ruled that intangible assets, such as a website, are not tangible "things" and therefore cannot be confiscated under this general rule.

In the case this ruling is based on, a defendant used a website for illegal activities and later sold it. The lower court ordered him to pay the money he earned from the sale. The Supreme Court overturned this, stating that because the website itself was an intangible asset, the money received from its sale could not be confiscated under the general forfeiture law.

Q3: Does this mean all illegal profits from intangible assets are safe from forfeiture?

A: Not necessarily. This ruling is specifically about the general forfeiture rule in the Criminal Code. Korea has other, specific laws (for example, related to organized crime or concealing criminal proceeds) that have broader definitions and may allow for the confiscation of intangible assets and profits. However, if a prosecutor only applies the general rule, the forfeiture is strictly limited to tangible objects.

Commercial Act Article 352 stipulates that a company must prepare and keep a shareholders’ registry. The registry shall contain the following essential matters:

The name and address of each shareholder.

The number of shares held by each shareholder.

The class and serial number of the shares, if different classes exist.

The date on which each shareholder acquired the shares.

The shareholders’ registry functions as the official record to establish shareholder status and rights. Under the principle of publicity, only those recorded in the registry are recognized as shareholders in relation to the company.

According to judicial precedent, the shareholders’ registry has a constitutive effect with respect to the exercise of shareholder rights, meaning that even if a person is substantively the owner of the shares, the company may refuse recognition unless that person is registered as a shareholder. Courts have emphasized that this ensures certainty and stability in corporate governance.

Commentaries further note that the registry is important not only for confirming ownership but also for corporate actions such as dividend payments, voting rights, and determining the legitimacy of shareholder resolutions . Find out more and try it now: https://chatbyun.com/

In its decision of January 26, 1996 (Supreme Court, Case No. 94Da24039), the Court addressed the validity of share certificates issued under such circumstances.

The Court held that the issuance of share certificates generally falls within the authority of the representative director, unless there is a specific statutory or constitutional provision requiring a resolution of the shareholders’ meeting or the board of directors. Even if the certificate fails to state the shareholder’s name or the date of issuance, these are not matters that affect the essential nature of the shares. Therefore, such omissions do not render the certificate void.

Furthermore, even if the representative director issues a certificate that differs from the type of share certificates stipulated in the company’s articles of incorporation (for example, consolidated share certificates), this does not invalidate the certificate. As long as the certificate represents shares already issued by the company, a mere violation of a provision in the articles of incorporation concerning the type of certificates—an optional provision—cannot be a ground for invalidity.

Thus, the Court affirmed that share certificates retain their validity despite such formal defects, provided that they substantively represent the issued shares.

Key Points:

Case: Supreme Court, Jan. 26, 1996, Case No. 94Da24039.

Rule 1: Omission of the shareholder’s name or issuance date in a registered share certificate does not invalidate it, since these are not essential elements of a share.

Rule 2: Issuance of a different form of certificate than stipulated in the articles (e.g., consolidated certificates) does not render it void, as long as it evidences already issued shares. Find out more and try it now: https://chatbyun.com/

Under the Korean Commercial Act, if share certificates are not issued, the transfer of shares is governed by the rules on the assignment of nominative claims (지명채권 양도).

In such cases, a shareholder may transfer shares through:

A transfer agreement between the transferor and transferee, and

Notification or consent to the company (the debtor in the sense of a nominative claim).

This means that the transfer is effective between the parties once the agreement is made, but it becomes effective against the company only when the company is notified of the transfer or gives its consent.

Accordingly, without the issuance of share certificates, the principle of transferability still applies, but the transfer procedure follows the framework for the assignment of nominative claims under the Civil Code, ensuring both the validity of the transfer and the company’s awareness of the new shareholder.

Key Points:

Statute: Commercial Act (Articles 335, 337, 352, read with Civil Code provisions on assignment of nominative claims).

Rule: If no share certificates are issued, shares are transferred by the legal method of nominative claim assignment.

Practical Effect: The transfer is valid between parties upon agreement, but binding on the company only upon notice or consent. Find out more and try it now: https://chatbyun.com/

To be held fully responsible for a crime as a "co-principal" (공동정범) in Korea, the prosecution must prove beyond a reasonable doubt that you were part of a shared plan and played a functional role. This requires an active agreement to commit a specific crime, where each person uses the others' actions to achieve a common goal.

The Supreme Court has stressed that merely knowing about a crime and failing to stop it is not enough to meet this high standard. If there is any reasonable doubt about your active participation, you must be given the benefit of the doubt.

In Korea, a court can order electronic monitoring (an ankle bracelet) for a person convicted of murder if there is a "risk of recidivism." The Supreme Court has clarified that this does not mean any mere possibility of reoffending.

Instead, the prosecution must prove there is a "significant probability" that the person will commit murder again. A judge must make this decision objectively at the time of sentencing, based on a comprehensive evaluation of all factors, including the offender's background, the motive for the crime, and their behavior after the offense.

Yes. In Korea, aiding and abetting a crime includes any action, direct or indirect, that makes it easier for someone else to commit the crime. This isn't just limited to physical or material help. Simply encouraging the person or strengthening their resolve to commit the crime can also be considered aiding and abetting. You can be found guilty even if your help was provided before the crime took place.

Crucially, you don't need to know the specific details of the crime. If you can foresee that your actions might help a crime to be committed, that is enough to be held legally responsible as an accomplice.

Not necessarily. Under Korean law, a mental disorder is only considered a legal defense if it significantly impaired the person's ability to judge their actions or control their behavior at the time of the crime. A medical diagnosis alone is not enough. The court makes the final legal decision. While a psychiatrist’s expert opinion is important, the judge will independently review all evidence, including the details of the crime and the defendant's conduct before and after the act, to determine legal responsibility.

No, not automatically. While a medical certificate is strong evidence in Korean criminal cases, it is not absolute proof. The court must be convinced "beyond a reasonable doubt." The judge will carefully scrutinize the certificate, especially if it's based only on the other person's subjective complaints of pain. The court will consider several factors:

• How soon the certificate was issued after the incident.

• Whether the diagnosed injury is consistent with the alleged cause.

• Whether the symptoms could be from a pre-existing condition.

• The overall circumstances of how and when the medical treatment was sought.

Essentially, the court will weigh all the evidence and not rely solely on the medical document.

Not necessarily. Korean law makes a distinction between "ordinary negligence" and "professional negligence." The charge of "professional negligence" (업무상과실) typically applies to someone whose ongoing, continuous job is safety management (like a professional property manager). For a building owner who only performs occasional maintenance and rents out space, the court is likely to see it as a case of "ordinary negligence" (과실) if your failure to maintain the property causes an injury. While you are still legally responsible for the injury, it is considered a less severe offense than professional negligence.

Yes. In Korea, everyone involved in a golf game has a duty to be careful and prevent injuries. While players must watch out for others, the court considers a caddie's role a form of professional duty (업무). This means a caddie's responsibility goes beyond simply assisting the player. They have a professional duty of care (업무상 주의의무) to anticipate potential dangers during the game and take active steps to prevent accidents and ensure the safety of all participants. If they fail to do so and an injury occurs, they can be held legally responsible for professional negligence.

Yes, absolutely. Under Korean law, marriage creates a legal duty for spouses to support and care for one another (based on Civil Code Article 826). This is not just a moral or social expectation. If your spouse requires assistance due to old age, illness, or other circumstances and you fail to provide the necessary help, you are abandoning this legal duty. If your spouse dies as a result of this failure, you can be found guilty of the serious crime of "abandonment resulting in death" (유기치사죄).

Physically restraining someone against their will can lead to a charge of unlawful arrest (체포죄). However, Korean law makes important distinctions regarding the duration of the act and the severity of any resulting injury.

• Duration of Restraint: For the crime to be considered complete, the physical restraint must last for a significant period. If the act of holding the person is only brief and temporary, the court may consider it an attempted unlawful arrest (체포미수), which is a less serious offense.

• Definition of Injury: To be charged with the more severe crime of "unlawful arrest causing injury" (체포치상죄), the injury must be legally significant. A very minor wound that requires no medical treatment, does not interfere with the person's daily life, and would heal naturally on its own is not considered a legal "injury" in this context.

Yes. According to the Supreme Court of Korea (Decision of August 23, 1996, 96도1525), even in a one-person company where all shares are effectively owned by a single individual, the company itself is recognized as a separate legal entity. The assets of the corporation belong to the company and not to the shareholder personally.

Therefore, when a sole shareholder used funds belonging to one company to repay the debts of another company he also owned, the Court held that:

Embezzlement (횡령죄) is established because the shareholder treated company funds as if they were his own and consumed them without legitimate authorization.

Breach of trust (배임죄) is also established when such diversion of funds results in loss or damage to the company.

The Court stressed that even if all shares are owned by one person, the shareholder, the company, and any other corporations must be treated as separate legal persons. Thus, the misuse of corporate property cannot be excused on the ground of sole ownership.

In short: Under Korean law, as confirmed in Supreme Court Decision 96도1525 (1996. 8. 23.), a sole shareholder who uses one company’s funds for another of his companies commits embezzlement, and if damage occurs to the company, also commits breach of trust. Find out more and try it now: https://chatbyun.com/

It might not be, but you must be very careful. While threatening harm that causes fear is a crime (협박죄), there's an exception when it's part of exercising a legitimate right (like collecting a debt).

However, your actions must be socially acceptable and not go too far. The court will not consider it a crime if your warning is a reasonable means to achieve a fair purpose. To decide this, a judge will look at the whole situation, including:

• The relationship and any power imbalance between you and the other party.

• Whether the threatened action is excessive or far beyond what's normally expected in such a dispute.

• If the threat is rationally related to the right you are trying to enforce.

For example, threatening to file a civil lawsuit to collect a debt is generally acceptable. Threatening unrelated harm or using excessive language could cross the line into a criminal offense.

Yes, you can be charged with the serious crime of abduction of a minor (미성년자약취죄) in Korea.

Even as a parent, you can be found guilty of abducting your own child. The court has ruled that "abduction" isn't limited to using physical force or threats. If you have the child for a temporary, agreed-upon period (like a court-ordered visitation) and then refuse to return them to the primary custodial parent, that act of refusal itself can be considered a form of illegal abduction.

By not returning the child, especially a young one who cannot go back on their own, you are using an "illegal de facto force" to move them from their stable life and place them under your control against their best interests. Ignoring the other parent and defying court orders to return the child will be treated as a criminal act.

For a crime to be legally considered rape (강간죄), the perpetrator's violence or intimidation must be severe enough to make the victim's resistance impossible or extremely difficult.

To determine if this high standard has been met, the court will not just look at one action. It will conduct a comprehensive review of all circumstances, including:

• The type and severity of the violence or threats.

• The relationship between the perpetrator and the victim.

• The overall context and situation before, during, and after the act.

There must be a direct causal link between the violence/threat and the sexual intercourse. However, the violence or threat does not necessarily have to happen before the act itself.

(1) You may keep the register electronically if your Articles so provide.
Article 352-2(1) of the Commercial Act allows a company to prepare its shareholders’ register as an electronic document (“electronic shareholders’ register”) if this is authorized in the articles of incorporation.


(2) Mandatory entries (what must be recorded).
An electronic register must include all items required under Article 352(1)—(i) shareholder’s name and address, (ii) type and number of shares, (iii) share certificate numbers (if certificates are issued), and (iv) acquisition date of each share—plus the shareholder’s email address (an extra item required only for electronic registers).
법제처

(3) Where and how it must be kept (Presidential Decree).
Under Enforcement Decree Article 11(1), if the company (or its transfer agent) can print out the contents of the electronic register in paper form at the head office or the transfer agent’s business office, the company is deemed to have kept the shareholders’ register at the head office as required by Article 396(1) of the Act.


(4) Shareholders’ and creditors’ inspection rights (Presidential Decree).
Per Enforcement Decree Article 11(2), shareholders and company creditors may, during business hours, request inspection or copies of the electronic register’s entries either in paper (written) form or as a file. However, the company must exclude other shareholders’ email addresses (the extra item recorded for electronic registers) from the scope of inspection/copying.


(5) General duty to keep and allow access (the Act).
Commercial Act Article 396(1)–(2) separately requires directors to keep the shareholders’ register at the head office (with a copy allowed at the transfer agent) and allows shareholders and company creditors to inspect or copy such documents during business hours. The Decree above specifies how these duties apply when the register is electronic.


Practical compliance checklist (for in-house use)

Articles of Incorporation: Include a clause authorizing an electronic shareholders’ register.


Data fields: Record all Article 352(1) items + email address for each shareholder.


Location & printability: Ensure the register can be printed at the head office or the transfer agent’s office—this satisfies the statutory “kept at head office” requirement.

Inspection workflow: Be ready to provide inspection or copies in paper or file format during business hours; implement a process to mask other shareholders’ email addresses.


General access duty: Remember Article 396 access rights apply to shareholders and company creditors. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Article 356-2 of the Korean Commercial Act introduces the system of electronic registration of shares as an alternative to issuing physical share certificates.

Basic Rule (Commercial Act)

Instead of issuing paper share certificates, a company may, if so provided in its articles of incorporation, register its shares with an electronic registration institution (전자등록기관), such as the Korea Securities Depository.

Any transfer or pledge of electronically registered shares becomes effective only upon registration in the electronic register (전자등록부).

A person whose name is recorded in the electronic register is presumed to be the legitimate holder of the shares. If a transferee acquires shares in good faith and without gross negligence based on the electronic register, the transferee acquires the shares validly, even if the transferor lacked authority (a form of “good faith acquisition”).

Delegated Regulation (Presidential Decree & Special Law)

The details of the electronic registration system are not fully contained in the Commercial Act but are governed by the Act on Electronic Registration of Stocks, Bonds, etc. (전자증권법) and its Presidential Decree.

These provide rules on:

The registration procedure and methods (신규등록, 말소, 변경등록).

Supervisory authority over the electronic registration institution.

The effects of electronic registration on third parties (e.g., timing of perfection against creditors).

Transitional provisions for conversion of existing paper shares into electronic shares.

For listed companies, the Presidential Decree specifies that physical share certificates can no longer be issued or demanded; all listed shares must be electronically registered. For unlisted companies, registration remains optional but must follow the procedures prescribed by the decree.

Practical Significance

The electronic registration system enhances efficiency and security in the transfer of shares, reducing risks of loss, forgery, or duplication of share certificates.

It also ensures market transparency, as all changes in share ownership are traceable in real time. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Yes. Article 359 of the Korean Commercial Act adopts the principle of good faith acquisition (선의취득) for share certificates.

Statutory Rule

A transferee who acquires a bearer share certificate (무기명주권) or a registered share certificate (기명주권), properly endorsed and delivered, in good faith and without gross negligence, acquires valid title to the shares, even if the transferor lacked authority or the transaction was otherwise defective.

This principle is intended to protect the security of commercial transactions and the negotiability of share certificates, similar to rules governing negotiable instruments.

Scope of Protection

The protection extends to bona fide purchasers who rely on the appearance of authority created by possession and endorsement of the share certificate.

However, if the acquirer acted in bad faith (knew the transferor lacked authority) or with gross negligence, good faith acquisition will not be recognized.

Case Law Example

The Korean Supreme Court has confirmed that, under Article 359, the validity of the acquirer’s ownership is preserved so long as the acquisition was made in good faith and without gross negligence, regardless of defects in the transferor’s title. This reinforces the negotiability and reliability of share certificates in commerce.

Practical Implication

Companies are generally bound to recognize as shareholders those who appear on the shareholder register after such a transfer.

Internal disputes between the “real” owner and the transferee must be resolved separately, without affecting the bona fide acquirer’s shareholder status against the company. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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An extinction judgment is a legal procedure under the Korean Commercial Act and the Civil Execution Act by which a court declares a share certificate null and void at the request of the person who has lost possession of it.

Purpose

The system protects shareholders who have lost, stolen, or destroyed their share certificates by allowing them to eliminate the legal effect of the old certificate and request issuance of a new one.

It prevents third parties from wrongfully exercising shareholder rights by presenting the lost or stolen certificate.

Procedure

The shareholder (or lawful possessor) petitions the court for an extinction judgment.

The court issues a public summons (공시최고) calling upon anyone who possesses the certificate to submit it within a fixed period.

If no submission is made, the court renders a final extinction judgment, declaring the share certificate void.

Legal Effect

Once the extinction judgment becomes final, the previous share certificate loses all legal force.

The shareholder may then demand the company to issue a new share certificate in replacement.

From the perspective of third parties, the extinguished certificate can no longer be used to claim shareholder rights.

Practical Significance

This system strikes a balance between protecting legitimate shareholders and maintaining security in commercial transactions involving negotiable securities.

Without such a system, the risk of fraudulent exercise of rights with lost or stolen certificates would undermine trust in the share transfer system. Find out more and try it now: https://chatbyun.com/

The extinction judgment serves as a safeguard against the good faith acquisition (선의취득) rule under Article 359 of the Korean Commercial Act.

Risk of Good Faith Acquisition

Under Article 359, a bona fide transferee of a properly endorsed share certificate may acquire valid ownership, even if the transferor lacked proper authority.

This rule promotes negotiability of securities but creates a risk: if a lost or stolen share certificate is transferred to an innocent purchaser, that purchaser may be protected as a legitimate shareholder.

Function of Extinction Judgment

To counter this risk, the law allows the original shareholder who lost possession of the certificate to apply for an extinction judgment.

Once the judgment becomes final, the lost certificate is declared legally void, meaning it cannot be validly transferred or acquired by anyone, even in good faith.

Legal Effect

After extinction, the company may issue a new share certificate to the rightful shareholder.

Any subsequent transfer of the old, extinguished certificate has no effect, eliminating the possibility of bona fide acquisition by a third party.

Practical Implication

This system balances transactional security (protecting bona fide purchasers before extinction) with shareholder protection (ensuring that, after extinction, only the rightful shareholder can exercise rights).

It thus prevents abuse of lost or stolen certificates while still maintaining the negotiability of share certificates in general. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Legal Mechanism

In a comprehensive share exchange, the parent company delivers its own shares (or, in certain cases, cash or other assets) to the shareholders of the subsidiary in exchange for all of their shares in the subsidiary.

As a result, the subsidiary’s shareholders become shareholders of the new parent company, and the subsidiary becomes wholly owned by the parent .

Establishment of Wholly-Owning Parent Company

The effect of this system is that the acquiring company automatically becomes a wholly-owning parent, and the target company becomes a wholly-owned subsidiary, without dissolution or liquidation of the subsidiary.

This provides a statutory mechanism for group restructuring without the procedural complexity of mergers.

Shareholder Protection

Shareholders opposing the exchange have a statutory right to demand share purchase (주식매수청구권) if they vote against the resolution.

The exchange must be approved by a special resolution at the shareholders’ meeting of both companies involved (Article 360-3) .

Practical Significance

This method is frequently used in corporate restructuring to centralize group control, especially where a holding company structure is desired.

Unlike mergers, the legal personality of the subsidiary remains intact, ensuring continuity of contracts and regulatory licenses. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Yes. Under Korean tax law, a share exchange is generally treated as a disposal (transfer) of shares, which triggers capital gains tax (양도소득세) for the shareholders who exchange their shares.

Tax Treatment of Share Exchange

Even though a comprehensive share exchange under Article 360-2 of the Commercial Act is a corporate restructuring method (resulting in the creation of a wholly-owning parent company), the transaction is deemed a taxable transfer of the subsidiary’s shares.

Accordingly, the shareholders of the subsidiary are regarded as having disposed of their shares in exchange for newly issued shares of the parent company (or other consideration such as cash).

Capital Gains Recognition

The taxable gain is calculated as the difference between the transfer value (fair market value of the new parent company shares or other consideration received) and the acquisition cost of the old subsidiary shares.

This gain is subject to capital gains tax under the Income Tax Act (소득세법) for individuals, or under the Corporate Tax Act (법인세법) for corporate shareholders.

Deferral or Special Relief

In some jurisdictions, share-for-share exchanges may qualify for tax deferral or rollover relief.

However, under Korean law, unless a specific tax deferral regime applies (such as for qualified mergers or spin-offs under strict conditions), a share exchange does not defer taxation. Thus, shareholders must recognize gain at the time of the exchange.

Practical Implication

Shareholders considering a comprehensive share exchange should carefully evaluate potential capital gains tax liabilities.

Companies often provide information and guidance to minority shareholders, since unexpected tax burdens can be a source of resistance to the exchange plan. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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In Korea, the valuation of unlisted company shares for tax purposes is generally determined under the Inheritance and Gift Tax Act (상속세 및 증여세법, “상증법”), based on a combination of income value (수익가치) and asset value (자산가치).

Valuation Method

For unlisted companies, market prices are not readily available. Thus, the tax law prescribes a formula that averages income value (based on earnings) and asset value (based on net assets).

This often results in a higher calculated value than the company’s actual market perception, especially when the company has accumulated assets or stable earnings.

Impact on Share Exchange

In a comprehensive share exchange, the acquiring company must issue new shares in exchange for the target’s shares.

If the target company’s shares are valued highly under the 상증법 formula, more shares (or higher-value consideration) must be provided to the target shareholders, increasing the transactional and tax burden.

Tax Consequences

As explained earlier, a share exchange is treated as a taxable transfer of shares, triggering capital gains tax.

Without special tax relief, shareholders face immediate taxation based on the inflated tax valuation rather than actual cash proceeds.

Need for Tax Incentives

Korean tax law provides limited special tax reliefs (조세특례) for certain qualified mergers, spin-offs, or restructuring.

However, if such relief is not available for the share exchange, the significant tax burden often becomes a practical obstacle to completing the transaction.

Conclusion:
Because unlisted company shares are valued under strict statutory formulas that may overstate their fair value, and because capital gains tax applies unless special tax incentives are granted, conducting a share exchange involving unlisted companies is often financially burdensome and difficult to implement in practice. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Normally, a share exchange is treated as a taxable disposal of the old shares, resulting in immediate capital gains tax. However, the Restrictive Special Tax Treatment Control Act (조세특례제한법, “STTCA”) provides deferral (이연 과세) or exemption if strict requirements are satisfied.

1. Statutory Requirements for Special Treatment

Wholly-owning parent–subsidiary structure:

After the exchange, the acquiring company must directly own 100% of the issued shares of the subsidiary (excluding treasury stock).

This must be achieved through the statutory mechanism under Commercial Act Article 360-2.

Continuity of shareholder interest:

Shareholders of the subsidiary must receive only shares of the parent company (share-for-share exchange).

If shareholders receive cash or other property in addition (boot), that portion is immediately taxable, and only the share portion may qualify for deferral.

Business continuity requirement:

Both companies must continue to operate their businesses for a minimum of 1 year following the exchange.

If either company is liquidated or significantly restructures within this period, tax deferral may be denied retroactively.

Registration and reporting obligations:

The companies must register the transaction with the tax authority and file the required documentation within the statutory period.

Failure to comply results in disqualification from the special regime.

2. Effects of the Special Treatment

Deferral of capital gains taxation:

Shareholders do not pay capital gains tax at the time of the exchange.

The tax basis (취득가액) of the old shares is carried over to the new parent company shares.

Tax is only recognized when the shareholder later disposes of the new parent shares.

Corporate-level relief:

The parent company may also benefit from reduced or exempted acquisition tax, registration tax, and securities transaction tax, depending on the transaction structure.

3. Limitations

Partial acquisitions: If the parent acquires less than 100% ownership, the transaction does not qualify.

Boot received: Any cash or non-share consideration is taxable immediately.

Non-compliance: If continuity, reporting, or registration requirements are not satisfied, the relief is revoked and back taxes imposed.

4. Practical Significance

The STTCA provisions are designed to facilitate corporate restructuring (지주회사 설립, 기업집단 재편) without imposing prohibitive tax burdens.

Without this relief, shareholders would incur substantial immediate taxes on paper gains, often making share exchanges impractical. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Let’s consider two different scenarios:

Scenario 1: Requirements Satisfied (Tax Deferral Granted)

Structure: Company A acquires 100% of Company B’s shares through a comprehensive share exchange pursuant to Commercial Act Article 360-2.

Consideration: All shareholders of B receive only newly issued shares of A (no cash or other assets).

Continuity: Both A and B continue their business operations for at least 1 year after the transaction, without liquidation or drastic restructuring.

Reporting: The companies properly register and file the share exchange documents with the tax authority within the required period.

Result:
Under the STTCA, the exchange qualifies for tax deferral. Shareholders of B are not immediately taxed on their capital gains. Instead, the tax basis of their B shares carries over to the A shares. Tax will only arise when they later dispose of the A shares. At the corporate level, A may also enjoy relief from acquisition tax and registration tax.

Scenario 2: Requirements Not Satisfied (Immediate Taxation)

Structure: Company A acquires only 90% of Company B’s shares in the exchange, with the remaining shareholders dissenting.

Consideration: Some B shareholders receive cash payments instead of A’s shares.

Continuity: Within 6 months of the exchange, Company B is liquidated and its assets are absorbed by A.

Reporting: The companies fail to file timely documentation with the tax authority.

Result:
This transaction does not qualify for special tax treatment.

Because A does not acquire 100% of B’s shares, the legal requirement for a “wholly-owned subsidiary” is not met.

Cash consideration triggers immediate capital gains taxation for those shareholders.

The early liquidation of B within one year and the reporting failure further disqualify the transaction.

Consequently, shareholders of B are subject to immediate capital gains tax based on the deemed fair market value under the Inheritance and Gift Tax Act (상증법).

Conclusion:
The availability of tax deferral under the STTCA depends strictly on compliance with all statutory requirements: (i) 100% ownership must be achieved, (ii) only shares may be given as consideration, (iii) business continuity must be maintained for at least one year, and (iv) proper reporting must be made. If any of these are violated, the exchange is taxed as a normal share disposal, and the economic burden on shareholders may make the restructuring impractical. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Generally, no. The special tax treatment under the Restrictive Special Tax Treatment Control Act applies primarily to domestic corporate restructuring transactions (mergers, spin-offs, comprehensive share exchanges, etc.) conducted under the Korean Commercial Act.

Domestic Scope of STTCA

The STTCA provisions on comprehensive share exchanges (주식의 포괄적 교환) are designed to facilitate the creation of domestic wholly-owning parent–subsidiary structures.

The law requires compliance with Commercial Act procedures (Articles 360-2 to 360-24), which apply to Korean companies.

Cross-Border Limitation

If a foreign company becomes the parent in a share exchange, the transaction cannot fully comply with the Commercial Act’s requirements for a comprehensive share exchange, since the Act does not govern foreign corporations.

As a result, the exchange does not qualify for special tax deferral under the STTCA.

Shareholders of the Korean company would be treated as having disposed of their shares, triggering immediate capital gains taxation.

Possible Alternatives

Some tax treaties (이중과세방지협약) may provide relief by reducing or exempting Korean capital gains tax, depending on the treaty partner country and the nature of the shares.

Structuring the transaction as a qualified inbound merger or through an intermediate Korean holding company might allow for limited domestic relief, but this requires careful tax planning.

Conclusion:
A cross-border share exchange where a Korean company becomes a wholly-owned subsidiary of a foreign parent does not enjoy the same tax benefits as a domestic share exchange under the STTCA. Unless a tax treaty provides relief, shareholders will likely face immediate capital gains taxation, making such transactions more burdensome than purely domestic restructurings. Try Chatbyun: Your AI-Powered Korean Legal Assistant
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Yes, it is a crime. The Korean Supreme Court has ruled that the crime of "Indecent Act by Compulsion" (강제추행죄) can be committed indirectly.

To be found guilty, a person does not have to physically touch the victim themselves. If a perpetrator uses threats or intimidation to force a victim to perform a sexually shameful act with their own body, the perpetrator is still legally responsible for the crime.

In this situation, the law considers the perpetrator an "indirect principal offender" (간접정범), meaning they used the victim as an instrument or "tool" to violate their own sexual freedom. The core of the crime is the violation of a person's sexual self-determination, regardless of who physically performs the act.

The court evaluates the perpetrator's violence from the victim's perspective at the time of the incident. Crucially, the charge cannot be dismissed simply because the victim didn't resist with all their might or because an escape route was visible in hindsight.

Meanwhile, an "attempted unlawful arrest" (체포미수) is established the moment an act begins with the intent to physically restrain someone, even if the restraint is brief or ultimately fails.

The court assesses the perpetrator's violence from the victim's perspective at the time of the event. It has warned not to hastily conclude that the violence was insufficient simply because the victim could have left the scene beforehand or did not resist with maximum force.

When the victim's testimony is the only direct evidence, the defendant's credibility becomes important. While an irrational or contradictory story from the defendant is not direct proof of guilt, it can be used by the court as indirect evidence to support the truthfulness and credibility of the victim's statement.

Yes. The law has special protections for minors (ages 13-18) and persons with diminished mental capacity. To commit an indecent act against them, the perpetrator can use "deceit" or "duress" (위력).

The term "duress" is interpreted very broadly by the courts. It is not limited to physical violence or direct threats. It includes any form of power or influence used to overwhelm the victim's free will. This can be tangible or intangible, such as exploiting one's social, economic, or professional position and authority. The court will examine the entire context, including the power imbalance and relationship between the two individuals, to determine if duress was used.

Yes. This is known as "surprise molestation" or "groping" (기습추행), where the physical act itself is the crime.

For this type of offense, the Korean Supreme Court has consistently ruled that the physical force used does not need to be strong or overpowering. Any physical contact exercised against the victim's will is considered sufficient force, regardless of how strong or weak it is.

Past examples that the court has found to be a crime include touching someone's buttocks over their clothes, massaging a person's shoulders against their will, or a teacher touching a student's ear. The court will consider the entire context to determine if the act was indecent.

Yes, absolutely. The Supreme Court has explicitly ruled on this issue.

It recognizes that victims of sexual offenses react in different ways depending on their personality, the specific situation, and their relationship with the perpetrator (for example, if the person is your boss).

Therefore, a victim's lack of immediate protest or physical resistance cannot be used as a reason to assume the act was consensual or to find the perpetrator not guilty. The focus is on whether the act was against your will, not on how you reacted in the moment of shock or fear.