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cannot be withdrawn from the aforementioned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