SOUTH KOREA Law and Practice Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
As a general rule, there is no statutory minimum capital requirement and most entities may be established by a single shareholder or member, except partnership- type entities. For foreign investors, however, an invest - ment of at least KRW100 million is generally required to qualify as a “foreign investment” under the Foreign Investment Promotion Act. Chusik Hoesa (Joint-Stock Company) The chusik hoesa is Korea’s standard corporate form and the vehicle most commonly used for medium- sized and large businesses. It is the only form that may be publicly listed and is therefore the default structure for IPOs and equity fundraising. Shareholders’ liability is limited to their capital contribution. Its governance structure comprises: • a general meeting of shareholders; • a board of directors; • one or more representative directors; and • where required, a statutory auditor or audit com - mittee. A chusik hoesa may be established by a single share - holder without any minimum capital requirement. Owing to its familiarity with investors and lenders and its suitability for capital raising, it is commonly used for large operating businesses, multi-investor joint ventures, holding company structures and business - es contemplating future public offerings or external investment. Yuhan Hoesa (Limited Company) The yuhan hoesa is a closely held limited liability com - pany. Members’ liability is limited to their contributions and no minimum capital is required. Compared with a chusik hoesa , it is intended for a closed ownership structure, with membership interests that are less freely transferable. It is therefore commonly used for wholly owned Korean subsidiaries, closely held busi - nesses, closed joint ventures and companies with no expectation of accessing public capital markets. Yuhan Chaegim Hoesa (Limited Liability Company) Introduced in 2012, the yuhan chaegim hoesa is often compared to a US-style LLC, although it is treated as a corporation rather than a tax-transparent enti -
ty under Korean law. Its principal attraction is gov - ernance flexibility, with management arrangements largely determined by the articles of incorporation rather than a formal board structure. It is frequently used for negotiated joint ventures, start-ups, project- based enterprises and other investment structures that require contractual flexibility. Less Common Forms The Korean Commercial Code also recognises hap- myeong hoesa (general partnership) and hapja hoesa (limited partnership). Because these forms involve unlimited liability for at least some participants, they are rarely used in mainstream commercial practice or Companies in Korea are incorporated through a reg - istration-based process rather than by governmental charter. For foreign investors, the most common corporate forms are chusik hoesa , yuhan hoesa and yuhan chae- gim hoesa , all of which follow broadly similar incorpo - ration procedures. inbound foreign investment. 3.2 Incorporation Process Where the investment is intended to qualify as a for - eign investment under the Foreign Investment Promo - tion Act (“FIPA”), the process generally begins with a foreign investment report filed with a designated for - eign exchange bank or KOTRA. Once accepted, the investor remits the capital contribution to a Korean bank. The company is then organised under the Korean Commercial Code through: • preparation of the articles of incorporation; • appointment of directors (and, where applicable, an auditor); and • adoption of the necessary incorporation resolu - tions. For a chusik hoesa , this ordinarily includes an inau - gural shareholders’ meeting and, where applicable, appointment of the representative director by the board.
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