SOUTH KOREA Law and Practice Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
resents it externally. The structure broadly resembles a one-tier board supplemented by a separate audit function. For companies with paid-in capital below KRW1 bil - lion, the governance structure may be simplified and a board or statutory auditor is generally not required. Yuhan Hoesa A yuhan hoesa is managed by one or more directors without a board of directors. Management authority is vested directly in the director(s), subject to matters reserved to the members’ meeting. A statutory audi - tor is optional. Yuhan Chaegim Hoesa The yuhan chaegim hoesa provides the greatest con - tractual flexibility. Management is vested in one or more managers designated in the articles of incorpo - ration and governance arrangements, including man - agement authority and representation rights, may be extensively customised without a statutory board. 3.5 Directors’, Officers’ and Shareholders’ Liability Directors owe duties of care and loyalty to the compa - ny. A director who intentionally or negligently breaches the law, the articles of incorporation or those duties may be liable to the company for resulting damages. Where a wrongful act is approved by board resolution, directors voting in favour may be jointly and sever - ally liable. Directors participating in the resolution are presumed to have approved it unless their objection is recorded in the minutes. Directors also owe supervisory duties and may be liable for failing adequately to supervise the affairs of the company, including the conduct of fellow directors and officers. Outside or non-executive directors are not automatically exempt. Directors may also incur lia - bility to third parties where damage is caused through wilful misconduct or gross negligence. Korean law further recognises liability for de facto directors who effectively direct or control the com - pany’s affairs. Statutory auditors and audit committee
members may likewise incur liability for failing properly to perform their supervisory functions. As a general rule, shareholders of a chusik hoesa , yuhan hoesa and yuhan chaegim hoesa enjoy limited liability up to the amount of their contributions. Korean courts nevertheless recognise a limited doc - trine of piercing the corporate veil. A company’s sepa - rate legal personality may be disregarded where the corporate form is abused to evade legal obligations or the company functions merely as an instrumentality of its controlling shareholder. The doctrine is applied sparingly. Sole ownership, close control or parent- subsidiary status alone are insufficient; courts gener - ally require exceptional circumstances such as: • commingling of assets; • disregard of corporate formalities; • abuse combined with undercapitalisation; • use of the company to evade existing liabilities; or • operation of the company as the alter ego of its controller. Accordingly, limited liability remains the general rule, although directors, de facto managers and, in excep - tional circumstances, controlling shareholders may incur liability where the corporate form is abused. Employment relationships in Korea are governed by statutory law, case law, collective bargaining agree - ments, work rules and individual employment con - tracts. Statutory law is the primary source and many employment protections are mandatory. The principal statute is the Labour Standards Act (“LSA”), which establishes minimum standards for wages, working hours, overtime, annual leave, dis - missal, disciplinary measures and other working conditions. Any contractual or internal provision fall - ing below these standards is generally invalid and replaced by the applicable statutory rule. Other key legislation includes: 4. Employment Law 4.1 Nature of Applicable Regulations
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