SOUTH KOREA Law and Practice Contributed by: Soo Bong Jung, Jinwook Song, Jinwon Choi and Jiyoung Sohn, Bae, Kim & Lee LLC
and the company fails to demonstrate that it exercised due care and supervision to prevent such misconduct. It should be noted that a criminal indictment to com - mence court proceedings is permitted only after the tax authorities make a criminal referral of the offence to the responsible prosecutor(s) with jurisdictional authority over the matter. 3.6 Financial Record-Keeping Under the Act on External Audit of Joint-Stock Com - panies and Others, joint stock companies and limited liability companies meeting any of the following condi - tions are required to be audited by an external auditor on an annual basis, and are required to prepare and keep corporate books with effective internal controls: • listed companies; • companies seeking to become a listed company during the current fiscal year or the immediately following fiscal year; • a joint stock company whose net asset value or total turnover is KRW50 billion or more as of the end of the immediately preceding fiscal year; and • a limited liability company whose net asset value or total turnover is KRW50 billion or more as of the end of the immediately preceding fiscal year. Any person who falsifies a balance sheet or an audit report (either actively or by omitting certain required information) may face imprisonment of up to ten years or a life sentence (depending on the affected amount in the balance sheet), and/or a criminal fine of up to double or quintuple the amount of profits or avoided losses. A company may face a criminal fine if an indi - vidual executive or employee is found guilty of violat - ing financial record-keeping laws and the company fails to demonstrate that it exercised due care and supervision to prevent such misconduct. For companies listed on any Korean stock exchange, any person found misrepresenting or omitting cer - tain material information may face up to five years of imprisonment or a criminal fine of up to KRW200 mil - lion. The company may also be subject to a criminal fine if the individual executive or employee is found guilty of violating financial record-keeping laws and
the company fails to demonstrate that it exercised due care and supervision to prevent such misconduct. 3.7 Cartels and Criminal Competition Law The MRFTA prohibits any overt or covert agreement between competitors that hampers competition in a relevant market. Specifically, agreements with the fol - • to determine the terms and conditions for transac - tions in goods or services or for the payment of prices or compensation; • to restrict production, shipment, transportation, or transactions in goods or services; • to restrict the territory of trade or customers; lowing objectives are prohibited: • to fix, maintain or alter prices; • to hinder or restrict the establishment or expansion of facilities, or the installation of equipment neces - sary to manufacture products or render services; • to restrict the types or specifications of goods at the time of production or trade; • to decide the successful bidder or bidding price; and • to practically restrict business in a particular sector by means of interfering with or restricting the activi - ties of other entities. The MRFTA provides for both administrative and criminal sanctions. The KFTC may impose an admin - istrative fine of up to 10% of the relevant sales, or up to KRW2 billion if the sales amount cannot be deter - mined; relevant sales refers to the sales amount of rel - evant products or services, or an equivalent amount, of the corporate perpetrators during the violation peri - od in a specific business sector. Corporate perpetra - tors may receive a cease-and-desist order and other appropriate administrative corrective orders. The gov - ernment does not have provisions for civil sanctions. For criminal sanctions, the responsible individuals may face up to three years of imprisonment or a crimi - nal fine of up to KRW200 million. At the same time, companies may be subject to a criminal fine of up to KRW200 million. 3.8 Consumer Criminal Law The Framework Act on Consumers permits the Kore - an government to issue an order to recall, destroy,
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