SOUTH KOREA Law and Practice Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
5.3 Incorporation and Registration In Korea, companies are incorporated through regis - tration with the competent registry office having juris - diction over the location of the company’s head office. Registry offices form part of the court system and are administered under the judiciary, rather than as ordi - nary administrative agencies. A company comes into legal existence upon completion of its incorporation registration, and subsequent changes to key corpo - rate particulars must also be registered. Registrable matters include the company’s name, business purpose, head office, method of public notice, capital amount, total number and classes of shares, restrictions on share transfers, and informa - tion on corporate officers and organs, including rep - resentative directors, directors and auditors. The principal registered particulars are publicly avail - able. Any person may inspect the commercial register or obtain an official certificate of registered matters upon payment of the prescribed fee. Supporting doc - uments filed with the registry are more restricted and are generally accessible only to persons with a legally recognised interest. Failure to make a required registration may result in administrative fines under the KCC. 5.4 Global Anti-Money Laundering As a threshold matter, Korean AML reporting obliga - tions are not imposed on companies generally. They apply mainly to designated reporting entities under the Act on Reporting and Using Specified Financial Transaction Information. The two core reporting duties are suspicious trans - action reporting and currency transaction reporting. A suspicious transaction report must be filed with the Korea Financial Intelligence Unit where there are reasonable grounds to suspect money laundering, terrorist financing or transactions involving criminal proceeds. Korean law does not treat AML board oversight as a standalone governance topic for all companies. Instead, AML is addressed through internal controls, compliance procedures and supervision of employee
compliance. For financial institutions, the board’s role is more explicit: it must approve and oversee internal control standards, risk management standards and related policies, and supervise the chief executive’s overall internal control responsibilities. Directors’ personal exposure is usually analysed under general company law rather than under a stan - dalone AML liability rule. If a director fails to establish or supervise an adequate control framework, espe - cially where warning signs existed, this may constitute a breach of supervisory duties or the duty of care. The director may face liability to the company. 6. Audit, Risk and Internal Controls 6.1 External Auditors Under the Act on External Audit of Stock Companies, Etc. (the “External Audit Act”), an external audit is mandatory for listed companies, companies intend - ing to list during the current or following business year, and other companies meeting statutory size thresholds. These thresholds are further specified in the Enforcement Decree by reference to factors such as assets, liabilities, sales, number of employees and, for certain limited companies, number of members. The relationship between the company and the audi - tor is structured with an emphasis on independence and audit quality. Companies must appoint an audi - tor within the statutory period, and listed companies, large unlisted stock companies and financial compa - nies are generally required to retain the same audi - tor for three consecutive business years. In specified cases, the Securities and Futures Commission may designate an auditor or require a replacement. The company’s audit function also plays a substantive role. The statutory auditor, audit committee or auditor appointment committee participates in the selection process. The statutory auditor or audit committee is required to determine in writing the auditor’s remuner - ation, audit hours and staffing, and to confirm whether those agreed terms were observed. Taken together, these rules are designed to reduce management influ - ence and preserve auditor independence.
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