SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, D&A LLC
dence. The debtor has the option to accept the pay - ment order served, or to file an objection within two weeks after the service date of the payment order. If the debtor accepts the payment order and does not file an objection within two weeks, the payment order will be final and enforceable; therefore, the creditor can enforce against the debtor’s assets. However, if the debtor files an objection, there will be a full trial hearing. This is a simple and expedited procedure to get the court’s final and enforceable order with a small amount of court fees payable, and is recommended for many foreign entities that want to collect unpaid receivables from a Korean debtor through expedited procedures. 2.7 Rules for Pleading Fraud There is no special rule or procedure for pleading fraud in Korea, and there is no difference between handling a fraud claim and other causes of action. 2.8 Claims Against “Unknown” Fraudsters As a general rule, it is not possible to bring a civil claim against unidentified fraudsters, primarily because the court must be able to serve the statement of claim on the defendant at the address specified in the pleadings. It is, however, permissible to add a further defendant or to amend the name of a defendant dur- ing the course of the proceedings, provided it is clear that the claimant has misidentified the defendant or made an error when preparing the claim. By contrast, it is possible to initiate criminal proceed - ings against unknown fraudsters. Unlike civil claims, the investigation of criminal matters falls within the responsibility of the relevant investigative authorities, rather than the complainant. 2.9 Compelling Witnesses to Give Evidence It is up to the judge whether to compel witnesses to attend an examination hearing. If a witness does not attend the hearing, and unless they have the right to refuse to testify even where they have been served the summons, the court can impose a fine of up to KRW5 million. Additionally, if the witness repeatedly does not attend, then the court can order detention of the witness for up to seven days. The court can force
the witness to attend the examination hearing with the help of a police officer by issuing a detention warrant.
3. Corporate Entities, Ultimate Beneficial Owners and Shareholders 3.1 Imposing Liability for Fraud on a Corporate Entity An individual corporate director’s or officer’s knowl - edge regarding fraudulent matters can be attributed to the company, provided that they acted in their capacity as a corporate director and the other party had knowledge that a corporate director acted on its behalf. Conversely, if an individual director purport - edly acted on a company’s behalf and the other party had knowledge that they did not actually represent the company, the director’s act may not be attributed to the company. It can serve in the company’s defence that it does not wish the director’s personal act to be attributed to it. In addition to punishing perpetrators for illegal acts, there are special rules in Korea regarding punishing the relevant corporation – for instance, the joint pun - ishment provision. 3.2 Claims Against Ultimate Beneficial Owners Piercing the Corporate Veil Piercing the corporate veil is a concept that is rec - ognised in Korea, though in extremely rare cases. In Korea, this theory is sometimes called the doctrine of the disregard of the corporate entity, which has the same meaning. The main factors in this theory include the following: • there must be unity of interest and ownership between the two entities; • fraudulent acts by the shareholders wholly govern - ing the corporate entity; and • this therefore creates inequitable damage to the corporate entity’s creditors. Although a company may appear to be a corpora - tion, in reality, if it is merely an individual entity of the company behind the corporation that is involved, or the company is used as a means to avoid the applica -
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