SOUTH KOREA Law and Practice Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
1. Introductory 1.1 Forms of Corporate/Business Organisations There are five types of corporate/business organisations in Korea, as follows. • Joint stock company ( chusik hoesa ) – similar to a corporation in the United States, this is the most commonly seen form of corporate/ business organisation in South Korea. A joint stock company secures its capital and assets by issuing stocks, and shareholders are liable only to the extent of their investment (ie, they have limited liability), and also have equity rights in the company based on the number of shares they hold. • Limited company ( yuhan hoesa ) – like a joint stock company, the members of a limited company (equivalent to the shareholders in a joint stock company) are liable only to the extent of their contributions, but the set-up process is simpler and the units (equivalent to the shares in a joint stock company) are not freely transferable, making it suitable for smaller corporate/business organisations. • Limited liability company ( yuhan chaekim hoesa ) – this is a company where unithold - ers can directly participate in management while each bears legal responsibility up to the amount that they invested. However, use of this form of company is rare due to (i) its lack of any meaningful benefits compared to a joint stock company and limited company, and (ii) a general lack of familiarity with this type of entity in the market, as it is a relatively new form of corporate/business organisation created in 2012. • Unlimited partnership ( hapmyung hoesa ) – here, each member, who is also a share - holder, assumes unlimited liability in propor - tion to their shareholding, and has the author -
ity to execute the company’s business and represent the company, making it suitable for joint business ventures among closely related individuals such as family members, relatives or close friends. • Limited partnership company ( hapja hoesa ) – this type of company has members who bear unlimited liability and members who bear limited liability up the amount of their invest - ment. Those with unlimited liability manage the business and members with limited liabil- ity provide capital and participate in the distri - bution of profits generated by the business. According to a survey published by the National Tax Service, approximately 94% of companies in South Korea are joint stock companies. The following guide therefore uses these as context. 1.2 Sources of Corporate Governance Requirements The primary sources of law governing corporate governance in South Korea are as follows. Korean Commercial Code (KCC) The KCC is the most fundamental law relating to corporate governance, which applies to both publicly traded and private companies. The KCC comprehensively regulates all aspects of corporate governance, such as the formation, decision-making, and dissolution of companies. It takes precedence over civil law with respect to corporate governance. However, for publicly traded companies, the Financial Investment Ser - vices and Capital Markets Act take precedence over the KCC. Financial Investment Services and Capital Markets Act (FISCMA) From a corporate governance perspective, the FISCMA provides for requirements around public disclosure, audit committees, outside
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