Corporate Law at South Korea
Corporate law in South Korea is governed by a combination of statutes and regulations that establish the legal framework for business entities, including corporations, partnerships, and foreign companies operating within the country. Here's an overview of the key aspects of corporate law in South Korea:
βοΈ Primary Legal Framework
Commercial Act (μλ²)
The Commercial Act is the principal source of corporate law in South Korea.
It governs:
Formation, operation, and dissolution of corporations.
Corporate governance (board of directors, shareholders, etc.).
Mergers and acquisitions.
Securities and capital markets to a limited extent.
Financial Investment Services and Capital Markets Act (FSCMA)
Governs public companies, securities issuance, and capital markets.
Administered by the Financial Services Commission (FSC) and Financial Supervisory Service (FSS).
Fair Trade Act (FTA)
Overseen by the Korea Fair Trade Commission (KFTC).
Regulates antitrust matters, monopolies, and corporate group structures (chaebols).
π’ Types of Business Entities
Chusik Hoesa (μ£Όμνμ¬) β Stock company (most common form for corporations).
Yuhan Hoesa (μ ννμ¬) β Limited liability company.
Hapja Hoesa (ν©μνμ¬) β Limited partnership.
Hapmyeong Hoesa (ν©λͺ νμ¬) β General partnership.
Branch or Liaison Office β For foreign corporations.
𧩠Corporate Governance Structure
For a Chusik Hoesa (stock company), governance includes:
Shareholdersβ Meeting β The highest decision-making body.
Board of Directors β Oversees management; must include outside directors if the company is listed.
Auditor or Audit Committee β Required for listed or large companies.
Recent reforms have focused on increasing shareholder rights, transparency, and corporate accountability, especially in large conglomerates (chaebols).
π Key Regulatory Trends
Chaebol Reform β Targeting governance and transparency in family-run conglomerates.
Environmental, Social, and Governance (ESG) Reporting β Increasing focus, especially for listed firms.
Shareholder Activism β Growing influence of institutional investors and minority shareholders.
M&A Regulations β Scrutiny of mergers to prevent monopolistic practices.
π Foreign Investment
Governed by the Foreign Investment Promotion Act (FIPA).
Generally open to foreign investors, but with some restrictions in specific industries (e.g., defense, broadcasting).
Incentives offered in Free Economic Zones (FEZs) and for certain high-tech sectors.
β οΈ Compliance & Enforcement
FSS: Enforces financial regulations and monitors listed companies.
KFTC: Handles antitrust and fair trade matters.
National Tax Service (NTS): Oversees corporate tax compliance.
Non-compliance can lead to penalties, fines, and even criminal liability, particularly in cases of accounting fraud, insider trading, or unfair trade practices.
RELATED Blog
0 comments