Korea Type of Companies
There are following types of company for a foreign investor to engage in business activities in Korea
Establishing a local company / Opening a Branch / Liaison office
The First type is mainly governed by the Foreign Investment Promotion Act (FIPA) and the other is regulated by the Foreign Exchange Transactions Act. However, among the above entities, only the Liaison office shall not engage in profit-generating activities.
The Procedure for Establishing a Local Corporation
Ways of Establishing a Stock Company
There are two ways of establishing a stock company: promotion of incorporation and subscriptive incorporation. Promotion of incorporation means that promoters subscribe to all the shares issued at the time of incorporation. On the other hand, subscriptive incorporation means that promoters subscribe to only part of the shares issued at the time of incorporation and the remaining shares are offered for subscription.
Registration of incorporation
The registration of incorporation of a stock company should be effected within two weeks from the date on which the investigation of the process of establishment is completed in the case of promotion of incorporation; and two weeks from the date on which the inaugural general meeting is closed in the case of subscriptive incorporation.
The documents to be submitted
The documents to be submitted by a foreign investor differ, depending on whether the investor concerned is an individual or a corporation. A foreign investor of Japan or Taiwan must submit the same documents as a national of Korea or a Korean corporation.
Establishment of a Foreign Company’s Domestic Branch
Types of Domestic branch
There are two types of domestic branches: a branch and a liaison office. A branch undertakes sales activities in Korea to generate profit, whereas a liaison office does not conduct sales activities to create profit but instead carries out non-sales functions such as business contacts, market research and R&D. Liaison offices can carry out quality control, market surveys, advertising, and other incidental and supportive roles. However, they are limited in the scope of their activities since they are not permitted to sell products directly, or to stock inventory for sale on behalf of the headquarters.
The documents to be submitted
Under the Commercial Act, a branch is required to establish And register a business office. In order for a foreign company to establish a domestic branch, a notification should be filed to the head of a designated foreign exchange bank. A liaison office does not require registration because it is not permitted to conduct sales activities and is only allowed to engage in activities such as information exchange.
Documents preparation for registration of branch establishment:
The following documents should be attached to the application form for registration of branch establishment:
- Notification form of the establishment of a foreign company’s domestic branch
- Documents certifying the foreign company (headquarters)’s name, location and major business operations (Notarization of the location of the headquarters is required if the documents are not original copies.)
- Where a permit, etc. is required for the establishment of a branch in accordance with other Acts and statutes, a copy of documents certifying that such permit, etc. has been obtained
Articles of association of the headquarters
- Board meeting minutes containing the company’s plans to establish a branch or liaison office in Korea and details on the appointment of its representative in Korea
- Specifications of the line of business that the company intends to operate in Korea and the scope of business
- Power of attorney in cases where the establishment of a domestic branch is commissioned to another person (Notarization of the location of the headquarters is required.)
- Application form for seal registration of the representative of the Korean office (for the convenience of the representative and is not mandatory)
- The branch representative’s acceptance of appointment with a notarized signature, and certificate of address