Korean Company Law

Dear Mr. Sean Hayes: We are considering opening a subsidiary in Korea. We are a NASDAQ listed company that will enter the Korean market in this coming year. Our first question is what corporate forms are allowed in Korea? We would also like to know what corporate form is the most common for Korean companies and foreign companies in our shoes? Michael in the United States.

Dear Michael, under the Korean Commercial Code four basic corporate entities are available. Part III of the Korean Commercial Code details the four corporate entities available in South Korea. It must be noted that most incorporated businesses in Korea chose the “jusik hoesa” corporate form.

1. Jusik Hoesa (Stock Company)
Jusik Hoesa is the only form of corporate entity that is allowed to publicly issue shares. The vast majority of corporations in Korea chose the Jusik Hoesa corporate form. It is also the most common corporate form that foreign companies chose for their subsidiaries.

2. Yuhan Hoesa (Limited Liability Company)
Yunhan Hoesa is a closely held company that is prohibited from having more than 50 shareholders. In recent years a few foreign companies have chosen the Yuhan Hoesa, however, most foreign companies are advised and will form a Jusik Haesa. A few companies, recently, have chosen this form because of possible U.S. tax benefits.

3. Hapja Hoesa (Limited Partnership)
In a Hapja Hoesa one or more partners may have unlimited liability and one or more partners may maintain limited liability. The entity, as all incorporated entities, is responsible for corporate taxes.

4. Hapmyeong Hoesa (Partnership)
In a Hapmyeong Hoesa two or more partners form the partnership. The partners must maintain unlimited liability. The entity, as all incorporated entities, is responsible for corporate taxes.

Aug. 26, 2011 update: The Korean Commercial Code has been amended. An update to this article can be found at: Establishing a Company in Korea. 

Appeared in the Korea Times on Feb. 29, 2008
by Sean Hayes (Host of Blog)

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