Sunday, October 09, 2011

Korean Commercial Code--An Update for Foreign Investors

By Don Southerton, BCW Editor
One area we focus on is laws that impact franchise, licensing, joint ventures, and direct investments with South Korea. We are again pleased to share an update by Kent Wong on recent changes to South Korea's commercial code. Kent is a Senior Foreign Attorney (Partner) at APEX LLC and noted expert on international investment.

The Korean Commercial Code (KCC) is the main body of laws in Korea relating to business and business enterprises in Korea. Recent amendments to the KCC include the addition of two new types of business entities: hapja johap(“partnership association”) and yuhan chaekim hoesa (“limited liability company”) to meet the increasing demands of investors and dynamics in Korea’s economy. The additional business entities were created to provide greater flexibility in the formation, operation and dissolution of a business enterprise to promote commerce while providing limited liability protection to investors.

With the additional legal entities, the business entities that will be recognized under the amended KCC are as follows: (i) johap (association), (ii) hapmyung hoesa (general partnership), (iii) hapja hoesa(limited partnership), (iv) yuhan hoesa (limited company), (v) chusik hoesa (joint stock company), (vi) hapja johapand (vii) yuhan chaekim hoesa. The main features of a hapja johap and yuhan chaekim hoesa are summarized at: ( October 8, 2011)

To conclude, Hapja johap and yuhan chaekim hoesa offer additional options for investors to conduct their business in Korea as they provide flexibility in corporate organization and operation while limiting liability to the investors’ capital contribution. While chusik hoesa (corporation) and yuhan hoesa (limited company) will likely remain the popular choice for larger companies, a hapja johap and yuhan chaekim hoesa will likely appeal to small-sized companies or investors with limited objectives. The utilization of the new company vehicles, however, will depend much on their tax treatment.

For further information, we strongly suggest you contact Kent Wong at Apex Law LLC.

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