Invest KOREA

Since capital goods can be an object of investment in establishing a foreign-invested company, the foreigner should notify foreign investment to a delegated agency (a bank or KOTRA, etc.). The foreigner should prepare a written specification of the goods, etc. to be introduced into Korea and apply for the examination and confirmation thereof to the delegated agency before their import declarations are accepted by a competent customs office. Despite the related regulations of the Foreign Trade Act, a written specification of the goods, etc. to be introduced, which has been examined and confirmed by the delegated agency, shall be deemed an import approval. ◎ After import declarations are accepted, the foreigner should receive a certificate of completion of investment in kind from the Commissioner of the Korea Customs Service (or a Korea Customs Service officer dispatched to KOTRA) by submitting a certificate (copy) of the completion of import declaration. Despite Article 299 of the Commercial Act, a certificate of completion of investment in kind which certifies that the Commissioner of the Korea Customs Service (or a Korea Customs Service officer dispatched to KOTRA) has confirmed the execution of the investment in kind and the type, amount and price of the object of investment shall be deemed an inspection report by inspector following the Non-Contentious Case Procedure Act and can be submitted for registration of incorporation and for registration of foreign-invested company.

Although the submission of a lease contract is not mandatory, a fixed address is required. However, a lease contract should be submitted when applying for business registration with the competent tax office after the registration of incorporation is completed with the registry office.

Documents a foreign investor should prepare in his/her country vary depending on whether the investor is an individual or a corporation. The document requirements for foreign investors from Japan or Taiwan are the same as those for a Korean national or corporation. In addition, some of the documents required should be apostilled or notarized by a public notary and subsequently by the Korean consulate located in the home country of the foreign investor in case of a non-signatory nation of the Apostille Convention.

The following information need to be included in the articles of association. ◎ Matters absolutely required to be entered (Article 289(1) of the Commercial Act): – If any of the following matters is omitted in the articles of association, the establishment of the company shall become null and void. a. Objectives b. Trade name c. The total number of shares authorized to be issued d. Par value per share: At least KRW 100 e. Total number of shares to be issued at the time of incorporation f. The location of a principal office g. Method of giving a public notice by the company h. The name, resident registration number and address of each incorporator ◎ Relative matters required to be entered: – ① Particulars of exceptional incorporation ② Other relative matters required to be entered – The particulars of exceptional incorporation shall be entered into a share subscription form signed by incorporators and be reviewed by inspectors (Article 299 and Article 302(2)2 of the Commercial Act) ◎ Optional matters that can be entered – Optional matters have no specific impact on the effects of the articles of association or on the business activities of a company when they are not entered into the articles of association, but will have the same legal effect as other matters upon entry into the articles of association. Optional matters differ from relative matters in that the latter takes effect only upon entry into the articles of association. – Optional matters include matters on business operations (e.g., the number of directors/auditors, a schedule of general meetings, business year, opening/relocation/closure of branches, etc.) within the boundaries that do not counter the essence of a stock company, imperative provisions of laws, and social order and take effect upon entry into the articles of association.

In the event of incorporation by promotion, registration for incorporation should be completed within two weeks of the date of the completion of the inspection on the incorporation process and in the event of incorporation by subscription, within two weeks of the date of the completion of the inaugural meeting. * The composition of incorporators and existence of the same trade name should be reviewed prior to the registration of incorporation. A stock company requires one or more incorporators who are required to acquire stocks in writing and become the shareholders of the newly created corporation. 1. An application for registration of incorporation 2. Articles of incorporation (notarized when the total capital is not less than KRW 1 billion) 3. A copy of document certifying the acquisition of stocks 4. The stock subscription agreement (in the case of incorporation by subscription) 5. Written consent to matters concerning issuance of stocks 6. Written consent to a reduction of the notice period for the inaugural meeting (in the case of the reduction of the notice period) 7. The minutes of the inaugural meeting or the minutes of the incorporators’ meeting (notarized when the total capital is not less than KRW 1 billion) 8. The minutes of the board of directors’ meeting (notarized when the total capital is not less than KRW 1 billion) 9. A certificate for custody of stock subscription payment (can be substituted by a certificate of balance when the total capital is less than KRW 1 billion) 10. An inspection report by directors, auditors, or the audit committee 11. A certificate of transfer of assets (in case of investment in kind) 12. A report on the particulars of exceptional incorporation prepared by a notary 13. An appraisal report by a certified appraiser 14. A certified copy of an investigation report by an inspector 15. A certificate of notification of foreign investment 16. A certificate of inauguration acceptance for executive officers* a) Korean nationals should affix his/her seal on the certificate, and attach a certificate of the seal impression and a certified copy of resident registration. b) Foreigners should attach a notarized original certificate of signature, and a copy of his/her passport. 17. A certificate of registration of seal impression (notarization of signature)* 18. A certified copy of resident registration (a certificate of address)* 19. Translations of the required documents (In case where the required documents including the directors’ inauguration acceptance are written in a foreign language) 20. A certificate of payment of registration tax (issued by the tax department of the Gu office having jurisdiction over the area in which the business’ headquarters is located) 21. Supreme Court revenue stamp 22. A power of attorney (where an agent makes the application)* 23. Corporate seal 24. An application for issuance of a corporate seal card (after the registration for incorporation). ※Items 11, 12, 13 and 14 apply only where particulars of exceptional incorporation exist such as investment in kind. Items 16, 17, 18 and 22 require notarization in the investor’s country and an apostille or a confirmation by the Korean consulate.

A trade name in English cannot be registered. However, it is possible to use a Korean trade name and put an English trade name in parentheses. ◎ Only Korean characters and Arabic numerals are allowed in filling out the application form or other documents related to the registration for incorporation.

Article 29 of the Commercial Registration Act (Unregistrable Trade Names) prescribes “No trade name same as a trade name registered by another merchant for the same type of business shall be registered in the same Special Metropolitan City, Metropolitan City, Special Self-governing City, Si (including an administrative Si) or Gun (excluding a Gun within the jurisdiction of a Metropolitan City).” ◎ Therefore, when selecting a trade name, a foreign-invested company should check whether the selected trade name already exists at the Registrar of Supreme Court Internet Register Office at (http:/www.iros.go.kr).

◎ A foreign-invested company (a local corporation) – An investment of at least KRW 100 million per foreign investor is required to establish a foreign- invested company under the Foreign Investment Promotion Act and the Commercial Act. ◎ A branch office or liaison office of a foreign company – A branch office: When engaging in a business that generates profits in Korea, it is classified as a “branch office” under the Foreign Exchange Transactions Act. Because a branch office is a foreign corporation, it is not recognized as foreign direct investment. – A liaison office: A liaison office is different from a branch office in that it does not carry out business that generates profits in Korea, but instead undertakes “non-sales” activities such as liaison work, market research, research and development activities. Unlike a branch office, a liaison office is assigned a serial number equivalent to a business registration number by a competent tax office without a registration process in Korea. ◎ Therefore, when selecting a trade name, a foreign-invested company should check whether the selected trade name already exists at the Registrar of Supreme Court Internet Register Office at (http:/www.iros.go.kr).

◎ Differences in terms of nature of business (1) An individual business: An individual engages in business under his/her name and has full ownership of the business as well as unlimited liability for business debts. (2) A corporation: A corporation is an entity completely different from individuals, and its operation is run by the representative director under the name of the corporation. A corporation limits its liability and guarantee to the amount of its assets and the representative director, directors and shareholders that are the members of the corporation are not liable to its debts. ◎ Differences in terms of establishment procedures (1) An individual business: An individual business can carry out business after notifying foreign investment and receiving a certificate of business registration from the competent tax office, without additional procedures. (2) A corporation: A corporation is required to undergo incorporation procedures (incorporation registration, business registration) and the process may take around two more weeks due to document preparations and procedural matters for registration.