Invest KOREA

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.

If the investment cannot be notified under the Foreign Investment Promotion Act because the amount of investment is less than KRW 100 million, a notification of acquisition of stocks by a non-resident should be filed to a foreign exchange bank pursuant to Article 7-32 of the Foreign Exchange Transactions Regulations.

There are four types of corporations - limited partnership company, partnership company, stock company and limited liability company – that can be established under the Commercial Act of Korea. As a stock company represents an absolute majority, the process of establishing a stock company is explained below (the “Act” refers to the Commercial Act). < Process of Establishing a Stock Company >

If foreign investor A transfers all of the stocks of foreign-invested company C to its overseas parent company B in the form of dividend in kind, overseas parent company B can acquire the stocks of foreign-invested company C through succession by notifying the acquisition of stocks, etc. and foreign-invested company C should apply for registration of alteration due to the change of foreign investor. ◎ Because foreign company B receives the stocks of foreign-invested company C owned by foreign investor A in the form of dividend in kind, foreign company B should notify the acquisition of stocks, etc. (Form 1) – Reason for acquisition (Paragraph 15): Others - C’s stocks paid as dividend in kind by A – Required documents: Certificate of nationality of B and documents verifying the dividend in kind ◎ Foreign-invested company C (or foreign company B) should apply for registration of foreign-invested company (Form 17) – Reason for registration of alteration: Change of foreign investor – Required documents: A modified shareholder register, the existing certificate of registration of foreign-invested company (to be returned)

If foreign investor A invests in kind the entire stocks of foreigninvested company B in domestic company C, foreign-invested company B should file for cancellation of registration of a foreigninvested company and foreign investor A should file a report on the acquisition of stocks, etc. of domestic company C and apply for registration of a foreign-invested company. ◎ Foreign-invested company B should cancel the registration of foreigninvested company through registration of alteration (Form 17) – Reason: Domestication ◎ This constitutes a case “where a foreign investor has transferred all of the stocks, etc. owned by himself or herself to a Korean corporation or company” as prescribed in Article 21(4)2 of the Foreign Investment Promotion Act. ◎ As foreign investor A invests in kind all of the stocks of foreigninvested company B in domestic company C, foreign investor A should file a report on the acquisition of stocks, etc. of domestic company C (Form 1) – Object of investment: Domestic stocks ◎ Constitutes “stocks owned by foreigners under the Foreign Investment Promotion Act or the Foreign Exchange Transactions Act” as prescribed in Article 2(10)2 of the Enforcement Decree of the Foreign Investment Promotion Act) (satisfies the requirements of investment of not less than KRW 100 million and acquisition of not less than 10 percent of the total voting stocks) – Required documents: Certificate of nationality of A, appraisal report on the stocks of foreign-invested company B ◎ Domestic company C (or foreign investor A) should apply for registration of foreign-invested company (Form 17) – Reason: New foreign investment – Required documents: Certificate of corporate registration, certificate of business registration, and shareholder register (or documents certifying the stock transfer)

If foreign investor A invests in kind the entire stocks of foreigninvested company C in foreign company B, foreign company B should acquire the stocks of foreign-invested company C through succession by notifying the acquisition of stocks, etc. and foreigninvested company C should apply for registration of alteration to reflect the change of foreign investor. ◎ Because foreign company B acquires the stocks of foreign-invested company C through the investment of foreign investor A, it should file a report on the acquisition of stocks, etc. (Form 1) – Reason for acquisition (Paragraph 15): Others - A’s investment in kind of C’s stocks – Required documents: A certificate of nationality of B, and documents verifying the investment in kind ◎ Foreign-invested company C (or foreign company B) should apply for registration of alteration (Form 17). – Reason for registration of alteration: Change of foreign investor – Required documents: The modified shareholder register, the existing certificate of registration of foreign-invested company (to be returned)