Contemplating investing in South Korea? If you are, then you should know that FDI in South Korea is encouraged by the government. Following ratification of the FTA, the South Korean authorities have significantly expanded cooperation with foreign investors, providing them with new incentives to open JVs.
So, let’s have a look at what it takes to register a JV in South Korea.
South Korea: Establishing a JV
The main law regulating JVs in South Korea is the Commercial Code. There are two types of JVs in the Republic of Korea:
The former are created by registering a corporation in South Korea, which is controlled & managed by JV participants or their directors. Also, JVs can be established in the form of JSCs or LLPs.
JVs with foreign investment are permitted. Establishing a JV with foreign investment in South Korea requires compliance with a number of laws, including the Law on Foreign Investment Promotion, the Law on Foreign Exchanges & the Law on Taxation.
Creating a JV in South Korea requires paying a registration tax on capital contributions. JVs purchasing real estate, vehicles & heavy-duty equipment are required to pay a special tax.
Registering a South Korean JV requires the presence of three directors. The only exception is made in cases when a company’s statutory capital exceeds seven hundred dollars. If that is the case, the presence of one or two directors is permitted.
JVs must have at least one auditor if the total amount of their statutory capital is less than eight hundred thousand dollars. Auditors are responsible for overseeing performance of JVs’ directors & their compliance with laws & internal rules.
Depending on a JV’s size & turnover, registering a JV in South Korea may sometimes require getting KFTC’s approval Securing KFTC’s consent to conclude an M&A deal in South Korea involves compiling a special report & submitting it to the said regulator.
It should be kept in mind that establishing, running or terminating a JV in South Korea may require the transference of IP rights.To be able to exercise IPR in a South Korean JV, parties to a JV must apply for a special license. Frequently, parties to a JV include a special clause in their JV agreement specifying which of them will own IPR & to what extent the other party can exercise the said rights.
There’s no restrictions on the transference of IP rights in South Korea; the only exception is made for technologies that have a high economic value or are vital for national security. In this event, transferring IP rights requires applying for a special permit with a properly authorized government agency.
Planning on establishing a JV in the Republic of Korea? Need legal advice on the regulation of JVs in South Korea? Then you should definitely consider retaining services of IQ Decision UK. Our legal advisors will be happy to give you a hand with drawing up an agreement on the creation of a South Korean JV or handle any other legal issue you’re currently facing.