WHAT TYPE OF COMPANY TO ESTABLISH IN KOREA – part 3

by Andrew Baek

July 19, 2024

Continuing from the previous article on the types of companies available in Korea, we will now look into the Stock Company.

Many of our clients, as well as professionals at foreign exchange banks, the registry, the tax office, and other entities or agencies involved in the establishment and registration of companies in Korea, are familiar with the Stock Company structure. However, some clients express hesitation in establishing a Stock Company due to concerns about legal requirements or the potential obligation for listing or public disclosure of corporate matters.

It is true that Stock Companies must meet certain legal requirements, such as establishing a board of directors, appointing standing auditor, forming an audit committee, or appointing outside directors. However, these requirements only apply when the capital or the total asset of the Stock Company reaches certain substantial threshold amount such as KRW 1billion, KRW50billion, KRW100 billion, and KRW 2 trillion.

Most importantly, public listing is not mandatory for Stock Companies. The decision to pursue a public listing is entirely at the discretion of the company. Also, public disclosure requirement for an unlisted Stock Company arises only under specific circumstances, such as when the company is large enough to require an external audit or when it becomes part of a business group subject to disclosure. To be more specific, a non-listed Stock Company would require an external audit when it has a total asset of at least KRW 50 billion, or meets at least two of the following criteria: total asset of at least KRW 12 billion, total debt of at least KRW 7 billion, total sales of at least KRW 10 billion, and employment of at least 100 people in the preceding year.

Thusly, in general, unless it reaches a considerable size, a Stock Company may remain privately and closely held by its shareholders. In terms of liability insulation, a Stock Company provides its shareholders with just as much liability protection as what an LC or an LLC offers to its members, or what an LPC offers to its limited partners. Furthermore, unlike other types of companies, it is much easier for a Stock Company to raise funds from external sources, and its shareholders enjoy a greater freedom in transferring their equity interests to other persons.

So, in general, unless it reaches a considerable size, a Stock Company may remain privately and closely held by its shareholders. Moreover, not only that a Stock Company would provide its shareholder with just as much liability protection as what an LC or LLC would offer to their members, or what an LPC would offer to its limited partners, a Stock Company, unlike other types of companies, provides its shareholders with greater freedom in transferring their equity interest to other persons.

So, for the above reasons, we generally recommend our foreign clients to choose Stock Company as the type of the company to establish in Korea. If you would like more information about the Stock Company structure and the establishment process in Korea, please contact our office.

To be Continued