The establishment of a local corporation and private business registration are recognized as a foreign investment under the Foreign Investment Promotion Act. However, the establishment of a domestic branch is not recognized as a foreign investment, and is regulated by the Foreign Exchange Transactions Act.
There are two types of domestic branches: a branch and a liaison office. A branch undertakes sales activities in Korea to generate profits;
Procedure for Setting up a Branch Office
In order for a foreign company to establish a domestic branch, a report shall be made to the head of a designated foreign exchange bank.
-Report form of the establishment of a foreign company’s domestic branch
-Articles of association (Notarization of the location of the headquarters is required)
-A certified copy of registration or operation permission of the headquarters
-Statement on business activities in Korea
-Power of attorney in cases where the establishment of a domestic branch is commissioned to another person (Notarization of the location of the headquarters is required)
Foreign company to establish a domestic branch shall make a report to the Minister of Strategy and Finance in any of the following cases:
-Financial businesses other than banking business, including fund loans, brokering and arranging overseas finance, cards, installment financing, etc.
-Businesses related to securities and insurances
-Businesses which are not permitted under the Foreign Investment Promotion Act or other laws
Under the Commercial Act, the establishment and registration of a business office is required in cases where a foreign company carries out business in Korea. Under the Foreign Exchange Transactions Act an office is not allowed to conduct sales activities but information exchange etc. Therefore, only branches can be registered as a business office. For foreign companies to do business in Korea, they shall appoint representatives, establish business sites, and have one of their executives based in Korea. (Commercial Law Article 614) The application form shall be attached with the following files (Commercial Registration Act article 112)
1.Statement that certifies the existence of the headquarters
2.Statement that verifies the qualifications of the representatives (e.g. appointment certificate or board of directors’ resolution)
3.Articles of association or statement that certifies the character of a company
4.Application form for seal registration of representatives in the Korean office (arbitrary)
All the files shall be certified by consuls of the respective nations in Korea or by the competent offices. The Supreme Court of Korea recognizes documents legalized by consuls in Korea. But in some cases, the court does not recognize documents legalized by competent offices in the respective countries, and requires the certification of consuls. However, it is just for enhancing the authenticity of documents, and is not a requirement. (It is true for the individual examination of registration civil servants.) In cases where the mother country of a foreign company joins the Convention Abolishing the Requirement for Legalization for Foreign Public Documents or Apostille, the company can submit a legalized document of Apostille. In cases where a mother country does not have a consul certification system (e.g. Japan), a foreign company can submit a public document without legalization or have the document legalized by Apostille. Submitting a legalized document avoids the inconvenience of authenticity examination.
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