Investing in Korea: A primer for Australian companies

This blog post sets out some key legal issues for Australian companies to consider when investing in, and doing business with, South Korea. For expert legal advice on this matter, reach out to our business lawyers.

Possible business structures

There are five main types of business structures that can be established in Korea:

Joint Stock Companies, Limited Liability Companies and Joint Ventures

Australian companies who wish to do business in Korea frequently choose to set up a subsidiary company. This could be in the form of either a joint stock company (‘JSC’) or a limited liability company (‘LLC’). In overly simplistic terms, and LLC is more akin to a Pty Ltd company in Australia whilst a JSC is akin to a Limited company. JSCs can make public offerings for share subscriptions and accordingly have additional regulatory requirements imposed upon them. For most Australians companies, a subsidiary LLC will be the preferred vehicle.

In order to create a JSC or LLC, there is a significant up-front investment requirement of KRW 100 million (approximately AUD 120,000) in order to establish the entity.

JSCs and LLCs may be used to participate in a joint venture with a Korean entity.

Liaison office and branch offices

If the up front capital requirements of an LLC prove prohibitive, another option is to establish liaison (or representative) office in Korea. Liaison offices can be used for non-revenue generating activities such as marketing, promotion, market analysis and reviewing business opportunities.  Liaison offices, however, are subject to additional restrictions on their operations and are not able to conduct commercial activities or generate revenue. Certain types of established business, generally banks and other financial services providers, can consider establishing a branch office. Such offices can conduct commercial activities, but the head office will remain liable for its operations.

Key legal issues to consider when doing business in Korea

Below we set out a short summary of key legal issued when doing business in Korea, covering intellectual property, employment and dispute resolutions laws

Intellectual Property

Patents and trademarks must be registered with the Korea Intellectual Property Office via an authorised Korean agent. As a foreign investor, an Australian company able to register patents or trademarks in its own name and receive the same rights and advantages as Korean companies. A patent has a 20-year lifespan that can be extended by an additional five years. A trademark has ten years of protection from the date of registration, which can be renewed. 

Copyrights are registered with the Ministry of Culture and Tourism. The government agency in charge of overseeing and regulating matters pertaining to the protection of IP rights is KIPO, which falls under the purview of the Ministry of Knowledge and Economy. 

Employment 

Work permits and visas 

Under the Korean Exit and Entry Control Act, a foreigner who wishes to reside in Korea must have a visa that allows an appropriate period of stay (normally six months or longer). If they wish to change work places, prior permission must be received from the local Immigration Office.

Termination of employment 

An employee may be terminated for a legitimate reason and with 30 days written notice or payment of a month’s wage. Employees may file an unfair dismissal claim against their employers with the Labour Dispute Mediation Committee. The Committee has the authority to investigate whether an employee has been dismissed for just cause and to order the reinstatement of an unjustly dismissed employee. 

Dispute resolution  

South Korea has a developed legal system with similar methods of resolving disputes to those available in Australia i.e. court litigation, arbitation and mediation.  Korea is party to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards and to facilitate the settlement of international disputes, numerous arbitration commissions exist. Selecting the arbitration body that best meets your business objectives requires careful consideration of a number of factors. Convenience, cost and the specifics of the case will all be factors in determining the arbitration body you choose.

The above article was written by Pippin Barry (BA, JD - 2012, The University of Melbourne), an Australian Legal Practitioner, and Hyein Kim, paralegal.