Branch
offices offer a great opportunity for companies to establish a business
presence in Korea without having to set up their head office here. This option
gives them the ability to assert their rights, in compliance with the South
Korean jurisdiction and build their property there.
The
authorized share capital of the parent company decides the registration fees
for its branch office in Korea. If the parent company has a high authorized
share capital higher, it will shoot up its registration fee.
A
branch runs a profit-making business in Korea, but it is not locally
incorporated and is not seen as direct foreign direct investment. Head offices
and their foreign branches come across as one legal entity (their accounting
& settlement are the same). There are no upper and lower limits in
investment amount or ownership.
Branches
require no formalities to fulfill to be incorporated, which makes their
registration even simpler than that of a local corporation and at a lower registration
fee. Different from liaison offices, branches are eligible to take up sales
activity. They are regarded as independent legal entities that are liable for
their debts and liabilities.
Normally,
branch offices work better for a reduced scope of operations. Foreign companies
can migrate to a local subsidiary later if required.
Registration of a Branch Office
A.
Definitions under Commercial Act
The Commercial Act defines ‘branches’ as ‘business establishments’ (Article
614 - Article 621 of the Act). As per this law, registration is only required
for foreign companies when they are to undertake business activities in Korea.
Thus, branches alone must complete registration procedures.
B. The
Registration Process
(1) Applicant: An application must be filed by a
representative of the company living in Korea for the sake of the concerned foreign
company (Article 23 (3) of the Commercial Act).
(2) Duration of Registration: not later than 3
weeks after the business office has been set up. (It is computed since the day
the Korean Foreign Exchange Bank issues a notification of the formation of a
local branch of a foreign company.
(3) Instruments of Registration (Article 614,
Paragraph 2, Item 3 of the Commercial Act)
a.
Name and
address of the delegate in Korea
b.
The instruments
for registration must be the same as the type of businesses
c.
Appropriate
laws for incorporation
(4) Required Attachments:
a. Certification of qualification as a
representative in Korea
b. The minutes of the general meeting of
shareholders, the resolution of the board of directors or the certificate of appointment
c. A certificate of existence of the headquarter
(proof of substances related to the establishment)
·
Japan: a
copy of company registration certificate
·
Other
countries: a certificate from the municipal board like the Ministry of External
Affairs
d. Documented proof of the category of the
company or the instruments of incorporation
(The aforementioned documents must have the
clearance of the appropriate agencies. This clearance can either be given by the
native country of the foreign company or a consulate in Korea.
a. Certificate of payment of license and
registration tax
b. Foreign residence certificate
(5) Issues to be mentioned in the application
form:
a.
Company
name (in the Korean language): the category of business (limited company,
limited partnership, partnership, corporation or others.) needs to be mentioned.
b.
Head
Office: name and location of the foreign company
c.
The
business office’s address in Korea
d.
Purpose of
registration
e.
Reason
for registration
f.
Particulars
of the representative director and the Korean representative
g.
The date on
which the company was launched, the reason for establishing the business office
and the date on which the business office was established
h.
Date of
acquiring the essential approval (or permission)
i.
Registration
Tax Amount
j.
Application
date
k.
Proxy
name and address in case of a proxy registration
l.
Governing
Registration Agency
Notice of Branch Establishment
A.
Documents
to be submitted when notifying Foreign Exchange Bank:
1. A documented statement concerning the founding
of a domestic branch of a foreign company
2. Instruments of incorporation of the head
office (certification at the head quarter’s location is a must)
·
For a corporation:
the instruments of incorporation of the headquarter
·
For a
private business: statement of accounts reviewed by a licensed accountant
3. A certificate of appointment of a local branch
manager, a copy of the manager’s passport or the resident registration
certificate
4. A power of attorney entrusting the
establishment of a domestic branch (it should be notarized in the country of
location of the headquarters)
5. A copy of company registration certificate or
business license (it should be notarized in the country of location of the headquarters
while submitting a copy of the document)
6. Certificate of Resolution of the Board of
Directors (a letter validating the efficacy of the resolution of setting up a
domestic branch in Korea)
B.
Often, a
foreign company is required to report the formation of a domestic branch to the
head of the assigned Foreign Exchange Bank.
C.
The branch
office must report the following to the minister of strategy and finance:
1. Financial services besides banking business
(fund loan, brokerage activities, foreign financial provisions, cards,
repayments, etc.)
2. Involvement in securities and insurance-linked
business
3. Financial services disallowed by the Foreign
Investment Promotion Act
Branch Shutdown and Fund
Clearance (Article 9-37 of Foreign Exchange Trade restrictions)
A. Notice of the Shutdown
If an individual who submitted a notification to
establish a branch as per the applicable rules and regulations intends to shut
down the domestic branch office, he/she should report the below-listed
documents to the receiver of the notification of the branch setup.
1. Documents required:
a. Notice for shutting down the local branches of
a foreign company (Form No. 9-11 Regulation)
b. A documented confirmation of the shutdown
(released by the head office of the foreign company)
c. An original document of setup’s notification
of the local branch of the foreign corporation
B. Clearing
Funds
If an individual who has submitted the notification of
shutting down a domestic branch of a foreign company seeks to pick up capital
resulting from clearance of assets held in Korea, he/she is required to submit
an application to the head of the chosen Foreign Exchange Bank.
1. Essential documents:
a. A copy of the Clearance Completion
Registration Certificate
b. A copy of bank balance statement
c. A copy of the declaration of working capital,
carried-over funds and other resources
d. A certificate of completion of tax payment
(prepared by the judicial tax office)
e. A copy of a notification form for shutting
down the local branches of foreign companies
f.
A copy of
the clearing report audited by a licensed public accountant (at the time of
closing down the liaison office, documents verifying that the funds acquired
after eliminating the locally possessed assets are essential)
C. Recoverable Funds
Restrictions
There are no limitations on the volume of recoverable
funds, provided that it does not exceed the range of leftover assets mentioned
on the liquidation report audited by a licensed public accountant.
Conclusion
Koreas ‘Foreign Exchange
Transaction Law’ regulates the creation and registration of a branch office in South
Korea.
A branch office is eligible
to participate in profit-making activities and hence it is liable to pay Korean
corporate income tax on its Korea-derived income.
Our
experts in South Korea company and business registration can best help you with
the detailed procedure and documentation for quickly registering your branch
office in Korea.
Do
not think twice to contact our Korea company registration agents
for professional help with setting up a business branch office in Korea.
