Classification by members' liability

  Partnership Corporation (Hapmyung Hoi-Sa)

All members of the Partnership Corporation shall assume direct and joint and several liability for the corporation`s obligations, unless any member proves that the corporation is capable of performing its obligations and the execution on the corporation`s assets can be easily affected. Contrary to the stock corporation, no member shall, without the consent of all the other members, transfer all or a part of his share in the corporation to another person.

  Limited Partnership Corporation (Hapja Hoi-Sa)

A limited partnership corporation shall be composed of members with unlimited liability and members with limited liability. Members with unlimited liability shall assume direct and joint and several liability to the corporation`s obligations, on the other hand, members with limited liability as well as members of the partnership corporation shall be liable to perform the obligations of the company to the extent of the amount of his contribution deducting the amount which has been already paid. If any dividends have been distributed, notwithstanding the fact that the company accrued no profit, such amount shall be added in determining the liability for performance. Each member, with unlimited liability, has the right and duty to manage the affairs of the company, whereas members with limited liability have only the right to inspect and investigate the corporation`s business and the state of its property. Members with both unlimited and limited liability may, with the consent of all the other members, transfer all or a part of their shares in the corporation to another person.

  Stock Corporation (Chusik Hoi-Sa)

The Stock Corporation is the most commonly incorporated company in Korea. Shareholders shall be liable for the company`s obligations to the extent of the subscription price which he paid for his shares and shall not be liable directly to the corporation`s creditors. Shares may, without any consent of other shareholders, be transferred to other persons. However, the article of incorporation may subject the transfer of shares to the approval of the board of directors and if the transfer of shares which is not approved by the board of directors, it shall have no effect against the corporation. In addition, share certificates shall be delivered for the transfer of shares. The transfer of shares made before the issuance of share certificates shall have no effect against the corporation.

Parent Corporation and Subsidiary Corporation

Where a corporation holds more than 50/100 of the total outstanding shares of another company, the former is called the "Parent Corporation" and the latter is called the "Subsidiary Corporation". The reason why those two corporations are distinguished is that the subsidiary corporation may not acquire shares of the parent company except in the following cases:

  1. In case of the all-inclusive exchange and all-inclusive transfer of stocks, the merger of corporations or the acquisition of the entire business of another corporation; and

  2. Where it is necessary to do so for achieving the objective in the course of exercising the rights of the corporation.

Where the subsidiary corporation acquires shares of the parent corporation, it shall dispose of those shares within six months after its acquisition. If a parent corporation and its subsidiary corporation, in aggregate, or a subsidiary corporation, by itself, holds more than 50/100 of the total outstanding shares of another company, such other corporation shall be deemed to be subsidiary company of the parent company for the purpose of the Commercial Act.

Foreign Corporation

A corporation which was incorporated in accordance with a foreign country`s law is the "Foreign Corporation". A foreign corporation intending to engage in business in the Republic of Korea shall appoint a representative in the Republic of Korea and shall establish a business office. A foreign company shall not engage in continuous transactions at the place of its business office before it has finalized the registration and any person who has engaged in transactions before the registration comes into effect shall be jointly and severally liable to the corporation for any such transactions. A corporation incorporated in a foreign country shall, if it has established its principal office in the Republic of Korea or its main purpose is to engage in business in the Republic of Korea, be subject to the same provisions as a corporation incorporated in the Republic of Korea. In connection with the application of other Acts and laws, a foreign corporation shall be deemed to be in the same position as that of corporation which initially incorporated in the Republic of Korea, unless otherwise provided by provisions.