2024 Establishing Branch Offices in South Korea
Branch offices in South Korea provide an appealing opportunity for foreign investors aiming to establish a presence in the country's dynamic market. Unlike setting up a local headquarters, companies can exercise their rights under South Korean jurisdiction and conduct profitable operations efficiently. With no restrictions on investment or ownership, and the option to transition to local subsidiaries if needed, Korea offers an ideal environment for growth and success in Asia.
Establishing a branch office in Korea allows companies to operate under South Korean jurisdiction without the need for a local headquarters. This setup enables firms to assert their legal rights while conducting profit-generating activities within the region. Branch offices function as part of the parent company, consolidating financial transactions and settlements. There are no limitations on investment amount or ownership, providing flexibility for operations. Companies can easily transition to local subsidiaries if their operational needs change in the future.
The registration fees for branch offices depend on the parent company's authorized share capital, with higher capital leading to increased fees. Compared to local corporations, the incorporation process for branches involves minimal formalities, resulting in simpler registration procedures and reduced costs. Unlike liaison offices, branch offices have the advantage of engaging in sales activities and are recognized as independent legal entities responsible for their financial obligations and liabilities.
Registration of Branch Offices
Legal Framework under the Commercial Act
Under the Commercial Act, 'branches' are classified as 'business establishments' (outlined in Articles 614 to 621). Foreign companies are required to register when conducting business operations in Korea, making registration obligations specific to branches.
Registration Procedure
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Applicant: An application must be filed by a representative residing in Korea on behalf of the foreign company (stipulated in Article 23(3) of the Commercial Act).
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Timeline: Registration must be completed within three weeks of establishing the business office, starting from the notification issued by the Korean Foreign Exchange Bank confirming the branch's establishment.
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Documentation Requirements (per Article 614(2)(3) of the Commercial Act):
a. Name and address of the Korean representative
b. Business registration documents tailored to the nature of operations
c. Compliance with pertinent laws governing incorporation
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Required Attachments:
a. Certification confirming the representative's eligibility in Korea
b. Supporting documents such as minutes from shareholder meetings, board resolutions, or appointment certificates
c. Proof of headquarters' existence, varying by country:
- Japan: Copy of company registration certificate
- Other countries: Certificate from relevant authorities like the Ministry of External Affairs
d. Documentation establishing the company's classification or incorporation status, authenticated by appropriate agencies from the company's home country or a consulate in Korea
e. Payment proof for licensing and registration taxes
f. Certificate of Foreign Residency
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Details for Application Form Submission:
a. Korean company name and business type (e.g., limited company, corporation)
b. Head office details of the foreign company, including name and location
c. Business office address in Korea
d. Purpose and rationale for registration
e. Details of the representative director and Korean representative
f. Date of company establishment and business office inauguration
g. Date of necessary approvals or permissions obtained
h. Amount of registration tax
i. Date of application submission
j. Proxy information if applicable
k. Relevant registration authority
Notification of Establishing a Branch
1. Documents Required for Notification to the Foreign Exchange Bank:
a. Official statement outlining the establishment of a local branch for a foreign company
b. Incorporation documents of the headquarters, verified at the headquarters location:
- For corporations: Articles of Incorporation of the headquarters
- For private businesses: Audited financial statements by a licensed accountantc. Appointment certificate for the local branch manager, along with a copy of the manager's passport or resident registration certificated. Notarized power of attorney authorizing the establishment of the domestic branch, issued in the headquarters' countrye. Copy of the company's registration certificate or business license, notarized in the headquarters' country when submittingf. Board of Directors' resolution certificate affirming the validity of the decision to establish a domestic branch in Korea
2. Generally, foreign companies must notify the designated Foreign Exchange Bank head regarding the establishment of a domestic branch.
3. Reporting Requirements of the Branch Office to the Minister of Strategy and Finance:
a. Financial services beyond banking operations (e.g., fund lending, brokerage services, foreign financial provisions, card services, repayments, etc.)
b. Participation in securities and insurance-related activities
c. Provision of financial services prohibited under the Foreign Investment Promotion Act
Conclusion
Establishing branch offices in South Korea presents a valuable opportunity for foreign investors. By circumventing the necessity for local headquarters, companies can operate efficiently under Korean jurisdiction without constraints on investment or ownership. This flexibility, alongside the option to transition to local subsidiaries if needed, positions South Korea as an attractive destination for business expansion in Asia.
Our specialists in South Korean company and business registration are well-prepared to assist you with the intricate process and required documentation for promptly registering your branch office in Korea. Contact us for expert guidance in establishing your business branch in Korea.
