Korea Branch Office Setup: Navigating Strategic Entry

Opening branch offices in Korea provides companies with a valuable opportunity to establish a local business presence without the need for a central headquarters. This strategic approach allows companies to protect their rights, adhere to South Korean jurisdiction, and participate in property development. The registration fees for a Korean branch office are contingent on the authorized share capital of the parent company, with higher capital leading to increased registration costs.

A branch in Korea operates independently, engaging in profit-generating activities without local incorporation, setting it apart from direct foreign direct investment. The amalgamation of head offices and their foreign branches creates a cohesive legal entity with shared accounting and settlement processes. Unlike liaison offices, branches are not only permitted but encouraged to carry out sales activities, functioning as independent legal entities responsible for their own debts and liabilities. The process of forming a branch is straightforward, involving fewer formalities than local corporations and incurring lower registration fees. This approach is well-suited for a more focused scope of operations, allowing foreign companies to seamlessly transition from branch formation to a local subsidiary if necessary.

Branch Establishment Notification

The submission of a mandatory notification for branch establishment is required, directed to a foreign exchange bank. However, specific circumstances may necessitate notification to the Ministry of Finance and Economy. These circumstances encompass finance-related activities beyond banking, as well as endeavors in securities and insurance, business activities not authorized by Korean laws, and those perceived to compromise public morals and order.

When notifying the Foreign Exchange Bank, essential documents to be provided include a documented statement, the head office's instruments of incorporation, a certificate appointing a local branch manager, a power of attorney, and a copy of the company registration certificate or business license.

Procedure for Establishing a Branch Office

A. Definitions in Commercial Act: According to the Commercial Act, branches are recognized as business establishments, necessitating registration when foreign companies partake in business activities within Korea.

B. Registration Process:

1. A mandatory application submission by a company representative residing in Korea.
2. Completion of the registration process within three weeks from the establishment of the business office.
3. Instruments of Registration must encompass details such as the delegate's name and address in Korea, alignment with business types, and adherence to pertinent incorporation laws.
4. Vital attachments include certification of the representative's qualification, meeting minutes, a certificate confirming the headquarters' existence, and documentation verifying the company's category or instruments of incorporation.
5. Application form details comprise the company name in Korean, particulars of the head office, the business office address in Korea, the purpose of registration, and other pertinent information.

C. Necessary Documentation:

• Validation of head office business operations (e.g., certificate of incorporation registration)
• Verification of qualification as a branch representative in Korea
• Authenticated articles of incorporation from the relevant government authority
• If applicable, an approval certificate
• Translation of the aforementioned four documents into Korean
• Proof of tax payment
• Transcript bearing the seal impression of the branch representative in Korea (For a foreign national, a notarized sealed signature is compulsory.)
• Written consent for holding the office (provided by the branch representative)
• Documentation substantiating the address of foreign nationals

Conclusion

In summary, opting for the establishment of branch offices in Korea proves to be a strategic avenue for companies seeking entry into the market without the necessity of a local headquarters. This approach not only ensures compliance with South Korean jurisdiction and facilitates property development but also introduces a nuanced perspective, wherein registration fees are contingent on the authorized share capital. Operating independently without local incorporation, branches play a significant role in the realm of foreign direct investment, forming a cohesive legal entity with shared accounting processes. Unlike liaison offices, branches are not just permitted but encouraged to engage in sales activities, underscoring their status as autonomous entities responsible for financial endeavors.

For comprehensive support throughout the branch formation process, Pearson & Partners, a consulting firm specializing in Korean expansion, offers extensive assistance in areas such as incorporation and tax accounting. Our services guarantee a smooth and successful establishment of your company in South Korea. If you require expert guidance on legal requirements, regulatory compliance, and strategic decision-making, please feel free to reach out to us.