Seamless Expansion: Branch Office Formation in Korea Decoded

Branch offices offer an invaluable opportunity for companies to establish a business presence in Korea without requiring a local head office. This strategic approach allows companies to assert their rights, ensuring compliance with South Korean jurisdiction and facilitating property development. Notably, the registration fees for a branch office in Korea are contingent on the authorized share capital of the parent company, with higher capital leading to an escalation in registration fees.

A branch engages in profit-making activities in Korea, functioning autonomously without local incorporation, and is not categorized as direct foreign direct investment. The unity 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 undertake sales activities, assuming the role of independent legal entities accountable for their debts and liabilities. The formation process for branches is straightforward, devoid of formalities compared to local corporations, and incurs lower registration fees. Typically suited for a narrower scope of operations, foreign companies can seamlessly transition from branch formation to a local subsidiary if the need arises.

Branch Office Formation Process

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

B. The Process of Registration:

1. Submission of an application by a company representative residing in Korea is mandatory.
2. The registration process should be completed within a three-week timeframe from the establishment of the business office.
3. Instruments of Registration must encompass details such as the delegate's name and address in Korea, aligning with the type of businesses, and adherence to appropriate laws for incorporation.
4. Essential attachments include certification of the representative's qualification, meeting minutes, a certificate confirming the existence of the headquarters, and documentation proving the company's category or instruments of incorporation.
5. Key details to be included in the application form involve the company name in the Korean language, particulars about the head office, the business office address in Korea, the purpose of registration, and other relevant information.

C. Necessary Documentation:

• Verification of the head office's business operations (e.g., certificate of incorporation registration)
• Confirmation of qualification as a branch representative in Korea
• Certified articles of incorporation from the relevant government authority
• If applicable, a certificate of approval
• Translation of the aforementioned four documents into Korean
• Proof of tax payment
• Transcript containing the seal impression of the branch representative in Korea (For a foreign national, a notarized sealed signature is mandatory.)
• Written consent for holding the office (from the branch representative)
• Documentation validating the address of foreign nationals

Notification of Branch Formation

Submission of a notification for the establishment of a branch is mandatory, directed towards a foreign exchange bank. However, specific circumstances require notification to the Ministry of Finance and Economy, encompassing finance-related activities beyond banking, securities- and insurance-related endeavors, business activities not sanctioned 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, instruments of incorporation from the head office, a certificate appointing a local branch manager, a power of attorney, and a copy of the company registration certificate or business license.

Conclusion

In conclusion, the branch offices formation in Korea represents a strategic avenue for companies to gain a foothold in the market without the necessity of a local head office. This approach enables them to navigate the intricacies of South Korean jurisdiction, ensuring compliance and facilitating property development. The variable registration fees, contingent on the authorized share capital, add a nuanced dimension to this process. Branches, operating independently without local incorporation, contribute to the broader landscape of foreign direct investment, fostering a cohesive legal entity with shared accounting processes. Unlike liaison offices, branches are not only permitted but encouraged to engage in sales activities, underscoring their role as independent entities accountable for their financial activities.

Pearson & Partners, a consulting firm specializing in aiding expansion into Korea, offers comprehensive support in navigating the intricacies of the branch formation process. Our services extend to incorporation and tax accounting, ensuring a seamless and successful establishment of your company in South Korea. For expert guidance on legal requirements, regulatory adherence, and strategic decision-making, contact us.