Legal Frameworks and Regulations for Business in South Korea

This article discusses the legal frameworks and regulations for businesses operating in South Korea, including the sources of law, intellectual property law, sale of goods, law of torts, contract law, and agency and employment law. It also provides an overview of the types of companies in South Korea and the incentives provided to foreign investors.

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Business Law & International Context

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Introduction
South Korea is a sovereign state which is a part of East Asia. The country is located in
the southern part of the Korean Peninsula. The growth of the country is dependent on
foreign investments; therefore, it encourages international organisations to invest in the
country. The country has enacted the Foreign Investment Protection Act 1988 which is
focused on providing incentives to parties who invest in the country. These incentives
include financial support, cash grants, tax reliefs, industrial locations, and others. The
organisations which conduct business in the country are categorised into two types which
include corporations and private businesses. These organisations are further categorised
into four subtypes which include general partnerships (Hapmyeong Hoesa), joint stock
corporations (Chusik Hoesa), limited liability partnerships (Hapja Hoesa) and limited liability
corporations (Yuhan Hoesa) (PKF, 2018). There are various legal frameworks and regulations
which are implemented on the organisations operating in South Korea.
Legal Concepts Applicability in South Korea
Legal System In South Korea, there are two key sources of law which apply to
the country which include primary and secondary sources. In the
primary sources of law, treaties, rules, legislation, and regulations are
included. The secondary sources include cases, journals, law reviews
and archives. In South Korea, the ruling or precedent of the court is not
considered as a law. However, these rulings carry strong values under
the Supreme Court. In South Korea, there are six basic codes in its legal
system which includes criminal code, commercial code, civil code, code
of criminal procedure, code of civil procedure and constitution (LOC,
2018).
Other than these codes, there are various other written laws in
South Korea as well. These laws include rules made by Supreme Court,
directions, rules, notices of government ministers, enforcement or
Presidential decrees, the National Assembly passes statutes, treaties
under article 6 (1) of the constitution and ministerial ordinances

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(Latestlaws, 2018). Although these are not considered as law, however,
they govern the functions of public servants.
Intellectual
Property
The Korean Copyright Act 1957 is the legislation which provides
provisions regarding copyright protection. This act was introduced in
the Berne Convention which was happened for the Protection of
Literary and Artistic Work (WIPO, 2018). Moreover, this act was
amended by the government of South Korea in 2011. The reason for
amendment was preparing it as per the terms of the Free Trade
Agreement which is formed between European Union and South Korea.
Organisations did not have to get their copyright registered in
South Korea, and their trademarks are protected by the Trademark Act.
The parties have to register these in the Korean Intellectual Property
Office. In the case of patents, the Utility Model Act and the Patent Act
provides provisions which are used by the Korean Intellectual Property
Office for their protection (Yoon, 2015). Parties can get a patent for
both products and methods; however, protection is available for
products by the Utility Model Act.
Sale of Goods The Sale of Goods provides the provisions regarding imposition
of sales tax rates for customers in South Korea. This tax is imposed on
the services which are purchased by customers. Currently, the tax rate
which is imposed on services of customers is 10 percent (Trading
Economics, 2018). In South Korea, various registered commissioned
agents are appointed as registered trading company which perform the
work of establish branch sales offices and hiring staff members.
Moreover, the provision of the Commercial Act 2010 applies to
the guidelines given under the Sale of Goods. Under this legislation, five
classifications are made on which the tax is imposed which include
maritime commerce, general provisions, insurance, companies, and
commercial activities. The commercial activities are governed under
Part II of this act. In this part, provisions regarding sales of movable
properties are given along with agency and advertisement activities

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(Lee, 2017). Thus, it is a key legal framework which provides key
provisions regarding implementation of tax on services consumed by
customers.
Law of Torts The Civil Code provides key provisions which govern the law of
torts in South Korea. Article 750 of the act defines torts as an unlawful
act of a person which resulted in causing an injury or loss to another
person, and such damages are a result of negligence or willful conduct
(Hyeon, 2011). Liability is imposed on the party to compensate the
aggrieved party for the loss suffered by them. The definition and
general provisions are included in Part I of the act, and Part III provides
key provisions which cover claims regarding contracts. Under Part III,
provisions regarding definition of damages caused due to torts are
given.
As per this act, the parties who suffered a loss due to torts can
make a claim within a period of three year when they become aware
regarding the tortious act or within ten years since the act has been
conducted. Under the claim for damages suffered due to torts, different
claims are included which include loss of wages, direct or active loss,
physical or psychological pain, indirect or passive loss and others (IPFS,
2018). The parties have to make a separate claim for these issues, and
they have to file them separately as well. In South Korea, the law of
torts is considered as a broad concept than compared to the crime
itself. For example, adultery is considered as a tortious act in South
Korea, and it is not considered a crime in the country.
Contract Law Contracts are referred to legally binding agreements which are a
key part of the business world. In case of South Korea, contracts are
considered as significant documents because they denote beginning
and end of negotiations between business organisations. In South
Korea, contracts are considered as agreements of gentlemen, and they
require more negotiations. Various laws govern the contracts in South
Korea, and these laws are applied based on the type of contracts

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(Lawlec, 2018). Various legal implications are imposed on those
contracts which govern business relationships in South Korea.
Contractual parties have the right to make a claim under a contract
through Part III of the Civil Code. There are certain elements which
must be present in order to form a valid contract between parties.
These elements include offer, acceptance, consideration, intention of
parties, and competence of parties.
Consent is not considered as valid in case elements such as
undue influence, deception, mistake, incapacity, duress, absence of
intent and sham transactions. The performance factors of a contract
include late performance, incomplete performance, set off, variation,
repudiation, satisfaction, and violation of the terms of the contract
which are considered as material (Krishna, 2018). In case the
contractual terms are not fulfilled by the parties, then various remedies
are available for aggrieved parties which include damages, specific
performance, rescission, discharge through frustration, incapability to
performance, and injunction.
Agency and
Employment Law
In South Korea, a separate law is not enacted by the
government for commercial agency agreements; however, these
agreements are governed under the provisions given by the Korean
Commercial Code. Under this code, the definition of a commercial agent
is given. As per the agent, it is referred to agent is referred to a party
who perform the business transactions between customers and their
principal and who is independent under the eyes of the law from the
principal (Kim & Bae, 2017). For performing these activities, commission
is paid to the agent. In case the commercial agents did not have
expressed authority from their principal then they are restricted from
entering into any transactions which are performed by the principal.
Moreover, the profits made in the transaction must be
transferred by the agent to the principal. As per Article 93 of the Labour
Standards Act, an employer who has hired a minimum of ten employees
has to comply with employment rules in a uniform manner. These rules

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govern the relationship between the employer and the employee.
Moreover, the act also provides provisions regarding minimum terms
and conditions which are necessary to be followed in employment
(Collins, 2017). As per this act, the contract for employment must be
written in which details regarding the employment which includes
salary, working hours, job description, holiday policies and other are
included.
Conclusion
Based on the above observations, it can be concluded that various laws apply in
South Korea which is enacted by the government to avoid dispute between business
organisations and govern their operations to ensure that they contribute to the economic
growth of the nation. Various sources of law are discussed in the report along with various
laws which includes agency law, employment law, contract, law, intellectual property law,
and tort law. While expanding their business in South Korea, organisations have to comply
with the provisions given under this section to avoid legal consequences.

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References
Collins, E. C. (Ed.). (2017). Employment Law Review. London: Law Business Research Ltd..
Hyeon, K. I. (2011). Transport Law in South Korea. Netherlands: Kluwer Law International.
IPFS. (2018). Law of South Korea. Retrieved from
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wiki/Law_of_South_Korea.html
Kim, D. O., & Bae, J. (2017). Employment relations and HRM in South Korea. Abingdon:
Routledge.
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negotiations-in-south-korea/
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Lee, B. M. (2017). Formation of contracts for the international sale of goods under Korean
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LOC. (2018). South Korea. Retrieved from
https://www.loc.gov/law/help/guide/nations/southkorea.php
PKF. (2018). Types of companies in Korea. Retrieved from
https://www.pkf.com/korea/news/2017/types-of-companies-in-korea/
Trading Economics. (2018). South Korea Sales Tax Rate – VAT. Retrieved from
https://tradingeconomics.com/south-korea/sales-tax-rate
WIPO. (2018). Republic of Korea. Retrieved from
http://www.wipo.int/wipolex/en/details.jsp?id=7182

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Yoon, J. (2015). The evolution of South Korea’s innovation system: moving towards the
triple helix model?. Scientometrics, 104(1), 265-293.