Introduction to the LLC in the Amended Commercial Act

April 6, 2012 § Leave a comment

The amended Commercial Code introduced new business entities such as LLC(Limited Liability Company) and LP(Limited Partnership) to satisfy the needs of our business societies placing emphasis on human resources and willing to limit the external liability of the participants.

The LLC(Yuhan Chaegim Hoesa) is a separate legal entity situated halfway between Limited Partnership Company(Habza Hoesa) and Limited Company(Yuhan Hoesa) in that LLC internally guarantees the self-governance of the participants while limiting the external liability of the participants at the same time. Key distinctions of LLC and Limited Company(Yuhan Hoesa) are set forth below.

Attributes

Limited Company

(Yuhan Hoesa)

Limited Liability   Company

( Yuhan Chaegim Hoesa)

 

Number of Share Holders Required

Minimum of 1; maximum of 50

Not prescribed by law

Authorized Capital

Authorized capital is not contemplated

Authorized capital is not contemplated

Minimum Paid-in Capital

No minimum paid-in capital requirement

No minimum paid-in capital requirement

Number of Directors

Minimum of 1; no maximum number prescribed

Not prescribed by law;

Instead, minimum of 1 managing member should be appointed among   the participants or nonparticipants

Board of Directors

Required

Not prescribed by law

Statutory Auditor

Appointment of statutory auditor is optional

Appointment of statutory auditor is optional

Issuance of Corporate Debentures

Not permitted

Not permitted

Management of business

Determined by a majority of directors

Determined by approval of all the entire managing members

Transfer of Shares

Free transferability is not guaranteed by Commercial Code and is   subject to approval of a majority of members holding at least 75% of units

So far as the articles of incorporation prescribed otherwise, free   transferability is not guaranteed by Commercial Code and is subject to   approval of all the rest members except the share of a non-managing member   subject to approval of all the managing members

 

Procedures for Establishing LLC

A. Foreign Investment Notification

The foreign investment notification procedures for establishing LLC is entirely the same with those for the stock corporation. Notification of foreign investment on a prescribed letter and a notarized Power of Attorney appointing local counsel to represent the foreign investor should be submitted to the government-designated foreign exchange banks or Korea Investment Service Center of the Korea Trade Investment Promotion Agency.

B. Incorporation Process

The members of LLC should draw up the Articles of Incorporation including information such as the names, registration numbers and addresses of the members, the address of the principal office, and the name and address of the representative managing member. As explained above, the Commercial Code allows the internal part of LLC being operated flexibly by the self-prescribed Articles of Incorporation, contrary to the Yuhan Hoesa.

The initial foreign investment in a LLC must be at least 100 million won, the same with the case of incorporating the Stock Company. The receipt of all payments should be finished until the registration process is completed because a certificate of deposit of subscription funds must be submitted to the Commercial Registry Office. The investment of members of LLC is not limited to money or kind, but credit or labor is not allowed for the investment in LLC under the Commercial Code.

The incorporation process of LLC is completed with the registration of the new company to the Commercial Registry Office located in the place of the principal office. The following is the key information required for the registration of LLC.

(a)    The names, resident registration numbers and addresses of participant(s)

(b)   The address of the principal office

(c)    The name, address, and resident registration number of the managing members (not necessary if the representative managing member is appointed)

(d)   The name, address, and resident registration number of the representative managing member appointed among the managing members 

(e)    The way of notification if it is prescribed in the Articles

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