Glossary of South Korean Corporate and Commercial Terms

Introduction

This glossary defines key terms used in South Korean corporate and commercial law, governed by the Commercial Act (상법). The terminology draws from German, Japanese, and increasingly global corporate law practice.

Key Terms

Stock Company (주식회사 / Jusik Hoesa)

The most common corporate form, equivalent to a public or private limited company in other jurisdictions. Capital is divided into shares, and shareholders’ liability is limited to their investment. Governance includes shareholders’ meetings, board of directors, and statutory auditors (or audit committees).

Limited Liability Company (유한책임회사 / Yuhan Chaekim Hoesa)

A corporate form introduced in the 2011 Commercial Act reform, modeled on the German GmbH. Members’ liability is limited, but the company is not required to have a board of directors. Popular for startups and joint ventures.

Director (이사)

A member of the board of directors, responsible for corporate management. Directors owe duties of loyalty (Article 382-3) and care (Article 382-2). Outside directors (사외이사) are required for listed companies.

Representative Director (대표이사)

The director authorized to represent the company in legal transactions and to execute company business. Typically appointed by the board of directors.

Shareholder Rights (주주의 권리)

Shareholders enjoy voting rights (one share, one vote), dividend rights, preemptive rights, appraisal rights, and derivative suit rights. Minority shareholders have additional protections including cumulative voting eligibility and dissolution petitions.

Shareholder Derivative Suit (주주대표소송)

A lawsuit brought by a shareholder on behalf of the company against directors who have breached their duties. Under Article 403 of the Commercial Act, any shareholder may bring a derivative suit if the company itself refuses to sue.

Board of Directors (이사회)

The company’s management body, composed of at least three directors for stock companies (Article 383). The board decides on major business matters and supervises management. Listed companies must have outside directors constituting at least one-quarter of the board.

Statutory Auditor (감사)

An individual or committee that monitors director compliance and financial reporting. For listed companies with assets over KRW 2 trillion, an audit committee (감사위원회) is mandatory.

Capital Increase (증자)

The issuance of new shares to raise additional capital. May be effected through a board resolution (within authorized capital) or shareholders’ meeting resolution (if authorized capital must be increased).

Merger (합병)

The combination of two or more companies into a single entity. Mergers require board approval, shareholders’ meeting approval (two-thirds majority), and may be subject to KFTC merger review.

Share Exchange/Transfer (주식교환)

A statutory procedure allowing a company to become a wholly-owned parent by exchanging its shares for all shares of another company. Used in corporate restructuring.

Commercial Registration (상업등기)

The public registration system for corporate information (incorporation, directors, capital, dissolution). Registration is maintained at the district court with jurisdiction over the company’s registered office.

Preemptive Rights (신주인수권)

The right of existing shareholders to purchase newly issued shares in proportion to their current shareholding. Articles of incorporation may restrict or exclude preemptive rights.

Winding Up (청산)

The process of dissolving a company, including liquidating assets, satisfying creditors, and distributing remaining assets to shareholders.