South Korea Corporate Compliance: Key Things to Know

South Korea has established its reputation as one of the top landscapes for business investments on a global scale. If you are looking to invest in this thriving market, make sure to understand the Korean corporate compliance. 

Foreign entrepreneurs often find themselves struggling with understanding Korean business regulations. Even worse, they are likely to overlook key compliance requirements, which may result in monetary penalties, adverse contract claims, or litigation.

This guide provides an overview of corporate governance in Korea in as structured a way as possible, while highlighting several areas of compliance that any foreign business needs to take into account when setting up and operating a corporation.

A. Determining Optimal Capital for Incorporation

Although there is no statutory minimum capital requirement for incorporation in Korea, foreign direct investment (FDI) companies generally need to invest at least KRW 100 million to qualify for FDI registration and access related incentives such as visa sponsorship and government support programs. Considering this, foreign entrepreneurs should carefully plan their capital structure to balance financial stability with Korean corporate governance standards.

A.1 The importance of capital in how the credibility of a business works 

Financial institutions usually assess capital strength before approving a loan or credit line, so corporations with low capital would have difficulty getting funded.

A stronger capital base makes a company seem more trustworthy and financially stable to investors, suppliers, and clients.

Financial Supervisory Service (FSS) and National Tax Service (NTS) in South Korea can especially focus on businesses that seem to have unreasonably low capital and suspect them, especially if it is an industry that takes a lot of investment money to have a lead over other players in it.

A.2 Foreign Entrepreneur Capital Recommendation Range

KRW 10M – 30M for Small consulting e-commerce service businesses

KRW 50M for Businesses requiring early-stage funding or strategic partnerships

Over KRW 100 million is typically required for foreign direct investment (FDI) companies aiming to qualify for certain government incentives, industry-specific subsidies, or eligibility for visa sponsorship. However, qualification for these benefits depends not only on capital investment but also on the business sector and compliance with regulatory requirements.Over KRW 100 million is typically required for foreign direct investment (FDI) companies aiming to qualify for certain government incentives, industry-specific subsidies, or eligibility for visa sponsorship. However, qualification for these benefits depends not only on capital investment but also on the business sector and compliance with regulatory requirements. This threshold ensures that foreign investors are willing to invest real financial commitment and operational scalability, thus making them suitable candidates for visa sponsorships, corporate loans, and international partnership.

Yet, the foreign entrepreneurs can have flexibility on investing capital from KRW 10M–100M+ while ensuring compliance with the Korean corporate governance standards.

B. Corporate Seal Qualifiers: The Magnitude of Corporations and Crime

Whereas in Western jurisdictions, a corporate signature will suffice, corporate governance in Korea requires the use of an official corporate registered seal (법인인감, Beobin Ingam), which serves as a legally-binding identifier.

B.1 Use of the Corporate Seal is Required

Business Establishment & Corporate Filings: All legal amendments, such as adding or dropping a director, or changing a business scope, should be authenticated with the registered seal.

Banking & Financial Transactions: Corporate businesses must submit a Corporate Seal Registration Certificate (법인인감증명서) when opening a corporate account, applying for a loan, or issuing a bond.

The corporate seal must also be affixed to important documents such as high-value contracts, shareholder resolutions, and real estate transactions. In practice, most banks, government offices, and counterparties require the corporate seal for legally binding agreements.

B.2 Mitigating Corporate Seal Risks

• Using the corporate seal without proper authorization can subject the company to fraud liability, because courts tend to presume that documents with the requisite seal are legitimate.

• All companies must institute stringent internal controls so that the seal is not accessible to all the executives and its usage is restricted.

• In this case therefore the commercial registry office should be contacted immediately and a new seal should be registered so that the original cannot be misused.

Government actions against the corporate seal can result from lack of compliance with Korea business regulations and incur government penalties and a contract dispute.

C. Compliance with tax invoice (digital) lodging & completeness errors

To follow the Korean corporate compliance, the correct issuance, verification, and payment of tax invoices are essential. South Korea has a mandatory electronic tax invoice system in place to make VAT reporting efficient and prevent tax evasion as well. 

C.1 DTI Tax Invoices through HomeTax System

In Korea, businesses are required to issue invoices on the NTS HomeTax platform, as follows:

• Authentication certificate with the tax invoice − Login through a tax invoice certificate, generally authenticated by the company’s main bank

• You will enter supplier and buyer information with business registration numbers

• Check transaction values, VAT calculations, and invoice type (Claim or Receipt)

• Sign and submit the invoice digitally at the end of 25 days following the month to which the invoice is issued.

  
  

C.2 Fixing Mistakes & Steer Clear from Compliance Roadblocks

If there are errors in VAT invoices, they must be corrected in time; otherwise, the VAT will not be allowed to be deducted. Common correction scenarios include:

• Wrong VAT rate → New Invoice with Negative (-) Adjustment.

• Duplicate Issuance → Reverse the duplicate with a negative (-) entry.

• Wrong Business Information → Revoke and Reissue Invoice with Correct Information.

  
  

D. Deficiencies in Corporate Registrations: Avoid Causing a Legal Setback

Many foreigners find registration deficiencies. It can lead to incorporation delay or rejection, and also legalization problems.

D.1 English Name Spelling Defaults

Company names must also be unique nationwide across Korea, regardless of industry. Even if another company operates in a completely different sector, duplicate names are not allowed under Korean corporate law.

However, English transliterations need to match the formal Korean name. The phonetics should match in both languages. 

D.2 Ambiguities in the Scope of Business & Compliance

• Business purposes must be specific, well-defined, and made in accordance with the Korean Standard Industrial Classification (KSIC).

• Rejections can come from broad or vague descriptions such as “IT Services” versus “Software Development for AI Systems.”

  
  

D.3 Pre-Submission Verification Strategies

Foreign entrepreneurs must take these steps to avoid registration deficiencies:

Perform a corporate name search via the Online Corporate Registration System.

Conduct a check to ensure the addresses of the shareholder and the director of the company are the same as those in the official files.

Define the purposes of business using KSIC classifications.

If these steps aren't followed, you may be issued a “Correction Request (보정명령)”, which will delay your corporate registration.

Final Takeaway: Setting Up a Fully Legal Operation in Korea

Compliance with Korea corporate compliance standards is necessary for a foreign company to ensure strong operations, financial stability, and credibility in the market. Foreign entrepreneurs must:

Determine a competency with which they can afford to operate, while ensuring compliance with regulatory requirements

Register and responsibly use corporate seals to avoid unauthorized transactions.

To remain VAT compliant, ensure that tax invoices are issued and verified correctly.

Prevent corporate registration deficiencies by checking before running into the trademark records. Business names must be unique, addresses valid, and scope specific.

At J&J Korea, we provide the necessary legal assistance in helping foreign businesses establish and be fully compliant with South Korean corporate laws. We provide everything you need for your Korean market entry, ranging from business registration, tax compliance, corporate secretarial, to legal advisory services, all with tailored solutions. Reach out to us now!