Dissolution and Liquidation Procedures for a Corporation in Korea

1. Overview

The dissolution of a corporation refers to the legal conditions under which the company loses its legal capacity. Dissolution does not immediately result in the termination of corporate status. While the company is unable to carry out its original purpose of conducting business due to dissolution, it continues to exist within the scope of liquidation until the liquidation process is completed, except in cases of merger, division, merger by absorption, and bankruptcy.

A liquidating corporation is not subject to regulations based on business activities. Therefore, directors cannot be appointed, and those who have already been appointed cease to hold their positions. The shareholders' meeting cannot pass resolutions such as changing the purpose, issuing new shares, reducing capital, establishing branches, or issuing bonds, except for the resolution to continue the liquidation process. Furthermore, directors or representative directors lose their positions, and the liquidator or representative liquidator executes the liquidation proceedings. However, auditors continue to hold their positions as auditors of the liquidating company until the expiration of their term.

Causes for dissolution: Article 517 of the Commercial Act

- Expiration of the duration specified in the articles of incorporation or other reasons stated in the articles

- Merger

- Bankruptcy

- Court order or judgment

- Division or merger by absorption of the company

- Resolution of the shareholders' meeting: The shareholders' meeting can dissolve the company at any time through a special resolution (Article 518 of the Commercial Act)

- Cancellation of business license: In the case of a company that holds a business license granted by the competent authority for business matters.

To extinguish an entity, it is necessary to go through dissolution and liquidation procedures. There are various reasons for dissolution, but typically it is decided by a resolution at a shareholders' meeting. Once a liquidator is appointed at the time of the dissolution resolution, they will carry out the liquidation process, and upon registration of the liquidation's conclusion, the corporate entity is terminated.

2. Dissolution Procedures

a) Resolution of Dissolution and Appointment of Liquidator at Shareholders' Meeting

The dissolution is resolved by a special resolution at the shareholders' meeting, and a resolution to appoint a liquidator is made. Typically, the CEO is appointed as the liquidator.

b) Registration of Dissolution and Appointment of Liquidator

Within two weeks after the resolution of dissolution, the liquidator must register the dissolution and the appointment of the liquidator.

3. Liquidation Procedures

Liquidation aims to terminate all legal relations of the company and distribute its residual assets. Once dissolved, the company continues to exist only within the scope of liquidation. The process includes collecting receivables, settling debts, and distributing remaining assets. It ends when the liquidator prepares a final account report, which is approved by the shareholders' meeting.

a) Notification of Dissolution and Appointment of Liquidator

The liquidator must report the reason for dissolution, its date, and personal details including the name, ID number, and address to the court within two weeks of taking office.

b) Investigation and Reporting of Company Assets

Immediately upon appointment, the liquidator must investigate the state of the company's assets, prepare an inventory list and financial statements like a balance sheet, and get approval from the shareholders' meeting, and then submit these to the court.

c) Announcement and Notification of Claim Reporting

Within two months of taking office, the liquidator must announce for a period of at least two months that creditors must report their claims within this period or be excluded from the liquidation. Known creditors must be individually notified.

d) Final Financial Statements Report

Once liquidation tasks are concluded, the liquidator must promptly prepare a final Financial statements and obtain approval from the shareholders' meeting.

e) Registration of Liquidation Conclusion

Once liquidation is concluded, the liquidator must apply for registration of liquidation conclusion within two weeks after the approval of the final Financial Statements.

4. Required Timeframe

The entire process from dissolution resolution to registration of liquidation conclusion usually takes more than two months (due to the period for announcement and notification of claim reporting).

5. Required Documents and Stamps

- corporate registry certificate and corporate seal certificate

- corporate seal stamp, corporate seal card(Blue card)

- articles of incorporation

- business registration certificate

- shareholders' list

- seals and seal certificates for shareholders representing at least one-third of shares & two-thirds of voting rights present

- copies of seal certificates for the liquidator, and residential registration transcript, seal stamp

- balance sheet and inventory list immediately after dissolution resolution

- balance sheet and profit and loss statement at the time of liquidation conclusion

To extinguish an entity, it is necessary to go through dissolution and liquidation procedures. There are various reasons for dissolution, but typically it is decided by a resolution at a shareholders' meeting. Once a liquidator is appointed at the time of the dissolution resolution, they will carry out the liquidation process, and upon registration of the liquidation conclusion, the corporate entity is terminated.

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