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Dissolution is not enough-Even after the business closure at the tax office?


The dissolution of a company refers to the legal fact or requirement that extinguishes the corporate entity. When a company dissolves, except in cases such as mergers or bankruptcy, it must go through the liquidation procedures stipulated by the Commercial Code to terminate its corporate existence. Dissolution has a significant impact on stakeholders such as shareholders and creditors who have legal relations with the company, and therefore, the Commercial Code regulates the procedures and requirements through individual provisions to protect shareholders and creditors.


Corporate existence ends only after liquidation is concluded


Even if a company dissolves, its existence as a corporation does not immediately cease. Unless the reason for dissolution is a merger, division, division merger, or bankruptcy, the dissolved company continues to exist within the scope of the liquidation purpose, and only after liquidation is concluded does its corporate existence finally terminate. The dissolution of a company is similar to the death of a natural person, but with the exception of the aforementioned cases, the company continues to exist for a certain period as a "company in liquidation," which is different from the death of a person. Simply put, dissolution is akin to a triggering condition necessary for the company's termination, while liquidation is the process of settling financial rights and obligations for the company to ultimately cease to exist.


The commonly mentioned business closure report is an act under the Value-Added Tax Law, where a company reports to the tax office that it will no longer operate and cancels its business registration. Even if a company files for business closure, as long as the registration of liquidation completion is not made, its corporate entity remains intact, allowing for the possibility of re-registering as a business and resuming operations whenever necessary.


The legal regulation of a company's dissolution and liquidation largely concerns how to determine the reasons for dissolution and how to fairly protect the interests of stakeholders in the liquidation process.


For more details, please send an e-mail to jz@taxjz.com or If you would like a free consultation with an English-speaking Accountant in Korea, please schedule a call at: Schedule a Call with Jz

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