South Korea (SK) is a sovereign state of East Asia which is located in the Korean Peninsula’s southern part (Kim, 2012). The foreigners are encouraged to invest both directly and indirectly in the economy of the nation. The Foreign Investment Promotion Act of 1988 promotes foreign investment in the nation and the investors are given a range of incentives for investing in the nation, for instance, financial support, tax relief, support of industrial sites and cash grants amongst the other things.
There are two key kinds of business originations in SK, i.e., the corporations and the private businesses. The corporations are further divided in four sub categories including:
- Yuhan Hoesa: Limited Liability Corporation;
- Chusik Hoesa: Joint Stock Corporation;
- Hapja Hoesa: Limited Liability Partnership;
- Hapmyeong Hoesa: General Partnership (Angloinfo, 2017a).
In the following parts, the different laws applicable on the businesses in SK have been highlighted.
The legal or the judicial system of SK is based on different sources of law, i.e., the primary and the secondary. Under the primary sources of law are the legislations, the treaties, and the rules and regulations. Under the secondary sources of law are the cases and the law reviews, journals and the archives (Latest Laws, 2017). Even though the court precedents have not been granted the status as being a law; in practice, the precedents have a strong value when it comes to the Supreme Court of Korea (SC). The six basic codes in the nation are the constitution, the civil code, code of civil procedure, the commercial code, the code of criminal procedure and the criminal code. In the other kind of written law contain the:
- The Presidential/ Enforcement Decrees;
- The National Assembly passed statutes;
- Directives, notices, rules propagated by the government offices or ministries, which are not law in a technical manner but are responsible for regulating the activities of the issuing parties, i.e., the public servants;
- Ministerial ordinances supplementing general statutes;
- Rules made by SC; and
- Treaties under Constitution’s Article 6(1) (Korea Law, 2017a).
The business contracts are a crucial document for the business in SK and a contract denotes a beginning, instead of marking the negotiation’s end. In SK, contract is regarded as a gentlemen’s agreement which, which is subjected to further negotiations. There are different laws applicable on the contract drawn in the nation, depending upon its contents. The business relationships are given a higher value in comparison to the legal implications of a contract (Santander, 2017).
Under the contract law of SK, the formation of contract has different aspects like offer, invitation to treat and acceptance; the defects of consent include incapacity, sham transaction, duress, mistake, deception, undue influence, illegality and absence of intention of creating lawful obligation; the performance includes deposit in court, set-off, accord and satisfaction, variation/ novatio; breach includes material breach, repudiation, late performance, incomplete performance; the remedies include termination, damages, restitutionary awards; and the contract can even be discharged by frustration due to incident or risk and impossibility of performance (Lawlec, 2017). The claims under the contract can be made through the Civil Code’s Part III (Statues of the Republic of Korea, 2013).
Sale of Goods
The sales of goods in SK are charged with sales tax rate for the consumers and are based on the goods and services being purchased. At present, the rate of sales tax on the specified goods and services in SK is 10% (Trading Economics, 2017). In SK, the registered commissioned agents are appointed named the registered trading company and even establish branch sales office having SK staff (Global Trade, 2010).
On the sale of goods, the Commercial Act, 2010 is applicable. This act is different into 5 parts where the general provisions, commercial activities, companies, insurance and maritime commerce is defined and the provisions related to these are stated. Apart from this, the addendums are given at the end of this act. Under part II, i.e., under the commercial activates, the different aspects of sale of moveable, properties, and the activities like agency, advertisements, and the like are detailed (Ministry of Legislation, 2017).
Agency and Employment Law
In SK, there is an absence of a separate regulation for the commercial agency agreements; though, the Korean Commercial Code (KCC) sets the provisions which are applicable over the relationship which is present between the principals and the commercial agents. This KCC defines the commercial agent as a legally independent individual from the principal, who makes the arrangements for the direct business transaction amid the customer and the principal and gets commission for doing so. A commercial agent, without the express permission of the principal cannot on his own account or for a third party, undertake any transaction which falls under the business performed by the principal. In case such is done, the agent has to transfer the profits earned by him through such act, to the principal (Fox Williams LLP, 2016).
Under the Labor Standards Act of Korea, through Article 93, an employer with a minimum of ten employees is required to prepare, as well as, maintain the rules of employment, which uniformly regulate the employment rules for all the employees, and these rules of employment ultimately become the part of the association or the relationship between the employees and the employer (Korea Law, 2017b). The minimum terms and conditions for any employment are also contained in this act. An employment contract has to be made in writing and it contains the details of employment including the job description, the work location, working hours, salary, details of employee and the company, the holiday entitlement and the like (Angloinfo, 2017b).
For conducting business in SK, a range of factors have to be take care of, one of which includes the protection of the intellectual property. The copyright laws of SK are based on Korean Copyright Act, 1957, which has been formed on the basis of the Berne Convention for the Protection of Literary and Artistic Works. This act was modified back in 2011, in order to be prepared for the EU and Korea’s Free Trade Agreement. Registration of copyright is not required in the nation. The Trademark Act protects the trademarks in SK and these are regulated and registered by the KIPO, i.e., Korean Intellectual Property Office. To govern and protect the patents in the nation, the KIPO utilizes the Utility Model Act and the Patent Act. There is a similarity between the utility model and it gets the same protection as a patent. Method and products can be patented; though the utility model right can be granted only to the products (Kim, 2012).
Law of Torts
The tort laws in SK are regulated through the Civil Code. Article 750 of this code states that a tort is something whereby due to an unlawful act of any person results in a loss or inflicts injury to some other person, which can be done in a willful or negligent manner, has to compensate the injured person for the damages. Under the Part 1 of this code are the general provisions, where different definitions are state. Part 3 not only contains the claims with regards to contract, but also for the tort. Under the tort part, even the damages have been defined, along with defining the tort (Statues of the Republic of Korea, 2013).
For a claim to be made under tort law there is a three year time period from the time when the aggrieved party became aware about the tortious act, or ten years from the time when the tortious act was committed. There are three different types of claims under tort, which can be made in SK and these include:
- Active or Direct loss, for instance the hospital bills;
- Passive or Indirect loss, for instance the lost wages; and
- Suffering and Psychological Pain, for instance the mental pain caused due to the bad experience.
These claims are all treated as separate claims and hence, under the SK laws, a claim can be separately filed for each of them. In SK, the tort is deemed as a concept broader than crime. An example of this can be seen in adultery, which is deemed as a tortious act in SK, but is not a crime (Kang, 2017).
On the basis of the discussion carried above, it is clear that in order to conduct business in South Korea, it is crucial that the different laws mentioned above are taken care of. As is with other nations, in SK, the businesses have to follow the contract law, the agency law, the employment law, the intellectual property laws, and the laws of tort. The legal system of SK highlighted that there are different sources of law. So, in order to conduct the business in SK, it is crucial that all of these are kept in mind, so as to comply with the norms of the nation and to ensure that there is no breach of law, which attracts a possible penalty.
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