Korea’s Corporate Law
There are total 4 ways that foreign film producers may shoot films in Korea by means of a liaison office or branch office in Korea, jointly producing with a production company in Korea, or just receiving production services.
(1) Establishment of Liaison Office
The establishment of a liaison office means that a foreign company who wants to shoot a film in Korea is registered in Korea as a foreign company and serves as its legal representative. Although the liaison office is located in Korea, on practical and legal terms it belongs to the overseas parent company and all responsibilities and liabilities of the liaison office are attributed to the overseas parent company. Thus, the Liaison Office is not allowed to undertake any commercial activity such as business contract transaction independently. Only the parent company which established the liaison office can conduct accounting transaction and business contracts.
Establishing a liaison office does not particularly require capital and the registration process is simple. Also, the liaison office is suitable for limited researching and collecting market information, and acting as a communication channel. The legal representative of liaison office may hire an employee for its operations or directly operate the liaison office. If the legal representative is not of Korean nationality, he or she should obtain a visa prior to entry into Korea.
Procedure for the establishment
- Report on the establishment of the liaison office to a designated Foreign Exchange Bank
- Obtain business identification number from the competent tax office
- Open bank account at the designated Foreign Exchange Bank
(remittances shall be made through this bank account between the parent company and the liaison office)
- Normal processing time required for the establishment : 3~4 days
(2) Establishment of Corporation in Korea
A foreigner or foreign corporation may establish a corporation in Korea. A corporation, established independently and newly in accordance with Korean laws, is an affiliated company of the overseas parent company which holds ownership as a majority stockholder and carrying legal binding force on its business activities. A corporation is a completely separate entity from the parent company in the legal and accounting aspects.
Therefore, the corporation should observe the Korean laws and regulations including Labor laws, Corporation laws, Accounting laws, Tax laws and other relevant laws and regulations governing its business activities in Korea.
Beside corporation, one may set up a limited liability company in Korea which can limit the liabilities of the owner, so it is obliged that appropriate consultation shall be asked prior to the establishment. In addition, firms which want to undergo film business activities in Korea must register as a film business, referring to the guideline set out by the Korean Film Council.
Procedure for the establishment
- Report the corporation as a foreign invested company to a designated Foreign Exchange Bank
- Register the establishment of the corporation with the competent tax office
- Register the establishment of the corporation with the District Court
(3) Co-production with Korean Production Company
There are various forms of co-productions with production companies in Korea and different approaches are possible depending on the terms of the contract. The Korean production partner can take on all the responsibilities for investments in Korea, due formalities, contracts as well as effective and efficient management of the production. In addition, if specific conditions are met, various financial benefits are given through the support programs offered by the Korean Film Council and regional film commissions.
At present, Korea has concluded a co-production treaty with France, New Zealand. For more detailed information, please refer to the web site of the Korean Film Council.
[Note] Establishment of Special Purpose Company (SPC)
One may set up a ‘special cultural industry company’ as a special purpose company for the purpose of investment in films, transparency and efficiency of the money being used, film production management as well as fair and accurate distribution of profits.
As of October 2010, thirty-eight special purpose companies have been registered with the Ministry of Culture, Sports, and Tourism and are being operated. In general, the period of establishment of the special purpose company starts from the time when the development of the movie has been completed and the main investment has been decided. The commercial law classifies SPC as either limited liability company of corporation and a capital base of 100 million KRW is required under the Promotion of Cultural Industries Law.
The Certificate of Registration will be issued by Ministry of Culture, Sports, and Tourism within 21 days from the date of application to the ministry with the completed documents. Generally, more than 30 days are needed for the registration.
(4) Cases Involving Receipt of Production Services Only
In cases where the foreign producer only receives production services, he or she may contact the film producer or production service company or freelance producer in Korea. The list of Korean film producers including production service companies, and freelance producers are available at the Korean Film Council. Once the partners have been arranged through these institutions, the foreign producer may receive all the services related to production support programs including film crew, actors, extras, location, equipment and technical companies and other matters associated with the production. The fee for the production services is estimated at 15% of the total production budget to be spent in Korea as a general rule and it is subject to change as the case may be. For legal advice, please refer to the Korean Bar Association homepage www.koreanbar.or.kr