Commercial Act

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The Commercial Act or Commercial Code (상법/商法) regulates the business activities of constructive merchants and companies.

The Act was enacted in January 20, 1962 (Act No. 1000), and consists of five parts: General Provisions (Part 1), Commercial Activities (Part 2), Companies (Part 3), Insurance (Part 4), Maritime Transport (Part 5) and Air Transport (newly inserted Part 6). Historically negotiable instruments like promissory notes, bills of exchange and checks have been regulated by the relevant laws - the Bills of Exchange and Promissory Notes Act (어음법) and the Check Act (수표법).

Key words
Commercial Act, commercial activity, company, transport, insurance

Content
The Commercial Act has been frequently revised while the fundamental framework remains intact. See the recent amendments to the Act.

General Provisions

 * Merchants
 * Trade emplyees
 * Trade names and Trade books (Financial statements)
 * Commercial registration

Commercial Activities
The following activities conducted for profit as business are called basic commercial activities. Other activities effected by a merchant for the purpose of his business are deemed to be [subsidiary] commercial activities. Arts. 46 and 47.
 * Sale (매매/賣買)
 * Mutual account (상호계산/相互計算)
 * Undisclosed association (익명조합/匿名組合, Tokumei Kuniai)
 * Commercial agents (대리상/代理商)
 * Brokerage (중개상/仲介商)
 * Commission agency (위탁매매업/委託賣買業)
 * Forwarding agency (운송주선업/運送周旋業)
 * Carriage (운송업/運送業)
 * Public entertainment business (공중접객업/公衆接客業)
 * Warehousing (창고업/倉庫業)
 * Financial lease (금융리스업)
 * Franchise (가맹업/加盟業)
 * Factoring (채권매입업/債權買入業)

Companies
Companies are grouped into five categories: hapmyong-hwesa (합명회사/合名會社, partnership company), hapja-hwesa (합자회사/合資會社, limited partnership company), yuhan-chaekim-hwesa (유한책임회사/有限責任會社, limited liability company), joosik-hwesa (주식회사/株式會社, stock company) and yuhan-hwesa (유한회사/有限會社, limited company).

A partnership company shall be incorporated jointly by at least two members, and no member of a hapmyong-hwesa may, without the consent of the other members, transfer his shares to other persons, effect any transaction which falls within the class of business carried by the company, or become a member with unlimited liability at, or a director of, another company whose business purpose is the same kind of business as the company. If no managing member is designated, each member shall represent the company, and if the assets of the company are insufficient to fully satisfy all its obligations, each member shall be jointly and severally liable to discharge the obligations. With the consent of all of the members the company may be transformed into a limited partnership company.

A limited partnership company shall be composed of members with limited liability and members with unlimited liability. Members with limited liability may not provide personal services or credits as a form of contributions, and every member with unlimited liability shall have the responsibility and duty to manage the affairs of the company unless otherwise provided in the articles of incorporation. A member with limited liability may effect a transaction which falls within the class of business carried on by the company without the consent of the other members and become a member with unlimited liability, or a director, of another company of which the business purpose is the same kind of business as the company. Also, he may transfer shares to other persons with the consent of all of the members with unlimited liability and be transformed into a partnership company with the consent of all of the members the company.

A stock company shall be incorporated jointly by at least one person, and the total number of shares authorized to be issued, the par value per share, and the total number of shares to be issued at the time of incorporation shall be determined. The number of shares to be issued at the time of incorporation shall be no less than one fourth of the total number of shares authorized to be issued by the company, and the capital shall be no less than fifty million won. The par value per share shall be at least one hundred won, and shares may be transferred. A stock company shall have a general shareholders' meeting, directors and the board of directors, auditors and an audit committee. The general shareholders' meeting shall be the highest organ, and the minority shareholders (shareholders who hold no less than three hundredths (3%) of the total issued and outstanding shares) may propose certain matters as issues to be resolved at the general shareholders' meeting. Directors and the board of directors shall manage the affairs of the company.

A limited company shall be incorporated jointly by at least one member, the total number of members of which shall not exceed fifty, total amount of capital of which shall be at least ten million won, and the amount of each unit of contribution to which shall be no less than five thousand won and shall be equal. The liability of a member shall be limited to the amount of his contribution to the company. A member may transfer his shares pursuant to the resolution of a general members' meeting, and the company shall have one or more directors who shall represent the company.

The newly amended Commercial Act has introduced a new type of company. It is a yuhan-chaekim-hwesa (유한책임회사/有限責任會社, limited liability company), similar to a limited liability company (LLC) in the United States. This entity was intended to provide flexibility in the composition of the organization and recovery of investments while providing limited liability protection against creditors of the company up to their invested amounts.

The limited liability company can be established upon a capital investment by one or more persons and registration of its incorporation. Capital contributions can be made in any form, such as cash or other tangible assets except those that are difficult to determine the reasonable market value (e.g., services or credit). There is no minimum capital requirement to establish a limited liability company. While a manager is required (may be a person or a legal entity), there is no mandate to have directors or an auditor. A member is allowed to transfer her interests in the limited liability company to a third party with the consent of other members or if permitted in its Articles of Association.

Insurances
Part 4. Insurance (보험/保險) provides for the types of insurance as follows:
 * Non-life insurance
 * Fire insurance
 * Transport insurance
 * Marine insurance
 * Liability insurance
 * Automobile insurance
 * Life insurance
 * Accident insurance

Maritime Commerce
Part 5. Maritime Commerce (해상/海商) was wholly amended by Act No.8582 in August 2007 and came into force on January 1, 2008. The English translation of this part, Articles 740-895, is available here.

In particular, with respect to electronic bill of ladings, the Regulation for the implementation of Electronic Bill of Lading-related Provisions of the Commercial Act (상법의 전자선하증권 규정의 시행에 관한 규정) was established as a Presidential Decree and came into force on March 23, 2013.

Air Transport
Effective as from November 24, 2011, a new chapter of air transport (항공운송/航空運送) has been established in Articles 896-935.