Factory

A factory (공장/工場) is an industrial site, usually consisting of buildings and machinery, or more commonly a complex having several buildings, where workers manufacture goods or operate machines processing one product into another.

Factories arose with the introduction of machinery during the Industrial Revolution when the capital and space requirements became too great for cottage industry or workshops. Most modern factories have large warehouses or warehouse-like facilities that contain heavy equipment used for assembly line production. Large factories tend to be located with access to multiple modes of transportation, with some having rail, highway and water loading and unloading facilities.

Manufactured products may be final consumer goods, or parts and sub-assemblies which are made into final products elsewhere. Factories may be supplied parts from elsewhere or make them from raw materials. Continuous production industries typically use heat or electricity to transform streams of raw materials into finished products.

Key words
factory, factory foundation, mining foundation, mortgage, preservation of ownership, list of foundation

Statutory ground
The term "factory" has a variety of meanings pursuant to each statute, as exemplified by:
 * Under the the Act on the Activation of Industrial Clusters and the Establishment of Factories (산업집적활성화 및 공장설립에 관한 법률), a factory means an industrial site, as designated by Presidential Decree to conduct manufacturing process as designated by Presidential Decree, which cosists of a building(s) or fixture, machinery, equipment and other facilities in use for manufacturing, and its ancillary facilities.
 * Under the Factory and Mining Foundations Act (공장 및 광업재단저당법/工場及鑛業財團抵當法), a factory means an industrial site which is, for the purpose business operation, being used for manufacturing or processing of goods, printing or photography, broadcasting or supplying electricity or gas.
 * Under the Enforcement Decree of the Construction Act (건축법시행령), a factory means "물품의 제조·가공(염색․도장·표백·재봉·건조·인쇄 등을 포함한다) 또는 수리에 계속적으로 이용되는 건축물로서 제2종 근린생활시설, 위험물저장 및 처리시설, 자동차관련시설, 분뇨 및 쓰레기처리시설 등으로 따로 분류되지 아니한 것" Schedule 1. 「용도별 건축물의 종류(제3조의4 관련)」of the Decree.

Factory mortgage
The term "factory mortgage" (공장저당권/工場抵當權) means the mortgage which has been created on the factory site and building(s) belonging to the factory under the Factory and Mining Foundations Act.

It other words, without establishing a separate foundation, the said mortgage can be created on the factory site and buildings. Upon being registered in the factory mortgage, its encumbrance effect shall reach the machinery and equipment, and other properties to be supplied and used in the factory.

Factory foundation
A factory foundation (공장재단/工場財團) is a foundation which has been established so that the factory owner may create mortgage under the Factory and Mining Foundations Act.

The concept of foundation has been devised to maintain the principle of one-thing-to-one-right in rem (일물일권주의/一物一權主義) so as to facilitate the factory owner to borrow as much money as possible. So to speak, the factory foundation is treated as one single real property. It shall not the object of other right than ownership and mortgage; however, that it may be leased to a third person by obtaining the consent of the mortgager. Article 12 of the Act.

The factory foundation is composed by the following assets, a part or whole of which belong to the same factory owner: Article 13.
 * 1) Land, buildings and other structures beloning to the factory;
 * 2) Machinery, equipment, utility poles, electric cables, pipelines, rail and other accessories;
 * 3) Aircrafts, ships, automobiles and other registered or registrable movables;
 * 4) Superficies and jeonse (lease) right;
 * 5) Lease with the consent of lessor; and
 * 6) Intellectual property rights.

Creation of factory foundation
A factory owner may create the factory foundation on one factory, or two or more factories. In the latter case, the factory foundation may be created even if each factory belongs to different owners. Article 10 (1). The components of the factory foundation shall not simultaneously belong to other factory foundation. Article 10 (2).

Two-step registration
The factory foundation is created for the preservation of ownership (소유권보존등기) upon registration on the Factory Foundation Registry. Its effect shall expire unless the registration to create the mortgage is conducted within ten months after the date of the registration to preserve its ownership. Article 11.

Likewise, the termination of mortgage does not lead to the extinction of the factory foundation. The foundation mortgage shall expire on condition that new mortgage is not created within ten months from the date on which the previous mortgage was extinguished. Article 21.

The factory owner may split one factory foundation created on two or more factories into a few factory foundations, and vice versa merged into one. Article 18.

List of factory foundation
Upon the registration of ownership preservation, the list of factory foundation (공장재단목록/工場財團目錄) shall constitute a part of the registry, and listed contents shall be deemed to be registered in due course. Article 36.

As from February 2012, the provisions of the Act was newly modified in line with the Registration of Real Estate Act (부동산등기법/不動産登記法) as well as newly adopted computerized system.

Factory foundation mortgage
The factory foundation mortgage (공장재단저당권/工場財團抵當權) is created on the factory foundation consisted of tangible and intangible properties belonging to the factory. Article 10. Compare this with the mining foundation mortgage.

As explained above, the factory foundation mortgage shall be created on the basis of a certain factory foundation by the mortgage agreement and the relevant registration.