Open a Holding Company in Korea

An individual who intends to set up a holding company in Korea or to change an existing legal entity into a holding company has to file a report with the Korea Fair Trade Commission (within 30 days of incorporation or conversion) that contains certain information. In this article, our company formation advisors in Korea explain different aspects related to setting up holding companies in this country.

What is a holding company?

A holding company in Korea is a legal entity that owns shares in other companies in order to control their activities, the total book value of which on the balance sheet has to account for at least 50% of the total assets of the legal entity, whose total assets must be at least KRW 500 billion.

What are the main steps for starting a holding company in Korea?

Here are the main steps of the registration procedure for a South Korean holding company:

• choose one of the legal entities that are suitable for such an enterprise (a joint stock company or limited liability company);
• check the trade name at the court registry and, optionally, file a trademark with the Ministry of Intellectual Property (formerly KIPO; this gives you the advantage of registering it as a trademark from the beginning);
• open a temporary bank account and deposit the needed capital (make sure to get the deposit certificate from the bank);
• prepare the registration documents and submit them to the Companies Register;
• obtain the Registration Certificate and register for taxation.

What is the information required to open a holding company in Korea?

The data required for applying to set up a holding company in Korea are:

• the nature of the foreign legal entity which will be set up;
• the name of the individual who intends to subscribe for the shares (in case of the change into a holding company, the name of the legal entity and its shareholders);
• the amounts of the subscription and the subscription ratio (in case of the change into a holding company – the shareholding ratio, the shareholding ratios of the shareholders of the legal entity);
• the nature of the activities in which the subscribers of the shares are involved (in case of the change into a holding company, the nature of the activities the legal entity is changed into);
• other information: our Korean company formation agents can provide more details on them.

Are there specific procedures for foreign investors?

Yes, in this case, you must first obtain a Certificate from the Korean Trade Investment Promotion Agency. For this purpose, you need to deposit minimum KRW 100 million (approx. USD 68,000) in a Foreign Exchange Bank.

How do I make the capital transfer from the temporary account?

Once you have registered the holding company, you must open a corporate bank account, which will also be the permanent one. After that, you can transfer the money from one account to the other and then close the temporary one.

What are the main features of general and financial holdings in Korea?

With regard to the regulations that they have to obey, general holding companies in Korea and financial holding companies in this country do have certain common characteristics.

Firstly, they are not allowed to simultaneously own financial and non-financial subsidiaries (general holding companies cannot control financial companies and subsidiaries, while financial holding companies cannot own non-financial entities and subsidiaries).

How long does it take to register a holding company in Korea?

You can expect the registration procedure to take about a month, including the Foreign Investment Certificate issuance period. The actual incorporation phase of the legal entity takes about one week in South Korea.

Do I need any special licenses to operate a holding company in Korea?

Given the fact that the main role of a holding company is to manage and control assets in its subsidiaries, you do not need to apply for any other permits. Any additional licensing requirements will fall onto the subsidiaries, which are treated as independent businesses; therefore, they will respect specific legislation applicable to them only.

Why should I open a holding company in Korea?

There are several world-renowned holding companies headquartered in South Korea, with major investments in telecom and automotive. So, a good reason to start such an enterprise here is the tradition the country has in offering a stable environment for such businesses. Another reason is related to the tax benefits holdings have: if the holding or a subsidiary loses money, they can use profits to help the business in need by redirecting funds. This also leads to less taxes paid by the holding in the form of reinvested profits.

If you need to know more about Korean holding companies, or for assistance in starting a business in Korea, we kindly invite you to contact our friendly staff. We can also help you if you need to open a company in other countries, such as Seychelles, through our local partners.