How to Manage Director Changes and Triumph in South Korea: What You Need to Know for the Best Results

When making changes to the board of directors in South Korea, companies must navigate intricate legal requirements and governance procedures. Understanding the specific steps involved ensures a smooth transition while avoiding unnecessary complications.

Who Can Be Appointed as a Director in South Korea?

South Korea allows both Korean nationals and foreign nationals to be appointed as directors without requiring residency. This flexibility makes it an attractive jurisdiction for international investors. However, documentation requirements are strict: foreign directors must provide notarized and apostilled proof of address, while Korean nationals need government-issued identification with their current residential address.

What Legal Steps Are Required for a Director Change?

The governance structure of your company determines the process. For entities with a board of directors, decisions about director changes typically require multiple resolutions. Representative Directors, with significant powers, must be appointed following clear guidelines in the Korean Commercial Act.

The process often involves:

• Board of Directors Meeting: To propose the director change and convene a shareholders’ meeting.
• General Shareholders’ Meeting: Where the resolution is formally approved.
• Second Board of Directors Meeting: If required, to appoint a Representative Director.

Notarization and filing are essential steps. Meeting minutes and resolutions must be notarized, and the changes must be filed with the Commercial Registry.

What Happens If Filing Is Late?

Although late filings are generally accepted, administrative fines may apply. These penalties emphasize the importance of timely submission.

What Are the Responsibilities of Outgoing and Incoming Directors?

Outgoing directors retain responsibility for actions taken during their tenure. They must complete a proper handover, including transferring company property and updating records. If the board falls below the legal minimum of directors, the outgoing director must continue their duties until a replacement is appointed.

Incoming directors assume fiduciary and statutory responsibilities, including overseeing compliance with corporate governance standards and supervising the company’s operations. For large companies, they must also ensure the establishment of internal controls.

Do Director Changes Affect Ultimate Beneficial Ownership (UBO) Disclosure?

If the new director qualifies as a UBO—holding 25% or more ownership or exercising significant control—UBO records must be updated within the same 14-day period as the director change filing. Failure to update UBO information can lead to regulatory scrutiny and financial penalties.

Do Internal Governance Documents Need to Be Updated?

Director changes may impact the company’s Articles of Incorporation. For example, if the appointment alters the board’s composition, term lengths, or responsibilities, the articles must be amended to reflect the changes.

How Can Companies Ensure Compliance?

Thorough preparation is key. Assemble all required documents, including:

• Notarized resignation and acceptance letters.
• Board and shareholder meeting minutes.
• Supporting identification documents for both outgoing and incoming directors.

By following legal procedures meticulously and ensuring accurate filings, companies can seamlessly navigate the complexities of director changes in South Korea while maintaining compliance.

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For more insights into processes in other jurisdictions, explore our article, Mastering Due Diligence: Key Steps You Need To Secure Investments.