Act On The Establishment And Operation Of Public Interest Corporations


Published: 2014-01-07

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 Article 1 (Purpose)   print
The purposes of this Act are to enable legal persons to maintain their public interests and to continue their sound activities by supplementing the provisions of the Civil Act as to the establishment and operation, etc. of legal persons.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 2 (Scope of Application)   print
This Act shall apply to legal persons, either as incorporated foundations or incorporated associations, with the purpose of conducting activities concerning aid or payment of school expenses, scholarships or research expenses, sciences and charities in order to contribute to the general interest of society (hereinafter referred to as "public-service corporation").
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 3 (Standing Rules to Articles of Association, etc.)   print
(1) The articles of association of a public-service corporation shall contain the following matters:
1. Objectives;
2. Name;
3. Location of its office;
4. Types, condition, and appraised value of its assets at the time of incorporation;
5. Matters concerning the methods of administration of assets and accounts;
6. Matters concerning the number, terms of office and appointment and dismissal of directors and auditors;
7. Matters concerning the exercise of voting rights and representation of directors;
8. Matters concerning the amendment of the articles of association;
9. Matters concerning public notices and the method thereof;
10. Where the period of existence and cause of dissolution have been determined, the period, cause and method of disposal of the residual property;
11. Matters concerning the inspection of business and auditing.
(2) Matters to be included in the articles of association in accordance with paragraph (1) and other necessary matters shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 4 (Standards for Permission of Incorporation)   print
(1) When the competent administrative agency has received an application for incorporation of a public-service corporation pursuant to Article 32 of the Civil Act, it shall permit incorporation thereof only when it is recognized through investigation of the relevant facts that an incorporated foundation can perform its intended business smoothly with earnings accruing from the property contributed and an incorporated association can perform its intended business smoothly with earnings accruing from the financial resources created with membership fees, donations or such (hereinafter referred to as "basic property", respectively).
(2) When the competent administrative agency approves incorporation of a public-service corporation, it may attach conditions, such as matters concerning collection of membership fees, stakeholders to be considered and other necessary conditions, as prescribed by Presidential Decree.
(3) When a public-service corporation intends to run a profitable business to achieve its purpose, it shall obtain approval of the competent administrative agency for every business, as prescribed by the articles of association. The same shall also apply to any amendment thereto.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 5 (Executives)   print
(1) A public-service corporation shall have five to fifteen directors and two auditors, and it may increase or decrease such numbers with approval of the competent administrative agency.
(2) Executives shall take office with approval of the competent administrative agency.
(3) The term of office of directors and auditors shall be prescribed by the articles of association, and the term of office of a director shall not exceed four years and that of an auditor shall not exceed two years: Provided, That reappointment is permitted.
(4) The majority of directors shall be nationals of the Republic of Korea.
(5) In relation to the composition of the board of directors, the number of directors who have special relations prescribed by Presidential Decree shall not exceed 1/5 of the incumbent directors.
(6) None of the following persons shall become an executive of a public-service corporation:
1. A minor;
2. An incompetent or quasi-incompetent;
3. A person who was declared bankrupt, but has not yet been reinstated;
4. A person in whose case three years have not passed since his/her imprisonment without labor or heavier punishment was completely executed or exempted;
5. A person in whose case two years have not passed since approval for his/her assumption of office as executive was cancelled pursuant to Article 14 (2).
(7) In cases of any vacancy in office of a director or auditor, the vacancy shall be filled within two months.
(8) Auditors shall not be persons who have special relations under paragraph (5) with directors, and the competent administrative agency may recommend one auditor thereof, from among those who have knowledge and experience in law or accounting, as prescribed by Presidential Decree.
(9) A public-service corporation shall determine the number of standing executives and employees with approval of the competent administrative agency and remunerate them.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 6 (Board of Directors)   print
(1) Each public-service corporation shall have a board of directors.
(2) A board of directors shall be comprised of directors.
(3) A chief director shall be elected by a mutual vote, from among directors in accordance with the articles of association.
(4) A chief director shall convene meetings of the board of directors and become the chairperson thereof.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 7 (Functions of Board of Directors)   print
(1) A board of directors shall deliberate and decide upon the following matters:
1. Matters concerning the budget, settlement of accounts, loans and acquisition, disposal and management of the property of a public-service corporation;
2. Matters concerning amendments to the articles of association;
3. Matters concerning dissolution of a public-service corporation;
4. Matters concerning appointment and dismissal of executives;
5. Matters concerning profitable business;
6. Other matters within its authority pursuant to Acts and subordinate statutes or the articles of association.
(2) Where an interest of a chief director or a director is in conflict with that of the relevant public-service corporation, he/she shall not participate in any decision on the matter concerned.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 8 (Convocation of Meetings of Board of Directors)   print
(1) The chief director may convene meetings of the board of directors whenever he/she recognizes that it is necessary to do so.
(2) The chief director shall, when a request for any of the following convocations is made, convoke a meeting of the board of directors within 20 days from the date of such request for convocation:
1. When a majority of the directors on the register request the convocation with the purpose of the meeting;
2. When an auditor requests the convocation pursuant to Article 10 (1) 5.
(3) When the chief director convokes a meeting of the board of directors, he/she shall advise every director of the specific purpose of the meeting seven days before the meeting at the latest: Provided, That this shall not apply where all the directors gather and request convocation of meetings of the board of directors.
(4) When a meeting of the board of directors should be convoked, where convocation of the meeting of the board of directors is impossible for not less than seven days due to the vacancy of a person who has the right to convoke the meeting or his/her evasion of convocation of the meeting, the meeting may be convoked with the consent of a majority of the directors on the register with approval of the supervisory authorities. In such cases, a director prescribed by the articles of association shall preside over the meeting of the board of directors.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 9 (Quorum for Resolutions, etc.)   print
(1) Proceedings of the board of directors shall, unless specifically prescribed in the articles of association, be resolved with the consent of a majority of the directors on the register.
(2) Each director has an equal right to vote on a resolution.
(3) Proceedings of the board of directors shall not be resolved in writing.
(4) For a resolution of the board of directors, directors who are nationals of the Republic of Korea shall constitute a majority of the directors present at the meeting.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 10 (Duties of Auditors)   print
(1) An auditor shall perform the following duties:
1. To audit affairs and the property of a public-service corporation, request directors to present data or opinions necessary for auditing, and speak at meetings of the board of directors;
2. To sign and seal the minutes of a meeting of the board of directors;
3. To state his/her opinion to the directors on affairs and the property of a public-service corporation;
4. To report any unlawful or improper matters to the board of directors, where he/she has discovered any unlawful or improper matters as a result of his/her auditing of affairs and the property of a public-service corporation;
5. To demand convocation of meetings of the board of directors, if necessary to make a report referred to in subparagraph 4.
(2) An auditor shall, where he/she has discovered any unlawful or improper matter as a result of his/her auditing of affairs and the property of a public-service corporation, report it to the competent administrative agency without delay.
(3) If a director is apt to cause notable damage to a public-service corporation because he/she engages in acts beyond the scope of the purposes of a public-service corporation or otherwise violates this Act or orders under this Act, or the articles of association, an auditor may apply to a court for the suspension of performance of duties of the director.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 11 (Property)   print
(1) The property of a public-service corporation shall be classified as basic property and ordinary property, as prescribed by Presidential Decree.
(2) The inventory and appraised value of basic property shall be stated in the articles of association, and if there is a change in the appraised value thereof, a public-service corporation shall undergo formalities for amendment to the articles of association without delay.
(3) If a public-service corporation intends to sell, donate, lease or exchange its basic property, or change the use thereof, or furnish it as security, or obtain more than a specific amount of money prescribed by Presidential Decree on long-term loan, it shall obtain permission from the competent administrative agency: Provided, That such public-service corporation’s declaration of such intention issued to the competent administrative agency shall substitute such permission from the competent administrative agency in cases prescribed by Presidential Decree, including where any conscientious public service corporation prescribed in Article 16 (2) of the Inheritance Tax and Gift Tax Act intends to sell or exchange its basic property, or change the use thereof for the purpose of achieving an increase in the basic property value by not exceeding 20 percent thereof. <Amended by Act No. 10428, Mar. 7, 2011>
(4) A public-service corporation shall manage its property with the full supervision of a bona fide manager to perform its intended business.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 12 (Budget and Settlement of Accounts)   print
(1) The fiscal year of a public-service corporation shall coincide with that of the Government.
(2) A public-service corporation shall submit a business plan and budget to be executed in the following year before the beginning of each fiscal year, and report the actual performance of business and settlement of accounts after the end of each fiscal year to the competent administrative agency, as prescribed by Presidential Decree. In such cases, the competent administrative agency may have a public-service corporation attach an audit certificate of a certified public accountant to a report upon closing accounts, as prescribed by Presidential Decree.
(3) A public-service corporation shall transfer any surplus from closing accounts to the basic property or carry it forward to the following year to use it for the intended business.
(4) Matters concerning the management of property, compilation of budgets, accounts or such of a public-service corporation shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 13 (Reversion of Residual Property)   print
(1) Any residual property of a public-service corporation, which has been dissolved, shall revert to the State or a local government, as prescribed by the articles of association.
(2) Residual property reverted to the State or a local government pursuant to paragraph (1) shall be used for public services, or shall be donated or loaned, without compensation, to another public-service corporation with a similar objective.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 14 (Supervision)   print
(1) The competent administrative agency shall supervise businesses of public-service corporations.
(2) In any of the following cases, the competent administrative agency may cancel its approval for the assumption of office of a director where he/she has failed to comply with its request to correct the reason even one month after the date of such request:
1. Where he/she has violated this Act or the articles of association;
2. Where he/she has caused the apprehension that the purpose of incorporation of the relevant public-service corporation may not be achieved due to disputes among executives, accounting irregularities, undue loss of property, notably unfair practices or such;
3. Where he/she has performed or intended to perform business other than the intended business.
(3) If it is deemed that a reason falls under any of the following in a public-service corporation running a profitable business, the competent administrative agency may order the public-service corporation to correct or suspend its business:
1. When it uses its earnings for a use other than its intended business;
2. When the continuation of the relevant business is deemed to run counter to the purpose of the public-service corporation.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 15 (Reduction and Exemption of Taxes)   print
Inheritance tax, donation tax, income tax, corporation tax, and local tax imposed on the property donated or contributed to a public-service corporation may be reduced or exempted, as prescribed by the Restriction of Special Taxation Act.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 16 (Cancellation of Permission for Establishment)   print
(1) When it is deemed that a reason falls under any of the following in a public-service corporation, the competent administrative agency which has permitted establishment of a public-service corporation may cancel its permission for the establishment thereof: Provided, That where the intended businesses of the public-service corporation are two or more, the same shall also apply when the relevant reason falls within part of its intended businesses:
1. When it has obtained permission for its establishment by deceit or other unjust means;
2. When it has violated any condition of such permission;
3. When it has become impossible to achieve its purposes;
4. When it has run a business other than its intended business;
5. When it has violated this Act, any order pursuant to this Act or the articles of association;
6. When it has done any acts prejudicial to the public good;
7. When it has failed to commence its intended business within six months from the date of permission for its establishment without any justifiable reason, or it has failed to attain actual results of business for one year or more.
(2) Cancellation of permission for establishment of a public-service corporation pursuant to paragraph (1) shall be made only when the purpose of supervision cannot be achieved otherwise or when a public-service corporation has failed to comply with the order, even though one year has passed after the competent administrative agency gave an order for correction.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 16-2 (Hearings)   print
Where the competent administrative agency intends to cancel permission for establishment of a public-service corporation pursuant to Article 16, it shall hold a hearing.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 17 (Audit, etc.)   print
(1) The competent administrative agency shall, if necessary for supervision, order a public-service corporation to submit its business report, or may audit the business, property management and accounts for their propriety and guidance so that it may smoothly perform its intended business.
(2) The competent administrative agency may, if necessary for the efficient supervision of a public-service corporation, have a certified public accountant or other related specialized institutions audit it pursuant to paragraph (1), as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 18 (Delegation of Authority)   print
The competent administrative agency may delegate a part of its authority provided for in this Act to a subordinate administrative agency or a local government, as prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 19 (Penal Provisions)   print
(1) If a public-service corporation violates Article 4 (3), 11 (3) or 12 (3), it shall be punished by imprisonment with labor for not more than three years or by a fine not exceeding thirty million won. <Amended by Act No. 12185, Jan. 7, 2014>
(2) If a public-service corporation falls under any of the following, it shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding ten million won: <Amended by Act No. 12185, Jan. 7, 2014>
1. Where it has violated the order pursuant to Article 14 (3);
2. Where it has violated Article 12 (2) or has made a false report;
3. Where it has refused or evaded an audit pursuant to Article 17;
4. Where an auditor has refused to perform his/her duties or has neglected his/her duties without any justifiable reason.
(3) Where a director or an auditor commits crimes referred to in paragraphs (1) and (2), not only shall the offender be punished, but the public-service corporation shall also be punished by fines referred to in paragraphs (1) and (2): Provided, That this shall not apply to cases where the public-service corporation has not neglected to pay due attention to and to supervise the relevant business in order to prevent such offenses, and to acts of an auditor recommended by the competent administrative agency.
[This Article Wholly Amended by Act No. 8895, Mar. 14, 2008]
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 Article 20 Deleted. <by Act No. 8895, Mar. 14, 2008>   print
ADDENDA
(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.
(2) (Transitional Measures concerning Existing Public-Service Corporation) Any public-service corporation established with permission of the competent administrative authority at the time when this Act enters into force shall be deemed to have been established pursuant to this Act.
(3) (Idem) Any public-service corporation referred to in paragraph (2) of the Addenda above shall take necessary measures as provided for by this Act, and apply for permission of amendment to the articles of association within six months.
(4) (Idem) When the competent administrative authority permits amendment to the articles of association under paragraph (3) of the Addenda above, it may provide for conditions pursuant to Article 4 (2).
ADDENDA <Act No. 4932, Jan. 5, 1995>
(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.
(2) (Transitional Measures concerning Directors) When the competent administrative authority approves assumption of offices of the directors of the public-service corporation, in which the number of present directors having a special relationship pursuant to the amended provision of Article 5 (5) exceeds one fifth of the total directors after this Act enters into force, it may only approve assumption of office of the directors not in such special relationship until the requirements of the amended provision of Article 5 (5) are fulfilled.
ADDENDA <Act No. 5453, Dec. 13, 1997>
Article 1 (Enforcement Date)
This Act shall enter into force on January 1, 1998. (Proviso Omitted.)
Article 2 Omitted.
ADDENDUM <Act No. 7228, Oct. 16, 2004>
This Act shall enter into force on the date of its promulgation.
ADDENDA <Act No. 7428, Mar. 31, 2005>
Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation.
Articles 2 through 6 Omitted.
ADDENDUM <Act No. 8895, Mar. 14, 2008>
This Act shall enter into force on the date of its promulgation.
ADDENDUM <Act No. 10428, Mar. 7, 2011>
This Act shall enter into force six months after the date of its promulgation.
ADDENDUM <Act No. 12185, Jan. 7, 2014>
This Act shall enter into force on the date of its promulgation.