The factual setting in which close corporations are formed and operated differs substantially from that in which publicly held corporations function. Yet close corporations in Korea are subject to the general corporation law and the securities exchang...
The factual setting in which close corporations are formed and operated differs substantially from that in which publicly held corporations function. Yet close corporations in Korea are subject to the general corporation law and the securities exchange law, statutes designed for publicly held corporations. The issuance of securities, the internal organization, and the day-to-day operation of close corporation are thus subject to rules designed for another game.
This article will propose rules designed expressly for close corporations. The concept of a close corporation law is not new. More than 100 years ago, Germany developed such a law which has been imitated by a number of countries including France and Japan. Great Britain has special statutes governing private companies. There are also a number of American statutes which contain special provisions for close corporations. All of these laws are designed to deal with the same problem : how to permit a small group of businessmen to obtain the benefits of limited liability quickly and at a reasonable cost, thus encouraging small business and facilitating joint ventures by large enterprise without at the same time exposing the public at large to the danger of stock swindles.
The proposed close corporation law set forth in this article is designed to be an integral part of Korea s existing corporation law and the law regulating securities. It presupposes the continued existence of the general corporation law and of the securities exchange law. It is thus important to consider the justification for the continued existence of present statutory provisions, which are complementary to the proposed close corporation law.