Commercial Act of South Korea/PART I GENERAL PROVISIONS

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Commercial Act
PART I GENERAL PROVISIONS

CHAPTER I COMMON PROVISIONS[edit]

Article 1 (Applicable Rules to Commercial Matters) 
When there is no provision in this Act as to a commercial matter, the commercial customary law shall apply; and if there is no such law, the provisions of the Civil Act shall apply.
Article 2 (Commercial Activities by Public Juristic Persons) 
Except as otherwise provided by any Acts and subordinate statutes, this Act shall apply to commercial activities effected by a public juristic person.
Article 3 (Unilateral Commercial Activities) 
If an act of a party among the relevant parties is considered as a commercial activity, this Act shall apply to all the parties involved.

CHAPTER II MERCHANTS[edit]

Article 4 (Merchant-by Nature of Business) 
A person who engages in commercial activities in his own name is called a merchant.
Article 5 (Merchant-by Legal Construction) 
(1) A person who engages in a business in a merchant's way maintaining a shop or similar equipment shall be deemed to be a merchant, even if he does not engage in commercial activities.
(2) The provisions of paragraph (1) shall also be applicable to a company even if it does not engage in commercial activities.
Article 6 (Business of Incompetent Person and Registration thereof) 
When a minor or a quasi-incompetent person engages in any business upon the permission of his legal representative, registration thereof shall be effected.
Article 7 (Incompetent Person and Member with Unlimited Liability)
When a minor or quasi-incompetent person has become a member with unlimited liability of a company upon the permission of his legal representative, he shall be deemed to be a person with full capacity in respect of any act done in the capacity of such member.
Article 8 (Representation of Business by Legal Representative) 
(1) If a legal representative engages in any business on behalf of a minor, quasiincompetent or incompetent person, registration thereof shall be effected.
(2) Any restriction upon the authority of legal representative shall not be effective against a third person acting in good faith.
Article 9 (Petty Merchants) 
The provisions relating to manager, trade names, trade books, and commercial registrations shall not apply to petty merchants.

CHAPTER III TRADE EMPLOYEES[edit]

Article 10 (Appointment of Manager) 
A merchant may appoint a manager and have him carry out business either at the principal office or at a branch office.
Article 11 (Agency Authority of Manager) 
(1) A manager may perform all judicial and extra-judicial acts relating to his business on behalf of the proprietor of the business.
(2) A manager may appoint and dismiss shop clerk and other employees who are not managers.
(3) Any restriction upon the authority of a manager shall not be effective against a third person acting in good faith.
Article 12 (Co-manager) 
(1) A merchant may cause several managers to exercise the agency of authority on a joint basis.
(2) In the case mentioned in the preceding paragraph, any declaration of intention made to any one of the managers shall be effective as to the proprietor of the business.
Article 13 (Registration of Manager) 
The appointment of a manager and the extinguishment of his agency of authority shall be registered by the merchant at the place either of the principal office or of the branch office for which he has been appointed. The same shall apply to matters as provided for in paragraph (1) of the preceding Article, and to any alteration thereof.
Article 14 (Apparent Manager) 
(1) An employee who has been given a title of a head of business of the principal office or of a branch office or such other person as has similar title shall be deemed to have the same authority as that of a manager of the principal office or of a branch office. This shall not, however, apply in respect of judicial acts.
(2) The provisions of the preceding paragraph shall not apply in cases where the other party has acted in bad faith.
Article 15 (Employee Invested with Partial Comprehensive Agency Authority) 
(1) An employee who has been entrusted with certain branches of business or specified matters relating to business may effect all acts other than judicial acts.
(2) The provisions of Article 11 (3) shall apply mutatis mutandis to the case mentioned in the preceding paragraph.
Article 16 (Employee of Shop which Sells Goods) 
(1) An employee of a shop which sells goods shall be deemed to have all the power in regard to the sale of goods.
(2) The provisions of Article 14 (2) shall apply mutatis mutandis to the case mentioned in the preceding paragraph.
Article 17 (Duties of Trade Employee) 
(1) Without the allowance of the proprietor of the business, a trade employee shall neither effect any transaction falling within the class of the proprietor's business on his account or on that of a third person nor shall he become a member with unlimited liability, nor a director of a company, nor a employee of another merchant.
(2) In the case that a trade employee has effected a transaction in contravention of the provisions of the preceding paragraph, and such transaction has been effected on his account, the proprietor of the business may regard such a transaction as effected on his own account, and if it has been effected for the account of a third person, the proprietor may request the employee to transfer the profit accrued from such transaction to himself.
(3) The provisions of the preceding paragraph shall not affect the termination of a contract by the proprietor against an employee or the proprietor's claims for damages against a trade employee.
(4) The right mentioned in paragraph (2) shall become extinct after two weeks from the time when the proprietor has become aware of such transaction or after one year has elapsed from the time when the transaction has been effected.

CHAPTER IV TRADE NAMES[edit]

Article 18 (Free Choice of Trade Name) 
A merchant may use his full name or any other denomination as his trade name.
Article 19 (Trade Name of Company) 
The word "partnership company", "limited partnership company", "stock company" or "limited liability company" shall be contained in the trade name of a company according to its nature.
Article 20 (Ban on Illegal Use of Trade Name of Company) 
No person other than a company may use, in the trade name, any word which is suggestive of a company. This shall apply even in cases where the business of a company has been acquired by transfer.
Article 21 (Unitary Trade Name) 
(1) A single trade name shall be used in the same business.
(2) A trade name of a branch office shall expressly show its dependent relationship to the principal office.
Article 22 (Effect of Registration of Trade Name) 
No trade name which has been registered by another person shall be registered as a trade name of the same kind of business in the same Seoul Special Metropolitan City, Metropolitan City, and Shi/Kun. <Amended by Act No. 3724, Apr. 10, 1984; Act No. 4796, Dec. 22, 1994; Act No. 5053, Dec. 29, 1995>
Article 22-2 (Provisional Registration of Trade Name) 
(1) If any person intends to establish a stock or limited liability company, he may apply for a provisional registration of the trade name to the registry having the jurisdiction over the place of its principal office.
(2) If a company intends to change either or both of its trade name or/and purpose, it may apply for a provisional registration of its trade name to the registry having the jurisdiction over the place of its principal office.
(3) If a company intends to move its principal office, it may apply for a provisional registration of its trade name to the registry having the jurisdiction over the place to which it is to move.
(4) In application of Article 22, the provisional registration of the trade name shall be deemed to be as registration of the trade name.
(5) In making a provisional registration of the trade name, the period up to the time the real registration is made, deposit and recovery of the deposit money, cancellation of the provisional registration, and other necessary procedures shall be determined by the Supreme Court Regulations.
[This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]
Article 23 (Prohibition of Use of Trade Name which is likely to Misconceive Ownership of Business) 
(1) No person shall, for unfair purpose, use any trade name which is likely to induce others to believe that it represents the business of another person.
(2) In a case where a person has used such a misrepresenting trade name in contravention of the provisions of paragraph (1), any person whose interest is likely to be thereby harmed or any person who has registered his trade name may demand cessation of its use.
(3) The provisions of paragraph (2) shall not prejudice any claim for damages.
(4) Any person who uses the registered trade name of another person in the same Seoul Special Metropolitan City, Metropolitan City, and Shi/Kun, in respect of the same kind of business shall be presumed to have done so for unfair purpose. <Amended by Act No. 3724, Apr. 10, 1984; Act No. 4796, Dec. 22, 1994; Act No. 5053, Dec. 29, 1995>
Article 24 (Liability of Person who has Lent His Name) 
A person, who has allowed another person to carry on business using his name or trade name, shall be liable jointly and severally with such other person to effect performance in respect of any obligation arising from a transaction in favor of a third person who has effected such transaction in the belief that such other person was the proprietor of the business.
Article 25 (Transfer of Trade Name) 
(1) A trade name may be transferred only in cases where business is discontinued or it is transferred together with the business.
(2) Transfer of a trade name shall not be effective as to third persons unless it has been registered.
Article 26 (Effect of Failure to Use Trade Name) 
If a person who has registered his trade name has failed to use it for a period of two years without any justifiable reason, he shall be deemed to have abolished trade name.
Article 27 (Application for Cancellation of Registration of Trade Name) 
If a trade name has been altered or abolished, and the person who has registered such trade name has failed to register such alteration or abolition within two weeks, any person interested may apply to the court for the cancellation of such registration.
Article 28 (Penalties for Illegal Use of Trade Name) 
Any person who has violated Articles 20 and 23 (1) shall be punished for a fine for negligence not exceeding two million won. <Amended by Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995>
Article 29 (Kinds of and Principles to make Trade Books) 
(1) In order to make clear the situation of property, profit and loss in the business, the merchant shall prepare an account book and balance sheet.
(2) Except as otherwise provided by this Act, the trade books shall be made in accordance with the generally fair and proper accounting practices.
[This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]
Article 30 (Method to Make Trade Books) 
(1) In an account book, there shall be entered transactions and other particulars having effect on property in business.
(2) A merchant shall, at the time of commencement of his business and thereafter at a fixed time, at least once a year, prepare a balance sheet based on the account books and those who prepared it should write his name and affix his seal or sign thereon, and a company shall prepare such a balance sheet in the same manner as a merchant at the time of its formation and at the end of each period for the settlement of accounts. <Amended by Act No. 5053, Dec. 29, 1995>
[This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]
Article 31 (Principles for Valuation of Assets) 
Assets to be entered in an account book shall be valued as follows:
1.The current assets shall be valued on the basis of the acquisition cost, manufacturing cost or current price: Provided, That if the current price is remarkably lower than the acquisition cost or manufacturing cost, the valuation shall be made according to the current price; and
2.The fixed assets shall be valued on the basis of the acquisition cost or manufacturing cost, less a reasonable depreciation, but when any unexpected diminution has occurred, a reasonable reduction shall be made.
[This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


Article 32 (Production of Trade Books) 
The court may, on application or by its own initiative, order a party to an action to produce his trade books or any part thereof.
Article 33 (Preservation of Trade Books, etc.) 
(1) Every merchant shall preserve his trade books, and all important documents relating to his business, for a period of ten years: Provided, That the slips or similar documents shall be kept for five years. <Amended by Act No. 5053, Dec. 29, 1995>
(2) The period mentioned in the preceding paragraph shall be computed in the case of trade books as from the time at which the book has been closed.
(3) The books and documents as referred to in paragraph (1) may be preserved by means of the microfilms and other data processing systems. <Newly Inserted by Act No. 5053, Dec. 29, 1995>
(4) In case where the books and documents are preserved under paragraph (3), the method of preservation and other necessary matters shall be determined by the Presidential Decree. <Newly Inserted by Act No. 5053, Dec. 29, 1995>

CHAPTER V TRADE BOOKS[edit]

CHAPTER VI COMMERCIAL REGISTRATION[edit]

CHAPTER VII TRANSFER OF BUSINESS[edit]