During the course of business operations, many companies may face the need to downsize, restructure, or cease operations altogether. In such cases, corporate dissolution is a legal procedure that must be carried out in accordance with applicable regulations in order to avoid future tax, financial, and legal liabilities.

I. Legal basis

• Law on Enterprises 2020
• Law Amending and Supplementing the Law on Enterprises 2025

II. Should a Company Choose Bankruptcy or Dissolution?

The decision between bankruptcy and dissolution primarily depends on the company’s actual financial condition and its ability to fulfill outstanding obligations at the time of termination.

• Choosing Corporate Dissolution: A company should choose dissolution when it is still able to fully settle all debts and financial obligations owed to the government, employees, and other creditors. Dissolution is generally appropriate when the company voluntarily decides to cease operations, restructure its business activities, or no longer wishes to maintain its legal entity status, provided that there are no disputes regarding assets or liabilities.
• Choosing Bankruptcy: A company should choose bankruptcy when it has become insolvent and is no longer capable of paying debts as they become due, or when creditors have formally demanded payment. In such circumstances, bankruptcy proceedings handled by the Court provide a legal framework for debt settlement, protect the rights of all stakeholders, and help minimize legal risks for company managers and owners.

In practice, attempting to dissolve a company that is already insolvent may result in the rejection of the dissolution application, prolonged processing times, and potential legal liabilities. Therefore, businesses should carefully assess their financial status and seek professional legal advice before deciding on the most appropriate course of action.

III. Cases in which an enterprise is dissolved

Pursuant to Article 207 of the 2020 Law on Enterprises (as amended and supplemented by Clause 23, Article 1 of the 2025 Law Amending and Supplementing the Law on Enterprises) as follows:

• Expiration of the operation duration stated in the Company Charter without extension.
• According to the decision of the enterprise owner, company owner, or members/shareholders.
• No longer maintaining the minimum required number of members as prescribed for a continuous period of 06 months without carrying out procedures for converting the type of enterprise.
• Being revoked of the Enterprise Registration Certificate in accordance with the provisions of law.

IV. Conditions for Dissolution

Before proceeding with dissolution, the enterprise must ensure that:

• All debts and financial obligations have been fully settled.
• All tax obligations to the tax authorities have been completed.
• The company is not currently involved in any dispute resolution proceedings at a Court or Arbitration body.

V. Enterprise Dissolution Procedure

• Step 1: Pass a resolution or decision on the dissolution of the enterprise.
• Step 2: Within 07 working days from the date the resolution/decision is adopted, the meeting minutes and dissolution decision must be sent to the Business Registration Authority, tax authority, and employees of the enterprise, and publicly posted at the head office, branches, and representative offices of the enterprise. (If the enterprise still has outstanding financial obligations, a debt settlement plan must also be sent to creditors and relevant parties.)
• Step 3: Carry out procedures to terminate the validity of the tax identification number and complete tax finalization.
• Step 4: Liquidate assets and settle all debts.
• Step 5: Within 05 working days from the date of fully settling all debts, the enterprise shall submit the dissolution dossier to the Business Registration Authority.
• Step 6: Receive confirmation of enterprise dissolution within 05 days after submission of the dossier.

Dissolution in Case of Revocation of the Enterprise Registration Certificate

• Step 1: Receive notification that the enterprise is undergoing dissolution procedures, along with the decision on revocation of the Enterprise Registration Certificate or a court decision on dissolution.
• Step 2: Within 10 days from receipt, the enterprise must hold a meeting to decide on dissolution and publicly post the decision at the head office, branches, and representative offices.
• Step 3: Liquidate assets and settle all debts.
• Step 4: Within 05 working days from the date of fully settling all debts, the enterprise shall submit the dissolution dossier to the Business Registration Authority.
• Step 5: Receive confirmation of enterprise dissolution within 05 days after submission of the dossier.

*Note: Throughout the dissolution process and until the tax code is formally terminated by the competent tax authority, the enterprise remains obligated to submit tax declarations, complete tax finalization procedures, and prepare financial statements through the final reporting period in accordance with applicable regulations.

VI. Recommendations for Enterprises

To ensure the dissolution process is carried out smoothly and in compliance with regulations, enterprises should:

• Review all legal, accounting, and tax documentation.
• Check for any outstanding financial obligations.
• Properly retain and archive all documents before ceasing operations.
• Seek advice from legal and tax professionals to minimize potential risks.

VII. About Us, Hankuk Law Firm

■ Hankuk Law Firm – Introduction

The goal of the legal services provided by HANKUK LAW FIRM is to support businesses, investors, and people. Our organization employs skilled Korean lawyers, partners, and professionals to provide legal services to businesses related to corporations and litigation.

To support the startup process, our lawyers and staff provide a wide range of services, including business law consulting, tax and immigration law consulting, real estate services, business consulting, marketing and communications, human resources, product distribution, franchise options, etc. We provide expert advice on every aspect of your business needs.

To protect the legitimate rights and interests of our clients and achieve the best results, we provide legal advice and participate in civil lawsuits related to business, labor, marriage, family, and inheritance.

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For reliable and effective legal advice, please contact HANKUK LAW FIRM now. We are committed to providing you with the best possible answers and our team of experienced lawyers has extensive knowledge in many legal fields. We are always here to provide the most competent and dedicated support, whether you are dealing with contractual issues, commercial disputes or need guidance on foreign investment. HANKUK LAW FIRM is honored to have assisted hundreds of domestic and international clients in skillfully resolving complex legal issues as their trusted legal partner. Do not let legal issues hinder your success. Let us accompany you towards legal achievement and comfort. For prompt guidance and support to ensure your rights are always maintained at the highest standards, contact HANKUK LAW FIRM now.

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