Series Order
Part 1 | When a Company Fails to Pay for a Transaction
Part 2 | Continued Use of a Business Name and the Transferee’s Liability
Part 3 | A Company Director’s Liability for Damages
Part 4 | The Person Hiding Behind a Company
Part 5 | What to Consider After Being Assaulted
Part 6 | What Is an Appropriate Criminal Settlement Amount?
Part 7 | If You Cannot Remember What Happened After Drinking, Could It Constitute Quasi-Rape?
Part 8 | Freelancers and Severance Pay
Part 9 | What to Consider When Assigning a Claim to Secure Business Financing
Part 10 | Can You Divorce a Foreign Spouse Who Has Disappeared?
Part 11 | Can a Tenant Terminate a Lease If the Landlord Delays Repairs?
Part 12 | Can a Subcontractor Receive Payment If the Main Contractor Disappears?
Part 13 | What to Know Before Your First Police Interview
Part 14 | Can a Buyer Recover a Deposit Before Receiving Approval for a Contract in a Land Transaction Permit Zone?
Part 15 | Is Entering Another Person’s Home While Concealing a Criminal Purpose Trespassing?
Part 16 | Impersonating Another Person on Instagram Can Lead to Criminal Punishment
Part 17 | When Does Indecent Assault Occur?
Part 18 | When Repairs Are Required After a Water Leak, Can the Tenant Decide How the Work Is Done?
Part 19 | How Far Does a Real Estate Agent’s Duty to Explain Extend?
Part 20 | Does Swearing in a Residential Area Constitute Criminal Insult?
Part 21 | Can Damages Be Claimed for Incorrect Tax Advice Without a Formal Engagement Agreement?
Part 22 | Can Families Claim Damages for the Exhumation of an Ancestral Grave?
Part 23 | How Far Does Individual Liability Extend in Cambodia-Based Scam Rings?
Part 24 | When Does Filming Sexual Activity Between Partners Constitute a Crime?
Part 25 | Childcare Corporation Assets Can Now Pass to a Designated Recipient After Dissolution
By Hong Seung-kwon, Principal Attorney, PAN Law Office (skh@law-pan.com)
Once a social welfare corporation is established, property contributed by its founder no longer remains the founder’s personal property. When such a corporation is dissolved, its remaining assets must generally revert to the national or local government in accordance with its articles of incorporation. Article 27 of the Social Welfare Services Act establishes this principle. Even if a founder contributed personal land and buildings decades ago to establish a social welfare corporation and operate a childcare center, dissolution did not allow the founder to reclaim those assets.
A significant exception took effect on May 12, 2026, for certain social welfare corporations operating childcare centers. The newly enacted Article 43-3 of the Infant Care Act allows a qualifying corporation to transfer its residual assets to a designated recipient instead of having them revert to the national or local government upon dissolution. The amendment reflects the sharp decline in the number of young children caused by Korea’s low birth rate and the resulting financial difficulties facing childcare centers. It is intended to ease a problem that prevented corporations from dissolving even when continued operation had become effectively impossible because all their assets would otherwise revert to the government.
A particularly important issue is the range of people who may receive the residual assets. When applying for authorization to dissolve, the corporation must submit a residual asset disposition plan identifying the intended recipient and explaining the reason for the transfer. The “person designated in the residual asset disposition plan” may be the original contributor, a relative or even an unrelated third party. The assets do not have to be returned solely to the person who originally contributed them.
The property subject to transfer is limited to the residual assets remaining after liquidation, rather than all assets held by the corporation. During liquidation, the corporation must first repay all its debts. If any property was acquired with subsidies from the national or local government, the corporation must return the required subsidy amount after accounting for depreciation in accordance with applicable laws. Only the property remaining after the debts and subsidy obligations have been settled may be transferred to the designated recipient.
Separate tax obligations may arise during the transfer. Depending on the recipient and the nature of the property, the transfer may trigger gift tax, capital gains tax or acquisition tax. The parties must therefore review the applicable tax laws and complete the required filings and payments.
Not every childcare center operator may use this special provision. The operator must be a social welfare corporation established under the Social Welfare Services Act, and its stated purpose in the articles of incorporation must be limited to the establishment and operation of childcare centers. A corporation that operates a childcare center alongside a senior welfare facility or another type of social welfare facility is generally excluded.
The childcare center operated by the corporation must also meet one of the legally prescribed conditions indicating operational difficulty. Article 37-2 of the Enforcement Rule of the Infant Care Act applies when the childcare center has already closed or suspended operations, when its average monthly enrollment rate remained below 20% during the 24 months immediately preceding the application for dissolution, or when the competent mayor or provincial governor publicly recognizes comparable circumstances that make it difficult to continue the corporation’s stated purpose.
This special provision is temporary. The addendum to the Infant Care Act limits the application of Article 43-3 to seven years from its effective date, meaning that the provision is currently scheduled to remain in force until May 11, 2033. A social welfare corporation established long ago with privately contributed assets and now struggling with declining enrollment should therefore consider whether it qualifies for the dissolution exception. That assessment should cover its articles of incorporation, the assets originally contributed, its subsidy history, enrollment rates over the preceding 24 months, existing claims and liabilities, and potential tax obligations.
About the Author
Hong Seung-kwon is the principal attorney of PAN Law Office. His practice covers civil and criminal litigation as well as emerging legal issues in the digital era. He continues to examine how technological innovation, property rights and changes in regulatory policy affect law and market order.
