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Untitled Document

THE LAW OF THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA ON EQUITY JOINT VENTURE

Adopted by Resolution No. 10 of the Standing Committee of the Supreme People’s Assembly on September 8, 1984,
amended by Resolution No. 44 of the Standing Committee of the Supreme People’s Assembly on January 20, 1994,
amended by Decree No. 484 of the Presidium of the Supreme People’s Assembly on February 26, 1999, and
amended by Decree No. 2315 of the Presidium of the Supreme People’s Assembly on May 17, 2001

Chapter 1. Fundamentals

Article 1. The Law of the Democratic People’s Republic of Korea on Equity Joint Venture shall contribute to expanding and developing economic and technical cooperation and exchange between the DPRK and other countries.
Article 2. Institutions, enterprises or associations of the DPRK are allowed to establish an equity joint-venture enterprise with corporate bodies or individuals of foreign countries. An equity joint-venture enterprise shall be set up in principle in the Rason economic and trade zone. In case of need, it may be established in other parts of the country.
Article 3. Equity joint venture may be effected in science, technology, industry, construction, transport and other fields. The State shall encourage equity joint venture in the introduction of high technology and other state-of-the-art technologies, manufacturing of internationally competitive products, infrastructure construction and scientific research and technological development.
Article 4. Liability of each partner of an equity joint venture to debts and other obligations of the joint venture which may arise during the operation of a joint-venture enterprise shall be limited to the amount of his or her subscription.
Article 5. An equity joint-venture enterprise shall have the ownership of the assets subscribed by its partners and conduct independent business.
Article 6. An equity joint-venture enterprise shall be a corporate body of the DPRK on the day when it is registered at the relevant body. The State shall protect legal rights and interests of equity joint-venture enterprises.
Article 7. Equity joint-venture enterprises in priority projects or those working together with overseas Korean compatriots or those established within a specified area of the DPRK shall enjoy preferential treatments such as reduction or exemption of tax and favourable conditions of land use.
Article 8. An equity joint-venture enterprise shall conduct its business activities in compliance with this law. Any matter which has not been covered by this law shall be subject to the relevant laws and regulations of the DPRK.

Chapter 2. Establishment of an Equity Joint-Venture Enterprise

Article 9. The institutions, enterprises or organizations of the DPRK and foreign investors wishing to run an equity joint venture shall, after consultations with relevant bodies and conclusion of the joint-venture contract, submit to the central trade guidance organ an application for the establishment of an equity joint-venture enterprise, accompanied with the memorandum of the equity joint-venture enterprise, a copy of the contract, feasibility study report and so on. The central trade guidance organ shall, within 50 days after the receipt of the application, decide whether to approve or to reject the application.
Article 10. The registration of an equity joint-venture enterprise shall be made at the People’s Committee of the province (or municipality directly under central authority) where the enterprise is to be located, or of Rason City, within 30 days from the day when the approval is given for its establishment. The date of its registration shall be the inauguration day of the equity joint-venture enterprise. The equity joint-venture enterprise shall, within 20 days after registration, register itself for tax purpose at the financial institution of the seat where it is located.
Article 11. Amounts of subscription by each partner shall be decided through mutual agreement between the partners. A joint-venture partner may subscribe in cash, kind, industrial property right, technical know-how, right to use land and so on. In this case, the prices of the property that has been contributed shall be assessed through mutual agreement between the partners on the basis of international market prices prevailing at that time.
Article 12. A joint venture partner may transfer or transmit its share of contribution to a third party, subject to consent of the other partner and then decision of the board of directors.
Article 13. An equity joint-venture enterprise may, with the consent of the Cabinet, open its branches, agencies or representative offices in the DPRK or in other countries and merge the companies or enterprises of foreign countries.
Article 14. A joint-venture partner shall make his subscription within the specified period of time. Where, for unavoidable reasons, he is unable to make subscription within the specified time limit, he may postpone it with the permission of the body that has approved the establishment of the enterprise.
Article 15. The registered capital of an equity joint-venture enterprise shall be 30 to 70 per cent or more of the total investment, depending on the size of the total investment. In case of increasing the registered capital, the change shall be made of the registration with the consent of the body which has approved its establishment.
The amount of registered capital shall not be reduced.

Chapter 3. Organizational Structure and Management of an Equity Joint-Venture Enterprise

Article 16. An equity joint-venture enterprise shall have the board of directors, which shall be the top decision-making body of the equity joint-venture enterprise.
Article 17. The board of directors shall discuss and decide on the major issues concerning the amendment to the memorandum, measures for the development of the joint-venture enterprise, planning of business activities, settlement of account and distribution, appointment and dismissal of the manager, assistant manager and the auditor.
Article 18. An equity joint-venture enterprise shall have the manager, assistant manager and accountants and may have other necessary management staff members. The manager shall be responsible for his work to the board of directors.
Article 19. An equity joint-venture enterprise may have an auditor. The auditor may inspect the management of the enterprise on a regular basis and shall be responsible for his work to the board of directors.
Article 20. An equity joint-venture enterprise shall be managed according to its memorandum and decisions made by the board of directors.
Article 21. An equity joint-venture enterprise shall start its operation within the specified period of time. Where, for unavoidable reasons, it is impossible to start operation within the specified period of time, it shall apply to the body which has approved its establishment for the approval of the delayed commissioning.
Article 22. An equity joint-venture enterprise shall have a license to conduct business activities. The central trade guidance organ or the Rason City People’s Committee shall authorize the business activities of an equity joint-venture enterprise and issue business license. The day on which the business license is issued shall be the date of starting the operation of the enterprise.
Article 23. An equity joint-venture enterprise may purchase materials needed for its operation or sell its products within the territory of the DPRK. In this case it is required to submit to the relevant body within the specified period the yearly plans to purchase materials and to market its products.
Article 24. An equity joint-venture enterprise may import materials needed for operation or export goods it has produced. In this case approval is needed only for the entry and exit of the import and export goods.
Article 25. An equity joint-venture enterprise shall conduct its business activities within the limit of its categories which it has been allowed to be engaged in. In case of increase in the number or change in categories of business, an approval shall be obtained for this purpose from the relevant organ which has approved the establishment of the equity joint-venture enterprise.
Article 26. An equity joint-venture enterprise shall employ labour from the DPRK. Some management personnel, technicians and skilled workers for special jobs who have been listed in the contract may be employed from foreign countries upon agreement with the central trade guidance organ.
Article 27. An equity joint-venture enterprise shall manage and use its employees in compliance with the labour-related laws and regulations of the DPRK for foreign-invested business.
Article 28. An equity joint-venture enterprise shall open an account with a bank of the DPRK upon agreement with the foreign exchange control body. If necessary, it may open an account with a bank of foreign country upon agreement with the foreign exchange control body.
Article 29. An equity joint-venture enterprise may borrow money needed for its business activities either from a DPRK bank or a bank of a foreign country.
Article 30. An equity joint-venture enterprise shall conduct its accounting as required by the accounting regulations of the DPRK regarding foreign-invested enterprises.
Article 31. An equity joint-venture enterprise which wishes to be insured shall take out the insurance policy of the DPRK.
Article 32. Employees of an equity joint-venture enterprise may organize trade unions. The joint-venture enterprise shall provide conditions for the activities of the union.


Chapter 4. Settlement of Accounts and Distribution by an Equity Joint-Venture Enterprise

Article 33. The financial year of an equity joint-venture enterprise begins on January 1 and ends on December 31 of the calendar year. Settlement of accounts for any financial year shall be completed by the end of February the next year.
Article 34. Accounts of an equity joint-venture enterprise shall be settled in such a way as determining the profit by deducting from the gross revenue the costs of materials, fuel, power, labour and depreciation, and insurance premium, purchase expenses, sales proceeds and other overhead expenses, and calculating the net profit by deducting from the profit the turnover or business tax or other expenses.
Article 35. An equity joint-venture enterprise shall create reserve fund by putting aside 5 per cent of its annual net profit until the reserve fund amounts to 25 per cent of its registered capital. The reserve fund shall be used only for the purpose of compensation for loss or increase of registered capital.
Article 36. An equity joint-venture enterprise shall create necessary funds for production expansion, technological development, bonus for employees, welfare and training. Types, amounts and use of different funds shall be discussed and decided by the board of directors.
Article 37. An equity joint-venture enterprise shall distribute profits after its balance sheets have been audited by the person concerned and approved by the board of directors. The profits shall be distributed to the partners according to the proportion of their contribution, after payment of income tax and deduction of reserve and other necessary funds from them.
Article 38. An equity joint-venture enterprise shall be liable to pay tax. However, income tax may be reduced or exempted for a certain period of time from the first profit-making year.
Article 39. An equity joint-venture enterprise may use its net profit of a year for covering the loss incurred the previous year. In this case, the carrying forward period shall be limited to 4 years.
Article 40. An equity joint-venture enterprise shall submit its financial statements within the specified period of time on a yearly and quarterly basis to the body which has approved its establishment, the financial body, and other relevant bodies.
Article 41. The foreign partner of an equity joint-venture enterprise may reinvest in the territory of the DPRK the whole or part of his profit which has been distributed. In this case, the income tax on the reinvested profit may be wholly or partially refunded from the total amount of income tax which has already been paid.
Article 42. The foreign partner of an equity joint-venture enterprise is allowed to remit abroad profits earned from business and other income, as well as money received after the liquidation of business.

Chapter 5. Dissolution and Settlement of Disputes

Article 43. An equity joint-venture enterprise shall be dissolved when it is unable to continue its operation for such reasons as the termination of the contract, insolvency, default of the contract obligations by either of the partners and natural calamities.
Article 44. An equity joint-venture enterprise may, if there is a reason to do so, decide on the dissolution at the board of directors even before the termination of the contract and dissolve itself with the permission of the body which has approved its establishment or according to a decision made by a court.
Liquidators shall be appointed and liquidation committee be organized by the board of directors if the enterprise is dissolved with the permission of the body which has approved its establishment, or by the court if it is dissolved according to a court decision. The liquidation committee shall settle all transactions and finish liquidation of the enterprise and, within 10 days therefrom, go through formalities needed for the cancellation of its business registration.
Article 45. In case of extension of its operation period, an equity joint-venture enterprise shall decide on it at the board of directors and obtain an approval for extension from the body which has approved its establishment, 6 months before the termination of the original contract. The operation period shall be counted from the day when the enterprise is registered at the People’s Committee of the province (or municipality directly under central authority) or of the Rason City.
Article 46. An equity joint-venture enterprise which has a grievance against an instruction given by an administrative body or an act done by an official of the administrative body may make an appeal to a higher body. The body which has received the appeal shall, within 30 days after its receipt, examine and settle the appeal.
Article 47. Any disagreement regarding an equity joint venture shall be settled through consultation. In case of failure in consultation, it shall be settled through arbitration or legal procedures provided by the DPRK or by an arbitration agency of a third country.


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