[Korean Nonprofit Fundraising & Donations ②] Are Supporting Member Fees Really Donations? — Five Factors Considered by the Korean Supreme Court in Decision 2021Do16765

Hello, I’m Administrative Attorney Jisangjin.

When a nonprofit organization in Korea prepares a new project, one of the first practical questions is how to finance it.

The organization may collect membership fees from members.

It may receive recurring support from existing donors.

It may also ask the general public for donations through its website or social media.

Although all of this money may ultimately enter the same corporate bank account, the payments do not necessarily have the same legal character.

In Part ① of this series on nonprofit fundraising and donations in Korea, I explained why donation collection registration should not begin simply with the question of whether the amount exceeds KRW 10 million.

The analysis should generally follow this order:

Articles of Incorporation → nature of the payment → solicitation activity → fundraising target → registration → collection and use → post-fundraising reporting

This series examines each stage in that sequence.

1. Donations Over KRW 10 Million? Why You Should Check the Articles of Incorporation Before Registration
2. Are Supporting Member Fees Really Donations? — Five Factors Considered by the Korean Supreme Court in Decision 2021Do16765 (This Article)
3. Already Collecting Donations Without Registration? — The KRW 10 Million Threshold and Unregistered Solicitation
4. What If Your Fundraising Campaign Exceeds Its Target? — When Is Amendment Registration Required?
5. Can Donations Be Used for Personnel and Promotional Expenses? — Fundraising Costs and Use Outside the Registered Purpose
6. Fundraising Is Not Over When Collection Ends — Completion Reports, Use Reports, and Audits

In Part ②, we will examine in more detail a question briefly introduced in the first article:

Are payments made by supporting members really membership fees?

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What If 500 Supporting Members Pay KRW 30,000 Every Month?

Suppose a Korean nonprofit has 500 people who each contribute KRW 30,000 every month.

That is KRW 15 million per month.

It becomes KRW 180 million per year.

Over four years, the total reaches KRW 720 million.

The nonprofit refers to all of these people as supporting members.

Its website also contains a "Supporting Member Registration" page.

The organization receives the payments every month through a recurring CMS payment system.

But when the Articles of Incorporation are reviewed, a problem appears.

There is no category called "supporting member" in the Articles of Incorporation.

There is no separate membership admission procedure.

These people are not entered in a membership register.

Can the nonprofit nevertheless describe the entire KRW 720 million received over four years simply as membership fees paid by supporting members?

The answer is no.

The important issue under Korea’s donation law is not the name the organization has chosen to use.

The first question is whether those people actually became members of the organization under its governing documents and actual operations.

The supporting member issue should therefore be reviewed in the following order:

Membership basis in the Articles → actual admission procedure → members’ rights and obligations → fee rules and management → actual operations

Only when these elements are connected does the organization have a stronger basis for distinguishing payments from members from donations received from outside contributors.

This issue reached the Korean Supreme Court in Supreme Court Decision 2021Do16765, decided February 2, 2023.

In that case, payments made by members accounted for approximately 92% of the amount at issue.

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The Law Looks at the Actual Membership Relationship, Not the Label "Supporting Member"

Article 2, Paragraph 2 of Korea’s Act on Collection and Use of Donations and Promotion of Donation Culture generally defines donations as money, goods, or other property acquired without consideration, regardless of the name used.

However, not every payment received by a nonprofit is included in the statutory definition of a donation.

The Act excludes certain payments collected by a corporation or organization from persons who have joined as members under its Articles of Incorporation, bylaws, or internal rules, including admission fees, lump-sum payments, membership fees, and money collected for the common interests of members.

The wording matters.

The law does not focus simply on people whom the organization calls members.

It refers to persons who have actually joined as members under the Articles, bylaws, or internal rules.

Therefore, a nonprofit should not conclude that a payment is a membership fee merely because the person is described as a supporting member.

The Articles of Incorporation and the actual membership structure come first.

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The 2024 Amendment Made This Standard Even Clearer

There is an important change in the current law.

The version of the Donation Collection Act applied in Supreme Court Decision 2021Do16765 mainly used the concept of payments collected from an organization’s members or persons affiliated with the organization.

The Act was amended in 2024.

The current wording is more specific.

It refers to persons who have joined as officers, party members, members, or similar participants under the Articles of Incorporation, bylaws, or internal rules.

That makes the question even clearer for nonprofits operating in 2026.

It is not enough to say:

Our organization has called these people supporting members for years.

The next question must be:

Under what provision of the Articles, and through what procedure, did that person become a member?

If the organization cannot answer that question, it should not simply assume that the payments are membership fees.

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In the Supreme Court Case, Member Payments Accounted for About 92% of the Amount at Issue

Now let us look at the actual case.

The organization involved in Supreme Court Decision 2021Do16765 was an incorporated association established to promote volunteer activities and provide services such as free meals.

The organization had registered its donation collection activities and had been collecting donations since 2013.

The period at issue ran from August 2013 to July 2018, approximately five years.

During that period, the organization received two broad categories of funds.

One consisted of donations from companies and other outside contributors.

The other consisted of recurring membership fees or support payments made by regular members and supporting members.

Payments from members accounted for approximately 92% of the total amount at issue.

In other words, most of the money involved in the case depended on one classification question:

Were these general donations, or were they payments collected from actual members?

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Prosecutors Treated the Member Payments as Donations

The prosecution did not distinguish between donations made by outside contributors and recurring payments made by regular or supporting members.

It calculated them all on the assumption that they were donations regulated under the Donation Collection Act.

As a result, issues were raised over whether the organization had exceeded the statutory limit on fundraising expenses by using funds for personnel and promotional costs, and whether some funds had been used outside the registered fundraising purpose.

The lower court also treated many of the regular and supporting members as little more than ordinary donors.

The Supreme Court took a different approach.

It held that the first question was whether those people were actually members of the organization.

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The Supreme Court Considered Five Main Factors

The Supreme Court held that when determining whether payments from members fall outside the statutory definition of donations, the organization’s internal rules and actual operations must be examined in detail.

In practice, the analysis can be organized around five factors.

1. Articles of Incorporation and Internal Membership Rules

The first question is whether the organization’s governing documents actually recognize the relevant membership category.

If a website uses the term supporting member but the Articles contain no such membership category, the problem begins at the first stage.

2. Purpose and Actual Operations of the Organization

The analysis does not stop with what is written in the Articles.

The organization must actually operate the membership system in accordance with those rules.

3. Membership Eligibility and Admission Procedures

The organization should be able to identify who may become a member and what application or approval procedure is required for membership.

4. Members’ Rights and Obligations

The analysis also considers whether a genuine relationship exists between the organization and the person as a member, including actual rights and obligations.

5. Payment and Management of Membership Fees

The organization should have rules governing membership fees and should actually collect and manage the payments in accordance with those rules.

The Supreme Court’s analytical structure can therefore be summarized as follows:

Articles → admission → rights and obligations → membership fees → actual operations → legal character of the payment

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In the Actual Case, the Articles and Membership Administration Were Connected

What did the organization in the Supreme Court case actually look like?

First, its Articles of Incorporation expressly recognized different categories of members.

These included regular members, supporting members, and general members.

The term supporting member was therefore not merely a marketing label created on the organization’s website.

It existed as an actual membership category under the Articles of Incorporation.

There was also a membership admission process.

Persons seeking to become regular or supporting members were required to submit membership applications.

The individuals who made recurring payments actually submitted regular membership applications or recurring support applications.

The Articles also established fee standards.

Regular members were required to pay at least KRW 10,000 per month.

Supporting members were required to pay at least KRW 5,000 per month.

Members also had rights and obligations.

They could attend meetings, express opinions, participate in resolutions, receive organizational materials and publications, and inspect information concerning the organization’s operations.

At the same time, they had obligations to comply with the Articles and internal rules, follow resolutions of the general meeting and board of directors, and pay membership fees.

The organization also issued membership cards or supporting member certificates to some members.

This was therefore not merely a structure involving people who sent money every month.

It was a connected membership system:

Articles → membership category → application → rights and obligations → fees → actual membership administration

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The Supreme Court Therefore Reconsidered the Legal Character of the Member Payments

The Supreme Court found that individuals who submitted regular membership or recurring support applications and made recurring payments acquired membership status under the organization’s Articles.

It also held that payments collected from those members could fall within the category of funds excluded from the statutory definition of donations under the law then in effect.

As a result, the part of the lower court judgment that had treated all payments from members as donations was reversed.

This decision should not be misunderstood.

The Supreme Court did not say:

Every payment from a supporting member is automatically excluded from donation regulation.

The more accurate lesson is this:

If a genuine membership system exists under the Articles, the person actually joins through that system, and the member’s rights, obligations, and fee structure are operated in practice, there is a stronger legal basis for distinguishing those payments from donations made by outside contributors.

Without that structure, a nonprofit should not rely solely on the label supporting member and treat the payments as membership fees.

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Which of These Three Structures Does Your Nonprofit Have?

In practice, the issue becomes easier to analyze by dividing organizations into three types.

Type 1. The Articles and Actual Membership System Are Consistent

The Articles recognize supporting members or another relevant membership category.

There is an actual membership admission process.

A membership register is maintained.

Members have rights and obligations.

The organization has membership fee rules and collects payments in accordance with those rules.

In this situation, there is a relatively strong basis for treating the payments as funds received from members.

However, if the nonprofit also receives donations from outside contributors, membership fees and outside donations should still be managed separately.

Type 2. The Organization Uses "Supporting Member" Only on Its Website

The Articles do not recognize supporting members.

There is no formal admission process.

The individuals are not entered in a membership register.

They have no actual membership rights or obligations.

They merely make recurring automatic payments.

In this case, the organization should not assume that the payments are membership fees.

It should first reconsider whether the payments constitute donations from outside contributors.

Type 3. Actual Members and General Recurring Donors Are Mixed Together

The Articles recognize supporting members.

However, the website also allows anyone to make a recurring donation without joining as a member.

In this situation, even if both groups pay KRW 30,000 per month, membership fees and payments from general donors should be distinguished.

The legal relationship between the contributor and the organization is different.

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A Recurring Donor and a Supporting Member Are Not the Same Thing

Consider two people.

Person A signs up on the website for a recurring KRW 30,000 monthly donation.

A does not submit a membership application.

A is not a member under the Articles.

A is not entered in a membership register.

A has no member rights or obligations.

Person B also pays KRW 30,000 per month.

However, B submits a supporting member application under the Articles.

B is entered in the membership register.

B has rights and obligations under the membership rules and pays the prescribed membership fee.

The same KRW 30,000 leaves both bank accounts every month.

But their legal relationships with the organization are different.

The fact that a person has paid regularly for a long period does not answer the question.

The organization must first determine whether an actual membership relationship exists.

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Lack of Voting Rights Does Not Automatically Mean the Person Is Not a Member

Another common question is whether a supporting member can still be considered a member if that person has no voting rights at the general meeting.

Voting rights alone do not determine membership status.

The Articles may establish different categories such as regular members, supporting members, or associate members, and assign different rights to each category.

The Supreme Court did not use voting rights as the sole test.

It looked at membership eligibility and admission procedures, rights and obligations, membership fee payments and management, and the organization’s actual operations.

The better question is therefore:

Under what rules and procedures did the person become part of the organization, and what membership relationship actually exists?

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The First Documents to Compare Are the Articles and the Website

When reviewing a nonprofit’s supporting member system, one of the most useful first steps is to place the Articles of Incorporation next to the actual donation or membership page.

Suppose the Articles recognize only one category: regular members.

The website, however, offers three categories:

Recurring Supporting Member,

Sharing Member,

Supporter Member.

Anyone who enters a card or CMS payment method is immediately described as a member.

There is no separate membership approval process.

The person is not entered in a membership register.

There are no membership rights or obligations.

Years later, it may be difficult to argue that all of those people were legal members and that all payments were membership fees.

A marketing use of the word member is not the same as a legal membership relationship.

The current Donation Collection Act expressly refers to persons who have joined as members under the Articles, bylaws, or internal rules.

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The Issue Becomes More Complicated If the Organization Has Already Collected Money for Years

The more difficult cases involve nonprofits that have already operated a supporting member system for several years.

Suppose an organization has received recurring payments from 700 supporting members for four years.

It later discovers that:

There is no supporting member provision in the Articles.

There are no membership applications.

There is no membership register.

There are no membership fee rules.

The payments were deposited into the same bank account as donations from the general public.

The accounting records classified all of them as donations.

Adding a new supporting member clause to the Articles today does not retroactively change the legal character of payments received during the previous four years.

Two separate questions must be addressed:

How should the membership system be structured going forward?

and

What was the legal character of the money already received?

To determine the nature of past payments, the organization may need to review the records that existed at the time, including:

• Articles of Incorporation
• membership rules
• historical website registration pages
• membership and recurring support applications
• membership registers
• CMS records
• bank accounts
• accounting records
• donor guidance materials
• website and social media fundraising posts

The key is to determine what the organization told each person, what procedure was used, and in what capacity the payment was received at that time.

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If Money Treated as Membership Fees Was Actually a Donation, the Issue Does Not End There

This is the most important practical point.

If money that the nonprofit has long treated as membership fees is actually classified as donations from outside contributors, the problem may not be resolved simply by changing an accounting category.

The analysis may need to continue in the following order:

1. How much of the money actually qualifies as donations?

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2. Did the organization actively solicit contributions from outside parties?

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3. What was the fundraising target at the time?

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4. Was donation collection registration required?

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5. How were the funds actually used?

↓

6. Were any disclosure or reporting obligations triggered?

In other words, if the initial classification between membership fees and outside donations is wrong, the administrative compliance analysis that follows may also need to be revisited.

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Can the Organization Fix the Problem by Adding a Supporting Member Clause to the Articles?

No.

If the Articles are changed but the actual operation remains inconsistent, the same problem continues.

If the Articles recognize a supporting member category, there should also be an actual admission procedure.

A membership register should be maintained.

Members’ rights and obligations should be defined.

Membership fee rules should exist.

The supporting member registration page on the website should follow the same structure.

CMS member data and the actual membership register should be consistent.

Accounting records should distinguish membership fees from donations received from outside contributors.

The organization therefore needs to review more than one document.

The structure should connect as follows:

Articles → membership rules → membership application → membership register → CMS → bank account → accounting → website and social media

All of these elements should tell the same story.

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What Can the Organization Review on Its Own?

If the nonprofit has not yet launched its supporting member program, it can begin by checking its own internal structure.

Review whether:

the Articles recognize the relevant membership category,

an admission procedure exists,

members’ rights and obligations are defined,

membership fee rules exist,

a membership register can be maintained,

and membership fees can be separated from outside donations.

However, it is risky to reach a conclusion from the current Articles alone when:

• the organization has already operated a supporting member system not reflected in the Articles;
• recurring donors have been treated as members without a membership admission process;
• actual members and general donors are mixed together;
• membership registers or historical application records are incomplete;
• membership fees and outside donations have been managed through the same account or accounting category;
• substantial amounts have been received for several years; or
• the organization also needs to determine whether past donation collection registration was required.

In these situations, it is often necessary to reconstruct the organization’s actual operations in chronological order.

The Articles, membership rules, applications, membership register, CMS records, bank accounts, accounting records, and historical fundraising materials should be reviewed together to determine the actual membership relationship and the legal character of the funds.

If a criminal investigation or prosecution has already begun, review by a Korean attorney may be necessary.

If the main issue concerns tax-deductible donation receipts or tax treatment, separate tax advice may also be required.

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The Numbers to Remember from This Case Are Five Years and 92%

The period at issue in Supreme Court Decision 2021Do16765 was approximately five years.

Payments made by members accounted for approximately 92% of the amount at issue.

The Supreme Court did not conclude that the money was a donation simply because it was called support money.

It also did not conclude that it was automatically a membership fee simply because the contributors were called supporting members.

Instead, the Court examined:

• the Articles and internal rules;
• the organization’s purpose and actual operations;
• membership eligibility and admission procedures;
• members’ rights and obligations; and
• payment and management of membership fees.

The first question for a Korean nonprofit should therefore be clear:

Has this person actually joined as a member under our governing documents and actual operations?

Only after answering that question should the organization determine whether the money is a membership fee, an outside donation, and whether donation collection registration requirements may apply.

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The Next Article Will Address Fundraising That Has Already Started

Part ③ of this series will move to a more urgent situation:

What should a nonprofit do if it has already started collecting donations without donation collection registration?

We will examine how the KRW 10 million threshold actually applies, why the fundraising plan and the amount actually collected must be distinguished, and how repeated collections may be treated under Korean Supreme Court precedent.

If you are unsure whether your current supporting member system qualifies as a genuine membership structure under Korean donation law, or how previously received payments should be classified between membership fees and outside donations, the Articles, membership records, application documents, and payment records can be reviewed first through a free preliminary review to determine the available approach.