Establishing a Nonprofit Corporation in Korea ② Drafting Bylaws: Why Different Officers Ask for Different Things
This is the second article in a three-part series on establishing incorporated associations and foundations in Korea.
| Part | Topic | Main Point | |---|---|---| | Part 1 | Finding the competent authority | Where should the application be filed? | | Part 2 | Drafting bylaws | Why different officers request different revisions | | Part 3 | Post-establishment obligations | Annual checklist to avoid cancellation of approval |
Part 1: Finding the Competent Authority
Hello, this is Administrative Agent Jean.
In Part 1, we discussed the first gateway to nonprofit incorporation in Korea: finding the competent authority.
Once the competent authority is identified, the next gateway is the bylaws.
Bylaws are the basic rules of the legal entity.
They define the organization’s name, purpose, activities, assets, officers, members, general meeting, board of directors, amendment procedure, and dissolution.
But while drafting bylaws, many applicants experience something confusing.
The law clearly lists the required items.
Yet in practice, different officers may ask for different things.
In this article, we will explain why this happens and how bylaws should be designed to reduce unnecessary supplementation during the approval process.
Key Summary
| Category | Details | |---|---| | Meaning of Bylaws | Internal autonomous rules governing the corporation | | Mandatory Items for Associations | Seven required items under Civil Act Article 40 | | Mandatory Items for Foundations | Purpose, name, office, assets, director appointment and dismissal under Civil Act Article 43 | | Practical Differences | Member count, financial foundation, number of directors, auditor appointment, foreign officer documents | | Why Standards Differ | Laws do not set detailed numerical standards, so competent authority discretion and internal practice matter | | Main Risk | Drafting bylaws first and discovering the authority’s requirements later | | Correct Order | Identify authority → consult responsible department → design bylaws → file incorporation approval |
Bylaws Are Not Just a Form
Bylaws are one of the documents submitted for incorporation approval.
But their meaning is much larger than that.
The Korean Supreme Court has treated the bylaws of an incorporated association not as a mere contract, but as autonomous internal regulations.
In other words, bylaws bind the organization and its members as internal rules.
Once written, the wording affects future general meetings, board meetings, officer appointments, member discipline, bylaw amendments, and dissolution.
So bylaws are not just documents for receiving approval.
They are the governance blueprint that prevents disputes after establishment.
The Mandatory Legal Items Are Clear
Article 40 of the Korean Civil Act lists the mandatory items for the bylaws of an incorporated association.
The bylaws must include the following.
| No. | Mandatory Item | Practical Drafting Point | |---|---|---| | 1 | Purpose | Must show nonprofit purpose and core mission | | 2 | Name | Should not be confusingly similar to existing corporations | | 3 | Office Location | Main office and relocation procedure should be considered | | 4 | Asset Rules | Membership fees, donations, grants, basic assets, and management rules | | 5 | Appointment and Dismissal of Directors | Election, dismissal, term, disqualification, vacancy replacement | | 6 | Acquisition and Loss of Membership | Admission, withdrawal, expulsion, rights and duties | | 7 | Duration or Dissolution Grounds, if determined | Must be stated if such matters are set |
If any required item is missing, the bylaws may be defective and approval may be delayed or denied.
For foundations, because there are no members, membership rules are not structurally required in the same way.
Instead, endowed assets, board operation, and asset management become much more important.
Up to this point, the law looks clear.
The problem begins after that.
Difference 1: Number of Members
The Civil Act does not set a specific minimum number of members for an incorporated association.
Because an association is based on people, at least two persons are generally required in theory.
But the Civil Act does not say “approval requires at least 30 members” or “at least 50 members.”
In practice, however, competent authorities often request a certain number of members.
One department may require 30 members.
Another may require 50.
Even when the number looks sufficient, the authority may check:
- Whether the members are real
- Whether they have voting rights
- Whether they can pay membership fees
- Whether nominal members were added only for appearance
- Whether the inaugural general meeting actually occurred
- Whether the member list and meeting minutes match
Some authorities may randomly contact members listed in the membership list.
Therefore, member count is not just a number.
It is evidence of the corporation’s substance and continuity.
Difference 2: Basic Assets or Financial Foundation
For an incorporated foundation, endowed assets are the foundation’s structural basis.
So assets are central.
An incorporated association, however, is based on members.
It is not naturally built around endowed property in the same way as a foundation.
Still, in practice, competent authorities may request proof of a certain level of assets.
Why?
Because the rules on nonprofit corporation establishment and supervision require the applicant to show sufficient capacity and financial foundation to conduct its purpose activities.
The problem is that the law does not specify a fixed amount.
So authorities may request materials such as:
- Proof of basic assets
- Proof of ordinary assets
- Expected membership fee income
- Donation or sponsorship commitments
- Budget plan
- Project cost calculation
- Office lease agreement
- Future income plan
Even if the law does not say “KRW 30 million is required,” you still need to explain financial foundation.
The bylaws must reflect this financial structure properly.
Difference 3: Directors and Auditors
Article 57 of the Civil Act states that a corporation must have directors.
But for ordinary Civil Act nonprofit corporations, the law does not set one uniform number of directors or require auditors in every case.
In practice, however, many officers request at least three directors and one auditor.
This is because the authority looks at transparency and internal checks.
| Category | Legal Structure | Common Practical Request | |---|---|---| | Directors | A corporation must have directors | Often 3 or more | | Auditors | Not always mandatory for all Civil Act nonprofit corporations | Often 1 or more | | Public Interest Corporations | 5 to 15 directors and 2 auditors | Legal requirement applies | | Foreign Directors | No general blanket prohibition under ordinary Civil Act structure | Identity, visa, and document checks required |
If the Act on the Establishment and Operation of Public Interest Corporations applies, separate requirements exist.
Such corporations generally need 5 to 15 directors and 2 auditors, and a majority of directors must be Korean nationals.
So it is risky to draft bylaws simply under the broad label “nonprofit corporation.”
You must first check whether the organization is an ordinary Civil Act nonprofit corporation, a public interest corporation, or subject to a special law.
Why Do Different Officers Ask for Different Things?
The reason is simple.
The law does not provide detailed numbers for every practical requirement.
The relevant nonprofit corporation rules generally state broad approval standards, such as:
- The purpose and activities must be feasible
- The corporation must have sufficient ability to conduct its activities
- Financial foundation must exist or be capable of being established
But they do not always specify how many members are needed, how much money is required, or how many directors are appropriate.
Seoul Metropolitan Government guidance also explains that standards such as member count, contributed assets, and other review criteria differ by responsible department and may change depending on policy.
As a result, under the same Civil Act Article 32 structure, actual review may vary depending on:
- Whether the authority is a central ministry or local government
- Whether ministry-specific nonprofit corporation rules exist
- Whether the department has internal criteria
- Whether the purpose activity is sensitive or specialized
- Whether the business scale is large or small
- Whether membership and finance look substantial
- What the officer focuses on during review
That is why nonprofit bylaws cannot be completed by copying an online template.
They must reflect mandatory legal items, competent authority practice, and actual operation together.
What If the Officer Requests Something Not Written in the Law?
Sometimes an officer requests documents or standards not clearly written as numbers in the law.
In that case, directly arguing “that is not in the law” may not always be the best practical strategy.
Nonprofit incorporation approval involves discretion.
A better approach is to proceed in order.
1. Check Whether It Appears in Official Rules or Guidance
Each ministry may have its own rules on the establishment and supervision of nonprofit corporations.
Local governments or departments may also publish guidance materials.
First, confirm whether the officer’s request is an official standard or an informal expectation.
Materials to check include:
- Civil Act
- General nonprofit corporation rules
- Ministry-specific nonprofit corporation rules
- Local government guidance
- Competent authority manuals
- Required document lists
- Recent approval examples or public materials
If the requirement appears in official standards, it should be reflected.
2. If There Is No Official Standard, Identify the Purpose of the Request
Even without a clear number in the law, the officer may request materials to determine whether approval criteria are satisfied.
For example, if an officer requests proof of KRW 30 million in assets, the question is not only “why KRW 30 million?”
The better question is:
What is the officer trying to verify: financial foundation, continuity, or actual substance?
Once the purpose is clear, alternative materials may be possible.
- If basic assets are insufficient, show membership fee income plan
- If membership fees are weak, show sponsorship commitments
- If sponsorship is weak, show detailed project budget
- If the budget is weak, show phased activity plan
- If membership is small, show expertise and activity history
The point is not a fight over numbers.
The point is building an explanation that satisfies the approval criteria.
3. Consult the Responsible Department Before Drafting Final Bylaws
If you finish the bylaws first and later learn the officer’s expectations, you may need to rewrite the entire structure.
Bylaws, business plan, budget, and member list are connected.
The correct order is:
- Identify competent authority
- Check department practice
- Adjust purpose activities
- Organize members, officers, and assets
- Draft bylaws
- Draft business plan and budget
- Hold inaugural general meeting
- File incorporation approval application
Bylaws may look like the first document to draft.
In practice, they should be designed after confirming the competent authority’s standards.
Bylaws Are Not Written Once and Forgotten
One more important point:
Bylaws cannot be changed freely later.
Under Civil Act Article 42, bylaw amendments of incorporated associations require approval from the competent authority to take effect.
Foundation bylaws are also subject to strict requirements and approval issues.
So when drafting bylaws, you should consider future changes in advance.
- Possible expansion of purpose activities
- Possible creation of new membership categories
- Possible use of online meetings or written resolutions
- Possible increase or decrease in directors
- Possible changes in membership fee structure
- Possible relocation to another city or province
- Possible participation of foreign officers
- Possible increase or decrease in basic assets
- Possible application for public interest corporation or donation-related status
Drafting very simple bylaws may look convenient at first.
But if the scope is too narrow, every expansion may require bylaw amendment approval.
If the scope is too broad, the competent authority may find the purpose unclear.
Bylaws can be risky when too narrow or too broad.
They must be designed strategically.
Even One Director Dismissal Clause Can Become a Dispute
Bylaws also matter after establishment.
In its January 4, 2024 decision, the Korean Supreme Court addressed a case where director dismissal grounds in the bylaws became an issue.
The Court explained that when a corporation has set dismissal grounds in its bylaws, those bylaw provisions become important.
If the bylaws list dismissal grounds, then absent special circumstances, a director cannot generally be dismissed during the term for reasons not stated in the bylaws.
On the other hand, if a stated dismissal ground actually occurs, the corporation may dismiss the director through the procedure set in the bylaws.
This case shows a clear lesson.
One bylaw clause can determine whether a director may be dismissed.
| Bylaw Wording | Possible Future Problem | |---|---| | Dismissal grounds too narrow | Difficult to remove problematic director | | Dismissal grounds too broad | Director status becomes unstable and disputes increase | | No dismissal procedure | Resolution validity may be challenged | | No opportunity to explain | Procedural defect may be argued | | Quorum unclear | Board or general meeting resolution may be disputed |
Bylaws are not only for approval.
They are for reducing future disputes.
When Foreigners Participate as Officers
Foreigners are increasingly involved as directors or auditors of nonprofit corporations.
This is common in multicultural, international exchange, foreign resident support, religious, and foreign founder community organizations.
For ordinary Civil Act nonprofit corporations, there is no general blanket prohibition on foreign officers.
However, documents and immigration status must be reviewed.
| Category | What to Check | |---|---| | Registered Foreigner | Certificate of alien registration, ARC, address proof | | Overseas Korean with Domestic Residence Report | Certificate of domestic residence report | | Signature or Seal | Seal certificate, signature confirmation, notarization possibility | | Foreign-Language Documents | Translation and notarization | | Visa Status | Whether officer activity or compensation is allowed | | Public Interest Corporation Act | Majority Korean director requirement may apply | | Compensation | Standing officer, employee, service fee, or activity allowance structure |
The key point is this:
Being able to serve as an officer and being able to actively work in Korea under immigration law are separate issues.
A foreigner may be listed as a director, but operating the corporation or receiving compensation may not be allowed under their current visa.
For nonprofits involving foreign officers, bylaws and immigration status should be reviewed together.
Clauses That Need Special Care
The following bylaw clauses require careful design.
| Clause | Why It Matters | |---|---| | Purpose | Starting point for competent authority review | | Activities | Connects purpose with actual operations | | Membership | Affects general meeting voting rights and member count | | Membership Fees | Helps show financial foundation | | Officers | Directors, auditors, term, reappointment, disqualification | | Dismissal | Future officer dispute standard | | General Meeting | Convocation, quorum, written resolution, online meeting | | Board of Directors | Board authority and voting method | | Assets | Basic assets and ordinary assets | | Bylaw Amendment | Civil Act requirements and authority approval | | Dissolution | Remaining asset distribution and authority approval |
Recently, online meetings, written resolutions, and electronic voting clauses have become especially important.
If an organization holds written or online resolutions without a bylaw basis, the validity of the resolution may later be challenged.
Pre-Drafting Checklist
Before drafting bylaws, check the following.
- Has the competent authority and responsible department been identified?
- Have department rules and guidance materials been reviewed?
- Has the practical standard for member count been checked?
- Has the required level of financial foundation been checked?
- Have director and auditor requirements been confirmed?
- Could the Public Interest Corporation Act or a special law apply?
- Will any foreign founder or officer participate?
- Is the purpose too broad or too narrow?
- Have future activity expansions been considered?
- Do the general meeting and board rules match actual operation?
- Are written resolution or online meeting clauses needed?
- Have future bylaw amendment approval issues been considered?
If these points are not checked before drafting, supplementation may require restructuring the entire application.
How Ethos Administrative Office Reviews Bylaws
Drafting nonprofit bylaws is not about making the wording look polished.
At Ethos Administrative Office, we review bylaws in this order.
- Organize the corporation’s purpose activities and activity scope
- Identify competent authority and responsible department
- Check public standards and practical requirements of the department
- Confirm whether association or foundation structure is appropriate
- Review possible member count, assets, and officer composition
- Check foreign founder or foreign officer participation
- Review possible conflict between visa status and nonprofit activities
- Reflect mandatory bylaw items
- Design general meeting, board, officer, and bylaw amendment clauses
- Confirm consistency with business plan and budget
Bylaws are one application document, but they are also the center of the entire filing structure.
If the bylaws are unstable, the business plan, budget, and inaugural meeting minutes may also become unstable.
Frequently Asked Questions
Q. Can I use an online standard bylaw template?
Not recommended without review.
A standard template may be useful as a reference, but it often does not reflect the competent authority’s standards or the organization’s actual operation.
Membership, officers, assets, general meeting, board, and bylaw amendment clauses should be adjusted to the organization’s purpose.
Q. Does an incorporated association need basic assets?
Not in the same structural sense as an incorporated foundation.
However, the approval review still requires financial foundation, so the organization must explain how it will conduct its activities through assets, membership fees, donations, sponsorships, or project income.
Q. Is an auditor mandatory?
For ordinary Civil Act nonprofit corporations, it is difficult to say that an auditor is mandatory in every case.
However, many authorities request at least one auditor in practice.
If the Public Interest Corporation Act applies, two auditors are required.
The competent authority’s standard must be checked.
Q. Can we just amend the bylaws later?
Bylaw amendment is not simple.
For incorporated associations, bylaw amendments require a valid resolution and approval from the competent authority.
Drafting bylaws roughly and fixing them later may increase the burden after establishment.
Q. Can a foreigner serve as a director?
Possibly, yes.
But documents such as alien registration certificate, domestic residence report certificate, signature or seal documents, translation, notarization, visa status, and compensation structure must be reviewed.
Public Interest Corporation Act issues should also be checked separately.
Q. What if the officer asks for something not written in the law?
It depends.
First, check whether the request appears in official rules or guidance.
If not, identify the purpose of the request and consider whether alternative documents can explain the same point.
Because nonprofit incorporation approval involves discretion, structured explanation is often more effective than direct confrontation.
Closing
Bylaws are the starting point of the legal entity.
At the same time, they bind the organization’s entire operation after establishment.
The Civil Act lists mandatory items.
But actual approval review also considers department-specific practice on member count, financial foundation, officer composition, foreign officer documents, and specificity of the business plan.
That is why the order matters.
Identify the competent authority → consult the responsible department → design bylaws → hold inaugural meeting → file approval application.
If you draft the bylaws first and try to adjust later, the entire structure may need to be rewritten.
If you are preparing to establish a nonprofit corporation, do not treat bylaws as a template.
Bylaws are the governance blueprint of the corporation.
Good design at the beginning makes both approval and future operation more stable.
The next article will cover post-establishment obligations and the annual checklist to avoid cancellation of approval.
Consultation
If you need assistance with nonprofit incorporation, bylaw drafting, competent authority consultation, foreign officer participation, or bylaw amendment approval, please contact us.
In a preliminary review, we first check your purpose activities, activity scope, expected competent authority, and bylaw drafting direction.