Q
I'm British, on an F-2 residency visa, in Korea for eight years. Three years ago a Korean friend and I opened a restaurant together. I put in 60 million won and worked in it full-time for the first two years; he put in about the same and handled the licenses. Because I was told it was "simpler," the business registration, the lease and the bank account are all in his name. We split profits informally, in cash, roughly equally, until last year. Then the payments stopped, and last month he told me I'd "invested" and been "repaid," that the restaurant is his, and that I should stop coming in.
I have: the transfer record for my 60 million won, two years of messages about the business, photos of me running the place, a handwritten note from year one saying "50/50," and staff who know me as the co-owner.
What can I do: (1) Does Korean law recognize a partnership that isn't on paper, when everything is registered to one person? (2) What am I entitled to — my money back, half the business, or half of what it's worth now? (3) How do I stop him selling or transferring it while this is sorted out?
A Answer
Korean law recognizes what you describe — two people contributing money and labor to run a business together for shared profit — as a partnership (조합, johap) under the Civil Act, and it recognizes it whether or not anyone registered it. The registration in his name governs the relationship with the tax office and the landlord; it does not decide who owns the business between the two of you. Your entitlement, if the partnership is established, is not your money back; it is your share of the partnership's net assets on dissolution, which includes what the restaurant is worth today. And yes, there is a court order that stops him transferring it while that is decided.
What this is under Korean law
Under Articles 703 and following of the Civil Act, a partnership is formed by an agreement of two or more persons to contribute to a common undertaking; the contribution may be money, property or labor, and the agreement may be oral. Partnership property is owned jointly by the partners regardless of whose name appears on registrations, and a partner who holds partnership assets in his own name holds them for the partnership. A "50/50" note, matching capital contributions, two years of full-time work, equal profit distributions and staff who understood you as co-owner are the evidence of that agreement; his "investor" characterization has to explain why an investor worked the floor and took half the profits.
If instead a court found this was a loan or an investment rather than a partnership, you would be entitled to repayment with interest — his "repaid" claim would then have to be proven by him, with records of what was paid. Either way, "you were repaid" is his burden, not your loss.
What you are entitled to
A partner may withdraw (탈퇴, taltoe) or seek dissolution (해산, haesan). On withdrawal, the withdrawing partner is entitled to a settlement (지분 정산, jibun jeongsan) of his share of the partnership's assets valued at the time of withdrawal — the restaurant's equipment, lease deposit, goodwill and cash, less liabilities. On dissolution, the partnership's affairs are wound up and the net assets distributed by share. Your share is presumptively proportional to contribution and, by your note, half. The profits withheld over the last year are also owed as distributions.
The accounting is the heart of the case. Because he holds the books and the account, the court can order him to produce them and can appoint an appraiser to value the business; refusal is drawn against him.
Stopping a transfer
A provisional disposition (가처분, gacheobun) prohibiting the transfer of the business, the lease and the equipment, or a provisional attachment (가압류, gaapnyu) on the business's assets and his accounts, can be obtained on a paper application before he learns of the claim. A partner who has just told the other partner to stop coming in is a partner about to sell; the application is the first filing, not the last.
How the process works
Demand for the books and for a settlement; the provisional disposition; then a claim for settlement of the partnership share, or for dissolution and liquidation, in the civil court. Cases of this kind often resolve at mediation once the valuation is on the table and the alternative is a court-supervised liquidation that damages the business for both of you. Your presence in Korea — you are an F-2 resident — makes this simpler than the cross-border cases we usually describe; nothing about your status affects your standing.
What to do now, and what not to do
Do not stop appearing at the restaurant if you can do so without confrontation; possession and continued involvement are evidence. Do not sign anything he proposes about "settling your investment." Do assemble the transfer record, the note, the messages, the profit distributions you can document, staff contacts and photographs, in date order. File the provisional disposition before the demand letter, not after.
Practical insight
Foreign partners in Korean small businesses lose by having agreed that registration in the Korean partner's name was "simpler," and then by treating that registration as the end of the argument when the partnership sours. It is the beginning of the argument. The note that says "50/50," kept for three years, is worth more than the registration; the two years of work are worth more than the note. The thing that loses the case is a transfer of the lease to a third party while the partner is deciding whether to act.
Send us the note, the transfer record and the lease details and we can prepare the provisional disposition and the demand together — by text consultation or at +82-2-522-3959.
— MEGA X Law Firm Korea, Civil Litigation Team
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