Suggested citations
AGLC4 | 합영법 2014 [Equity Joint Ventures Law of the Democratic People's Republic of Korea (2014)] [tr Daye Gang]
Bluebook | Hapyeongbeob 2014 [Equity Joint Ventures Law of the Democratic People's Republic of Korea (2014)] translated in Law and North Korea by Daye Gang, https://www.lawandnorthkorea.com/.
Adopted on September 8, Juche 73 (1984), as Decision No. 10 of the Standing Committee of the Supreme People’s Assembly
Amended and supplemented on January 20, Juche 83 (1994), as Decision No. 44 of the Standing Committee of the Supreme People’s Assembly
Amended and supplemented on February 26, Juche 88 (1999), as Directive No. 484 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on May 17, Juche 90 (2001), as Directive No. 2315 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on November 30, Juche 93 (2004), as Directive No. 780 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on May 23, Juche 95 (2006), as Directive No. 1774 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on September 26, Juche 96 (2007), as Directive No. 2367 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on August 19, Juche 97 (2008), as Directive No. 2842 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on November 29, Juche 100 (2011), as Directive No. 1993 of the Presidium of the Supreme People’s Assembly
Amended and supplemented on October 8, Juche 103 (2014), as Directive No. 173 of the Presidium of the Supreme People’s Assembly
CHAPTER I. BASICS OF EQUITY JOINT VENTURES LAW
Article 1 (Objectives of Equity Joint Ventures Law)
The Equity Joint Ventures Law of the Democratic People’s Republic of Korea shall serve to expand and develop economic and technical cooperation and exchange with many countries in the world through equity joint ventures.
Article 2 (Parties to equity joint ventures)
Institutions, enterprises and organizations may receive the approval of investment management institutions and establish an equity joint venture enterprise with a corporation or individual of another country. An equity joint venture enterprise shall, at its basis, be established in the production sector.
Article 3 (Equity joint venture sector and subjects for encouragement)
Equity joint ventures may be done in different sectors such as the machine industry, the electronic industry, the information industry, scientific technique, the light industry, agriculture, forestry, the fishing industry, the construction and construction materials industry, traffic and transportation, and finance. The State shall encourage equity joint ventures with subjects such as the introduction of cutting edge techniques, scientific research and technical development, production of products that have high competitiveness in international markets, and infrastructure construction.
Article 4 (Subjects that are prohibited or restricted from equity joint ventures)
Equity joint ventures are prohibited or restricted for subjects such as those that exceed environmental protection standards, subjects that export natural resources capable of generating wealth, subjects that are economically or technically inferior, subjects with little economic benefit, or subjects of work such as restaurants or shops.
Article 5 (Ownership rights and independence of equity joint venture enterprises, responsibility for debts)
Equity joint venture enterprises have ownership rights over property the parties have invested in and over property rights, and shall conduct their business activities independently. Equity joint venture enterprises shall take responsibility for debt that occurs in their business activity process with their own registered capital.
Article 6 (Corporation qualifications of equity joint venture enterprises)
Equity joint venture enterprises are a corporation of our country from the day they are registered with the investment management institution. The legal rights and interests of equity joint venture enterprises are protected by law.
Article 7 (Preference for equity joint enterprises)
The State shall give preference to equity joint venture enterprises that are the subject of encouragement and equity joint venture enterprises done with overseas Koreans, such as reduction of tax, guarantee of profitable land use conditions, and preferential supply of bank loans.
Article 8 (Application of law)
The establishment, operation, dissolution and settlement of an equity joint venture enterprise shall be done according to law. Particulars not regulated in this law shall follow the relevant regulations.
CHAPTER II. ESTABLISHMENT OF EQUITY JOINT VENTURE ENTERPRISE
Article 9 (Application to establish equity joint venture enterprise and approval)
Parties seeking to establish a equity joint venture enterprise shall conclude a contract and must submit to the investment management institution an application document to establish an equity joint venture enterprise and attach things such as a copy of the equity joint venture contract, a copy of the bylaws of the equity joint venture enterprise, and an economic and technical statement. The investment management institution shall deliberate on the application document to establish an equity joint venture enterprise within 30 days of receiving it, and in cases of approval shall issue an equity joint venture enterprise establishment approval document to the applicant, and in cases of rejection must send a notification document of rejection for which the reasons are stated.
Article 10 (Registration of equity joint venture enterprise)
A party that has been issued an equity joint venture enterprise establishment approval document must register with the province (or municipality directly under central authority) People’s Committee or the special economic zones management institution in the location of the enterprise within 30 days. Tax registration and customs registration shall be done within 30 days of the day of registration with the province (or municipality directly under central authority) People’s Committee or special economic zones management institution.
Article 11 (Investment portion, invested property and property rights)
The portions to be invested in the equity joint venture enterprise shall be determined by agreement of the equity joint venture parties. The equity joint venture parties may invest using property rights such as property in designated currency, property in goods and industrial ownership rights, land use rights, resource development rights. In these cases, the price of property or property rights invested shall be determined by agreement between the parties based on the international market price at the relevant time.
Article 12 (Transfer of investment portions)
Equity joint venture parties may transfer their investment portions to a third party. In these cases, the consent of the other party to the equity joint venture and the approval of the investment management institution must be received.
Article 13 (Establishment of branch office, office, agency)
Equity joint venture enterprises may set up things such as branch offices or agencies in our country or in other countries with the approval of the investment management institution.
Article 14 (Investment period, investment in intellectual property rights)
Equity joint venture parties must invest within the period pointed out in the enterprise establishment approval document. In cases where there are inevitable circumstances, the investment period may be prolonged with approval from the investment management institution. The investment of intellectual property rights such as patent rights, trademark rights, or industrial design rights may not exceed 20% of the registered capital.
Article 15 (Registered capital)
Registered capital in an equity joint venture enterprise must be more than 30~50% of the total investment sum. In cases where registered capital has been increased, equity joint venture enterprises must make an amended registration with the authorities concerned. Registered capital may not be reduced.
CHAPTER III. EQUIPMENT AND BUSINESS ACTIVITIES OF EQUITY JOINT VENTURE ENTERPRISES
Article 16 (Board of Directors and its status)
Equity joint venture enterprises shall have Boards of Directors. A Board of Directors is the highest decision-making institution of an equity joint venture enterprise.
Article 16 (Powers of the Board of Directors)
The Board of Directors in an equity joint venture enterprise shall deliberate upon and decide issues such as the amendment and supplementation of bylaws, development measures of an enterprise, the increase of registered capital, business administration plans, settlement and distribution, persons responsible, vice-persons responsible, appointment and dismissal of financial inspectors, and the dissolution of the enterprise.
Article 18 (Managerial personnel of equity joint venture enterprises)
Equity joint venture enterprises may have persons responsible, vice-persons responsible, and financial accountants, and may have other required management personnel. The person responsible shall take responsibility for his or her work before the Board of Directors.
Article 19 (Financial inspectors of equity joint venture enterprises)
Equity joint venture enterprises must have financial inspectors as a member of that enterprise and not a supervisor. The financial inspector shall properly inspect the financial state of the enterprise according to the decision of the Board of Directors and shall take responsibility for his or her work before the Board of Directors.
Article 20 (Administration and operation standards for equity joint venture enterprises)
Equity joint venture enterprises shall be administered and operated according to the bylaws and the decisions of the Board of Directors.
Article 21 (Working period of equity joint venture enterprises)
Equity joint venture enterprises shall commence work within the period pointed out in the enterprise establishment approval document. In cases where work cannot be done within the period raised in the enterprise establishment approval document, the working dates may be prolonged with the approval of the investment management institution. Enterprises that have prolonged the working dates shall pay designated arrears charges.
Article 22 (Permission to operate and date of work commencement of equity joint venture enterprises)
Equity joint venture enterprises must receive permission to operate before the designated scheduled date of work commencement. The day the operating permit issued by the investment management institution is received shall be the date of work commencement of the equity joint venture enterprise.
Article 23 (Purchase and product sales of business administration supplies)
Equity joint venture enterprises may purchase raw materials, resources or facilities in our country according to what has been decided, or may sell produced products in our country. In these cases, the relevant plan must be submitted to the investment management institution.
Article 24 (Levy of customs duty)
In cases where an equity joint venture enterprise brings in supplies required for production and business activities from other countries or sends out produced products to different countries, customs duty shall not be levied. However, in cases where supplies that have been exempted from customs duty are sold in our country, customs duty shall be levied.
Article 25 (Types of business of equity joint venture enterprises)
Equity joint venture enterprises must conduct business activities according to approved types of business. In cases where types of business are sought to be changed or extended, the approval of the investment management institution shall be received.
Article 26 (Recruitment)
Equity joint venture enterprises must recruit employees from our country labour. Some managing personnel and technical experts or technical engineers in special occupations may be recruited from the labour of other countries after notifying the investment management institution.
Article 27 (Management of labour)
Equity joint venture enterprises must manage labour according to labour regulations applying to foreign investment enterprises.
Article 28 (Accounts of equity joint venture enterprises)
Equity joint venture enterprises must have an account in a bank in our country or a foreign country investment bank. In cases where an account is sought to be held in a bank in another country, the approval of the foreign currency management institution must be received.
Article 29 (Loan of funds)
Equity joint venture enterprises may borrow funds required for business activitiesfrom a bank in our country or in another country. Borrowed North Korean won and North Korean won exchanged into foreign currency must be deposited and used at the designated bank.
Article 30 (Financial management and accounting calculations)
Equity joint venture enterprises must do their financial management and accounting calculations according to financial accounting regulations that apply to foreign investment enterprises.
Article 31 (Purchase of insurance for equity joint venture enterprises)
In cases where equity joint venture enterprises purchase insurance, they must purchase insurance from an insurance company in our country. Compulsory insurance shall be purchased at an insurance company determined by the central insurance guidance institution.
Article 32 (Guarantee of activity conditions of workplace union organizations)
Employees of equity joint venture enterprises may form a workplace union organization.
Equity joint venture enterprises must assure the activity conditions of the workplace union organization.
CHAPTER IV. SETTLEMENT AND DISTRIBUTION OF EQUITY JOINT VENTURE ENTERPRISES
Article 33 (Business year of equity joint venture enterprises)
The business year of equity joint venture enterprises is from January 1 to December 31. Annual settlement shall be done within February of the next year.
Article 34 (Settlement method of equity joint venture enterprises)
The settlement of equity joint venture enterprises shall be finalized by the method of the profits being the total income less the costs of things including raw material and resources costs, fuel and power costs, labour costs, depreciation, supplies purchase expenses, workplace and company management costs, insurance premiums, and sales costs, and from those profits the transfer taxes, business taxes and other expenditures are deducted, and the net profits are finalized.
Article 35 (Accumulation of reserve funds)
Equity joint venture enterprises must accumulate 5% in net profits obtained every year as a reserve fund until the relevant sum of money reaches a sum equal to 25% of the registered capital. The reserve fund may only be used to make up the losses of the equity joint venture enterprise or extend registered capital.
Article 36 (Raising and type of funds)
Equity joint venture enterprises must raise funds required such as production expansion and technical development funds, bonuses for employees, cultural facilities funds, and training funds. The type and scale of funds, subjects of use and scope shall be considered and decided by the Board of Directors.
Article 37 (Distribution of profits)
Equity joint venture enterprise shall receive an inspection of settlement documents from a financial inspector and ratify it with the Board of Directors before distributing profits. Profit distribution shall be done by the method of submitting income tax from net profits, deducting required funds including the reserve funds, then dividing between the equity joint venture parties according to their investment portions.
Article 38 (Payment and reduction of tax)
Equity joint venture enterprises must pay designated tax. equity joint venture enterprises in encouraged sectors may receive a reduction in income tax for a set period.
Article 39 (Compensation for enterprise losses)
Equity joint venture enterprises may make up losses from the previous year from the net profits of the current year. In this case, the compensation period may not go over four successive years.
Article 40 (Accounting settlement)
Equity joint venture enterprises must regularly do accounting settlement for business activities. The accounting settlement document shall be submitted to the relevant financial institution in the period determined.
Article 41 (Reinvestment of profits)
Investors from foreign countries may reinvest the part or the whole of profits distributed from an equity joint venture enterprise in our country. In these cases, part or whole of the income tax relevant to the reinvested portion may be returned from income tax already paid.
Article 42 (Remittance of profits and other income to foreign countries)
Investors from foreign countries of equity joint venture enterprise may remit distributed profits and other income or funds received after settling the enterprise to outside the territory of our country without restriction.
CHAPTER V. DISSOLUTION AND DISPUTE RESOLUTION OF EQUITY JOINT VENTURE ENTERPRISES
Article 43 (Reasons to dissolve equity joint venture enterprise)
In cases where equity joint venture enterprises cannot be operated for reasons of expiration of period of existence, loss of ability to pay, nonfulfilment of contractual duties of the parties, enduring business administration losses, or natural disaster, they shall be dissolved.
Article 44 (Dissolution of equity joint venture enterprise before expiry)
If a reason to dissolve an equity joint venture enterprise arises before the end of the period of existence, the Board of Directors shall make a decision and may receive the approval of the investment management institution to dissolve it. In these cases, the settlement committee shall be organized by the Board of Directors. The settlement committee shall finish the trade activities of the equity joint venture enterprise, finish the settlement, then must do the enterprise registration cancellation procedure within 10 days. However, in cases where it is recognized during the settlement process that the enterprise should go insolvent, the insolvency must be raised in court.
Article 45 (Prolongation of period of existence of an equity joint venture enterprise)
Equity joint venture enterprises may prolong their period of existence. In these cases, the Board of Directors shall deliberate and decide 6 months before the end of the period of existence and then receive the approval of the investment management institution. The period of existence shall be calculated from the day the establishment of the enterprise is approved.
Article 46 (Dispute resolution)
Differences in opinion related to the equity joint venture shall be resolved by method of agreement. In cases where they cannot be resolved by method of agreement, they shall be resolved by methods of conciliation, arbitration, or court proceedings.
Last updated 1 September 2020