KLRI : KOREA LEGISLATION RESEARCH INSTITUTE

Ⅰ. Backgrounds and Purposes

  ○ Micro, Small and Medium-sized Enterprises (“MSMEs”) account for major part in any country’s economy in terms of GDP, employment, etc. Especially the economic growth of a developing country is deeply dependent upon MSMEs. Like other countries, the role and importance of MSMEs are obvious in Korea.

  ○ In spite of their importance, the performance of MSMEs is reportedly faced with economic, regulatory and financial barriers. Among others, the UNCITRAL WGI has reviewed business registration reform. In order to encourage entrepreneurs to operate their business in the legally regulated economy, States need to take steps to rationalized and streamline their system of business registration. 

  ○ This research aims to analyze the issues raised on recent legislative guide on business registration. WGI recently completed its final reading on 54 recommendations and accompanied paragraphs. While some minor further changes are expected, the guidelines shall operate as international standards for regulating business registration system. The analysis on the discussions in the UNCITRAL would give Korean government and academia some insights, especially on business registration reform.  

Ⅱ. Major Content 

  ○ This research starts with review on overarching document (WP110) defining the mandate of WGI on MSMEs. This document covers the importance of MSMEs in the global economy, the concept and nature of MSMEs, the way to creating sound business environment for all business. Through analysis on this paper, one can better understand the backdrop of the legislative guide on business registration and the importance of MSMEs’ transition from extralegal economy to legally regulated economy.

  ○ The draft legislative guide comprises 54 recommendations and 237 paragraphs. Additionally, it also has the Annex that has three recommendations and 16 paragraphs. The recommendations deal with ① objectives of business registry; ② establishment and functions of the business registry; ③ operation of the business registry; ④ registration of a business; ⑤ post-registration; ⑥ accessibility and information-sharing; ⑦ fee; ⑧ liability and sanctions; ⑨ deregistration and ⑩preservation of records. This research made detailed interpretation on the recommendations themselves and analyzed major points of the commentaries accompanied.

  ○ Once approved by the plenary meeting of UNCITRAL, the legislative guide, while not mandatory, shall be accepted as international best practice. Korea has well-organized business registration system supervised by the Supreme Court and has developed efficient and logical practice. Further, the Korean government, under the initiative of the Ministry of SMEs and Startups, has operated the internet-based simplified business registration  system which also covers tax registration and social security registration. However, the legislative guide sheds some lights on additional development for business friendly surroundings in Korea as follows: under the one -stop shop approach by the legislative guide, the Korean one-stop shop needs to broaden its boundary including sole entrepreneurs and enterprises with more paid-in capital or members; the Korean government needs to adopt the unique identifier which is available for all governmental agencies including business registries, tax authorities and social securities authorities; and the fee system on business registration and public access to registered information should be revisited 

Ⅲ. Expected Effects

  ○ This research, by providing detailed information on the current legislative initiative and process, will help better understand the process for legislation in the UNCITRAL and its main concern. 

  ○ Based upon the analysis, the Korean delegates may be more actively involved in following sessions and insert the provisions necessary for Korea into the legislative guide or model law of the UNCITRAL. 

  ○ This research will also contribute to the development of domestic legislation. From comparative legal perspectives of international workshop and conference, this research will help legal professionals to be updated with current trend in MSMEs regulations and to bring in positive change or revision to our legal system.