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Social Enterprise Promotion Act

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SOCIAL ENTERPRISE PROMOTION ACTEnacted by Act No. 8217, Jan. 3, 2007
Amended by Act No. 8361, Apr. 11, 2007
Article 1 (Purpose) The purpose of this Act is to contribute to the integration of
society as well as to the enhancement of the quality of the
people’s life thereof, by means of expanding social service s,
which are not sufficiently provided in society, and creatin g jobs.
Article 2 (Definitions) For the purpose this Act, the definitions of terms shall be as
follows: (1) The term “social enterprise” used in this Act means an
organization which is engaged in business activities of
producing and selling goods and services while pursuing a
social purpose of enhancing the quality of local residents’ life
by means of providing social services and creating jobs for t he
disadvantaged, as an enterprise certified according to the
requirements prescribed in Article 7; (2) The term “the disadvantaged” used in this Act means
people who have difficulty in purchasing social services
necessary to themselves for a market price, the detailed cri teria
thereof shall be determined by the Presidential Decree;
(3) The term “social service” used in this Act refers to
service in education, health, social welfare, environment and
culture and other service proportionate to this, whose area is
prescribed by the Presidential Decree; (4) The term “connected enterprise” used in this Act means
an enterprise which provides a certain social enterprise wi th
various support including financial assistance, manageme nt
consultation, etc. and is a personally, materially and lega lly
independent entity of the social enterprise; and
(5) The term “connected local government” used in this Act
refers to a local government which provides administrative and
financial supports for a certain social enterprise with the aim to
expand social service and create jobs for the sake of local
residents.
Article 3 (Functions and Responsibilities by Each Operatin g Entity)
(1) The nation shall draw up support measures for a social

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enterprise and pursue necessary measures comprehensivelyfor
the purpose of social service expansion and job creation.
(2) A local government shall draw up and carry out support
measures for a social enterprise in consideration of local
characteristics.
(3) A social enterprise shall make efforts to reinvest profi ts
created by business activities in the maintenance and expan sion
of social enterprises.
(4) A connected enterprise shall not gain profits made by a
social enterprise.
Article 4 (Social Enterprise Support Committee) (1) In order to deliberate on the following subparagraphs on
social enterprises, the Social Enterprise Support Committ ee
(hereinafter referred to as “the Support Committee”) shall be
placed under the Minister of Labor: 1. Deliberation of the basic plan for social enterprise supp ort
under Article 5;
2. Matters concerning the review criteria for the certifica tion
of a social enterprise under Article 7;
3. Certification of a social enterprise under Article 7; and
4. Other matters necessary for the support of social enterpr ise
determined by the Presidential Decree.
(2) The Committee shall be composed of not exceeding 15
members including one Chairman. The Chairman shall be the
Vice Minister of Labor, and the members shall be appointed by
the Minister of Labor out of persons with deep knowledge and
experience concerning public officials of the related cent ral
administrative agency and social enterprises determined b y the
Presidential Decree.
(3) Necessary matters concerning the operation of the Commi ttee
shall be decided by the Ordinance of the Ministry of Labor.
Article 5 (Establishment of the Basic Plan for Social Enterp rise
Support)
(1) The Minister of Labor shall establish the Basic Plan for
Social Enterprise Support (hereinafter referred to as “the basic
plan”) every five years after the deliberation of the Suppor t
Committee with the aim to promote social enterprises and
support them systematically.
(2) The Basic Plan shall include the following subparagraph s:
1. Direction to promote the support for social enterprises;
2. Matters concerning conditions creation to promote socia l
enterprises;

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3. Matters concerning the operation support for social enterprises;
and
4. Other matters as determined by the Presidential Decree for the purpose of promotion of and support for social
enterprises.
(3) The Minister of Labor shall establish and carry out the
annual implementation plan every year according to the basi c
plan.
(4) Matters necessary for the establishment and implementa tion
of the basic plan and the annual implementation plan shall be
determined by the Presidential Decree.
Article 6 (Research on the Actual Conditions) The Minister of Labor shall conduct research on the actual
conditions of activities done by social enterprises every f ive
years and notify the result to the Support Committee.
Article 7 (Certification of Social Enterprises) (1) Anyone who intends to run a social enterprise shall be
certified by the Minister of Labor after meeting the certifi cation
requirements under Article 8.
(2) When certifying as referred to in paragraph (1), the
Minister of Labor shall go through the deliberation of the
Support Committee.
Article 8 (Certification requirements and Procedures of So cial Enterprise)
(1) Anyone who intends to be certified as a social enterprise
shall fall under any of the following subparagraph: 1. Having the form of organization determined by the
Presidential Decree such as a corporation and association
under the Civil Law or a company and non-profit private
organization, etc. under the Commercial Act;
2. Carrying out business activities including production, sale,
etc. of goods and services by hiring a paid employee;
3. The main purpose of the organization concerned shall be
to realize a social purpose such as enhancing the quality
of local residents’ life by means of providing jobs or
social services for the disadvantaged. In this case, the
specific determination criteria shall be decided by the
Presidential Decree;
4. Having a decision making process in which persons
concerned such as service recipients, workers, etc. partic ipate;
5. Profits made by business activities shall be more than the criteria determined by the Presidential Decree;

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6. Having articles of association, rules, etc. in accordance
with Article 9;
7. When there are profits that can be distributed by fiscal year, 2/3 of the profits or more shall be spent for a
social purpose (limited to a company under the Commercial
Law); and
8. Having other matters determined by the Presidential Decree.
(2) When certifying a social enterprise, the Minister of Labo r
shall publish it in a governmental newspaper.
(3) Matters necessary for certification requirements and
procedures of a social enterprise shall be determined by the
Ordinance of the Ministry of Labor.
Article 9 (Articles of Association, etc.) (1) Anyone who intends to be certified as a social enterprise
shall have the articles of association, rules, etc. (herein after
referred to as “the articles of association, etc.”) stating the
following subparagraphs: 1. Purpose;
2. Contents of business;
3. Title;
4. Location of the main office;
5. Form and operating method of organization and governance ,
and decision making process of important matters;
6. Matters concerning profit sharing and re-investment;
7. Matters concerning contribution and financing;
8. Matters concerning the composition as well as appointmen t
and dismissal of engaged persons;
9. Matters concerning dissolution and liquidation (when a
company under the Commercial Law has remaining asset
that can be distributed, 2/3 of the remaining asset or
more shall be donated to other social enterprise, fund for
public interests, etc.); and
10. Other matters as determined by the Presidential Decree
(2) When there is an alteration in the articles of association
according to paragraph (1), this shall be reported to the
Minister of Labor within 14 days of the day of alteration.
Article 10 (Operation Support, etc.) (1) The Minister of Labor may provide various support such
as specialized advice, information, etc. in areas of admini stration,
technology, tax, labor, accounting, etc. which is needed fo r the
operation of a social enterprise.

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(2) The Minister of Labor may entrust the support business
under paragraph (1) to a government-invested agency or a
private organization determined by the Presidential Decre e.
Article 11 (Support for Facility Expenses, etc.) The nation or a local government may support or finance
site expenses, facility expenses, etc. or lease state-owne d land
and co-owned land, which is necessary for the establishment or
operation of a social enterprise.
Article 12 (Prior Purchasing of Public Institution) (1) The head of a public institution under Article 2(8) of the
Promotion of Small and Medium Enterprises and Encouragemen t
of Purchase of Their Products Act (hereinafter referred to a s
“the head of a public institution”) shall promote the prior
purchasing of goods and services produced by a social
enterprise. (2) When the head of a public institution draws up a
purchasing plan according to Article 12(1) of the Promotion of
Small and Medium Enterprises and Encouragement of Purchase
of Their Products Act, he shall divide the purchasing plan of
goods and services produced by a social enterprise and inclu de
it in the purchasing plan.
Article 13 (Tax Reduction and Support for Social Insurance P remium)
(1) The nation and a local government may reduce national
tax and local tax as determined by the Corporate Tax Act, the
Restriction of Special Taxation Act, and the Local Tax Act. (2) The nation may support a part of employment insurance
premium and industrial accident compensation insurance
premium according to the Act on the Collection, etc. of
Employment Insurance and Industrial Accident Compensatio n
Insurance Premium, insurance premium according to the
National Health Insurance Act, and pension insurance premi um
according to the National Pension Act.
Article 14 (Financial Assistance for a Social Enterprise Pr oviding
Social Service)
(1) The Minister of Labor may provide a social enterprise
providing social service with financial support such as lab or
costs, operating expenses, consultation expenses, etc. wi thin the
limit of the budget through public recruitment and examinat ion.
(2) When providing assistance for a social enterprise which
is connected to a company or a local government prescribed in

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paragraph (1), the Minister of Labor may provide additional
support of business expenses in consideration of the financial
support conditions of a connected company or a connected loc al
government.
(3) Matters necessary for the selection requisites, examin ation
procedure, etc. of the object of financial support shall be
determined by the Ordinance of the Ministry of Labor.
Article 15 (Responsibility Limit of a Connected Company) A connected company shall not hold the employment
responsibility for a worker of a social enterprise.
Article 16 (Tax Reduction for a Connected Company) The nation or a local government may reduce national tax
and local tax for a connected company as determined by the
Corporate Tax Act, the Restriction of Special Taxation Act, and
the Local Tax Act.
Article 17 (Report, etc.) (1) A social enterprise shall draw up a business report
stating matters determined by the Ordinance of the Ministry of
Labor including business performance, interested parties ‘
participation in decision making, etc. and submit it to the
Minister of Labor until the end of February every fiscal year .
(2) The Minister of Labor shall instruct and supervise a
social enterprise, and if deemed necessary, he/she may give a
social enterprise and its member an order to make a report or
submit a related document necessary for the business. (3) The Minister of Labor may, if necessary, give a correctiv e
order after reviewing the report or instructing and supervi sing
under paragraph (1) and (2).
Article 18 (Cancellation of Certification) (1) The Minister of Labor may cancel a certification when a
social enterprise falls one of the following subparagraphs :
1. In case the person gets certification in false or other
fraudulent ways; and
2. In case the person fails to have certification requiremen ts
under Article 8.
(2) The Minister of Labor shall hold a hearing in case of
cancelling a certification under paragraph (1). (3) Specific criteria and detailed procedures of a certific ation
cancellation shall be determined in accordance with the
standards set by the Ordinance of the Ministry of Labor.

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Article 19 (Restriction of the Use of Similar Title)Anyone who is not a social enterprise shall not use the title
of social enterprise or a similar title.
Article 20 (Delegation of Authority) Part of the authority given to the Minister of Labor under
this Act may be delegated to the head of a local government or
the head of an employment security agency under the
requirements prescribed by the Presidential Decree.
Article 21 (Fine for Negligence) (1) A person who falls under any of the following subparagrap hs
shall be punished by a fine for negligence not exceeding ten
million won: 1. A person who fails to comply with an corrective orderunder Article 17 (3); and
2. A person who uses a social enterprise or a similar title in violation of Article 19.
(2) A person who falls under any of the following subparagrap hs
shall be punished by a fine for negligence not exceeding five
million won: 1. A person who fails to comply with his/her duty to
report the alteration of the articles of association, etc.
under Article 9 (2);
2. A person who is negligent in his/her duty to draw up
and submit a business report according to Article 17 (1)
or makes a report in false or other fraudulent ways; and
3. A person who fails to make a report or submit a
document according to Article 17 (2), or makes a false
report.
(3) The fine for negligence under paragraph (1) and (2) shall
be imposed and collected by the Minister of Labor under the
requirements prescribed by the Presidential Decree. (4) A person who is dissatisfied with the imposition of a
fine for negligence under paragraph (3) may raise an objecti on
against the Minister of Labor within 30 days of the notificat ion
of the imposition.
(5) If a person on whom a fine for negligence is imposed
under paragraph (3), raises an objection pursuant to paragr aph
(4), the Minister of Labor shall notify the competent court
thereof without delay, and the competent court shall try the
case under the Non-contentious Case Litigation Procedure A ct.
(6) If a person fails to pay a fine for negligence without
raising an objection within the period prescribed in paragr aph

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(4), the fine for negligence shall be collected in accordance with
the examples of disposition of national taxes in arrears.
Addendum
This Act shall enter into force on Jul. 1, 2007.
ADDENDA
Article 1 (Enforcement Date) This Act shall enter into force on the date of its
promulgation, but the revised provisions of. Article 9 (7) o f the
Addenda shall enter into force on Jul. 1, 2007.
Articles 2 through 8 Omitted.
Articles 9 (Revision of Other Laws) (1) through (6) Omitted.
(7) Parts of the Act on the Promotion of Social Enterprises
shall be revised as follows:
“Article 10 (1) of the Promotion of Small and Medium
Enterprises and Encouragement of Purchase of Their Product s
Act” as prescribed in Article 12 (2) shall be changed to “Arti cle
12 (1) of the Promotion of Small and Medium Enterprises and
Encouragement of Purchase of Their Products Act.” (8) through (17) Omitted.
Article 10 Omitted

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