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BASIC WORKERS WELFARE ACT

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BASIC WORKERS WELFARE ACT

Act No. 6510, Aug. 14, 2001

Amended by Act No. 6916, May 29, 2003

Act No. 7159, Jan. 29, 2004

Act No. 7469, Mar. 31, 2005

Act No. 8135, Dec. 30, 2006

Act No. 8635, Aug. 3, 2007

Act No. 8852, Feb. 29, 2008

Act No. 9042, Mar. 28, 2008

CHAPTER

General Provisions

Article 1 (Purpose)

The purpose of this Act is to improve workers' quality of life and contribute to the balanced development of the national economy by prescribing the matters necessary in establishing welfare policies for workers and carrying out welfare projects. Article 2 (Definition)

The terms used in this Act are defined as follows :

1. The term ▀Íworker▀Îrefers to a person who lives on wages, salary and other corresponding incomes, regardless of types of occupation

2. The term ▀Íemployer▀Îrefers to a person who carries out business using workers.

3. The term "housing business operator" refers to a person who builds or purchases houses for the purpose of selling or leasing them to workers.

4. The term ▀Íemployee stock ownership association▀Îrefers to an entity which is organized by workers of a corporation in accordance with the conditions prescribed in this Act in order to acquire and manage the stocks of the corporation concerned.

Article 3 (Basic Principles of Workers Welfare Policies) (1) Worker welfare (excluding basic working conditions such - 2 -

as wages, working hours, etc.) policies shall aim to expand opportunities for workers to participate in economic and social activities, to promote their will to work and to improve their quality of life.

(2) In establishing and implementing worker welfare policies, consideration and support shall be given to ensure that workers are not subject to discrimination on the grounds of gender, age, physical condition, employment type, religion, social status, etc.

(3) In providing support for the improvement of workers▀Ë welfare pursuant to this Act, preferential treatment shall be given to workers in small and medium enterprises, low-income workers and workers on long-term service.

(4) The scope of small and medium enterprises, low-income workers and workers on long-term service referred to in paragraph (2) shall be prescribed by the Ordinance of the Ministry of Labor in consideration of the characteristics of workers welfare projects.

Article 4 (Responsibility of the State or Local Governments) In establishing and implementing workers welfare policies, the State or local governments shall make efforts to promote workers▀Ëwelfare by providing budget and taxation support according to the basic principles of workers welfare policies prescribed in Article 3.

Article 5 (Responsibility of Employers and Trade Unions) (1) An employer shall make an effort to promote the welfare of workers in the concerned workplace.

(2) An employer may establish an in-company Workers Welfare Fund to promote the welfare of workers in the concerned workplace. Necessary matters concerning the establishment and management of and support, etc., for an in-company Workers Welfare Fund shall be prescribed by a separate law. (3) Trade unions and workers shall make an effort to improve productivity by increasing their will to work and cooperate on workers welfare policies.

Article 6 (Prohibition of Use for Other Purposes) Any person who receives subsidies or loans for workers▀Ë welfare shall use the money only for the intended projects. - 3 -

Article 7 (Raising Funds)

(1) The State shall make an active effort to raise funds needed for workers welfare projects under this Act. (2) The funds raised pursuant to paragraph (1) may be contributed or loaned to the Workers Welfare Promotion Fund under Article 47.

Article 8 (Workers Welfare Policy Committee)

(1) The Central Workers Welfare Policy Committee (hereinafter referred to as ▀Íthe Central Committee▀Î) shall be set up in the Ministry of Labor to deliberate the basic directions of and major policies on workers welfare under this Act. (2) The Central Committee shall be composed of less than 15 members including a chairman, with the numbers of members representing workers, employers and public interests to be equal, and the chairman shall be assumed by the Minister of Labor and its members shall be appointed by the Minister of Labor from among those prescribed by the Presidential Decree. (3) The Central Committee shall deliberate the matters described in any of the following subparagraphs:

1. Basic plan for the promotion of workers▀Ëwelfare under Article 9 (1);

2. Matters concerning the raising of funds needed for workers welfare projects; and

3. Other matters referred to by the chairman. (4) Necessary matters concerning the composition and operation of the Central Committee shall be prescribed by the Presidential Decree.

(5) A City and Provincial Workers Welfare Policy Committee (hereinafter referred to as ▀ÍCity and Provincial Committee▀Î) may be set up in special cities, metropolitan cities and provinces (hereinafter referred to as ▀Ícities and provinces▀Î) to deliberate the basic directions of and major policies on workers▀Ëwelfare in cities and provinces. In case there are other committees suitable to function as the City and Provincial Committee, the former may take the place of the latter and necessary matters concerning the composition and operation of the City and Provincial Committee shall be prescribed by an ordinance. Article 9 (Establishment, etc., of Basic Plan)

(1) The Minister of Labor shall establish a basic plan for the promotion of workers▀Ëwelfare(hereinafter referred to as the ▀Íbasic plan▀Î) every five years through consultation with the - 4 -

heads of related central administrative agencies. In this case, the basic plan shall be subject to deliberation by the Central Committee under Article 8.

(2) The basic plan shall include the matters described in any of the following subparagraphs:

1. Matters on workers▀Ëresidential stability;

2. Matters on workers▀Ëlivlihood stability;

3. Matters on workers▀Ëproperty formation;

4. Matters on the employee stock ownership system;

5. Matters on the establishment and operation of welfare facilities for workers:

6. Matters on the raising of funds needed for workers welfare projects; and

7. Other matters considered by the Minister of Labor to be necessary for the promotion of workers▀Ëwelfare.

(3) The Minister of Labor shall, if he/she has established a basic plan, shall announce it.

(4) The head of a local government shall establish and implement the workers welfare promotion plan of the local government concerned in accordance with a basic plan deliberated by the Central Committee pursuant to Article 8(3). Article 10 (Cooperation, etc., of Related Authorities) (1) The Minister of Labor or the head of a local

government may request related agencies and associations such as central administrative agencies to submit documents required for the establishment of a basic plan and implementation of workers welfare projects and the related agencies and associations shall comply with such a request unless there is a justifiable reason.

(2) If local governments and the State-subsidized nonprofit corporations carry out workers welfare projects, they shall consult with the Minister of Labor.

Article 11 (Financial Institutions Engaging in Loan Activities) (1) The State and a local government may have financial institutions (hereinafter referred to as ▀Íinstitutions engaging in loan activities▀Î) described in any of the following subparagraphs engage in loan activities under this Act:

1. A financial institution established under Article 8 (1) of the Banking Act; and

2. Other financial institutions prescribed by the Presidential Decree.

(2) The Minister of Labor and the head of a local - 5 -

government may give priority, such as in engaging in loan activities under this Act, to the financial institutions which give preferential treatment to workers.

Article 12 (Tax Incentives)

The State or the head of a local government may provide tax incentives as prescribed in tax laws such as the Restriction of Special Taxation Act, in a bid to promote workers▀Ëwelfare by ensuring workers▀Ëresidential stability, livlihood stability, property formation, the activation of the employee stock ownership system, and the establishment and operation of workers welfare facilities and the workers welfare promotion fund. - 6 -

CHAPTER

Workers Residential Stability

Article 13 (Operation of Workers Housing Supply System) (1) In order to support the acquisition or rental of housing by workers, the State and a local government may operate a system of having a housing business operator sell or lease (hereinafter referred to as ▀Ísupply▀Î) housing preferentially to workers. (2) The Minister of Land, Transport and Marine Affairs shall include a supply plan on the housing to be supplied to workers (hereinafter referred to as ▀Íhousing for workers▀Î) pursuant to paragraph (1) in the comprehensive housing plan prescribed in Article 7 of the Housing Act. (3) Types and sizes of housing for workers, workers to be supplied with housing, supply methods and other necessary matters shall be determined by the Minister of Land, Transport and Marine Affairs through consultation with the Minister of Labor.

Article 14 (Loans for Workers' Housing Funds)

(1) In the cases falling under any of the following subparagraphs, the State may provide loans for funds (hereinafter referred to as "workers' housing funds") needed by a housing business operator or a worker out of the National Housing Fund prescribed in Article 60 of the Housing Act:

1. In case a housing business operator builds or purchases housing for workers; and

2. In case a worker acquires housing for workers. (2) Necessary matters concerning those eligible for and procedures for loans for workers' housing funds, and other supports shall be determined by the Minister of Land, Transport and Marine Affairs through consultation with the Minister of Labor.

Article 15 (Loans for Housing Purchase Funds, etc.) (1) To ensure workers▀Ëresidential stability, the State may provide loans for funds(hereinafter referred to as ▀Íhousing purchase funds▀Î) needed by workers to purchase(including new construction) or rent housing out of the National Housing Fund prescribed in Article 60 of the Housing Act. No. 6916, May 29, 2003>

(2) The State or a local government may have institutions engaging in loan activities provide loans for housing purchase funds to workers at an interest rate lower than general interest rates and pay the balance.

(3) Necessary matters concerning those eligible for and procedures for loans for housing purchase funds, and other supports shall be determined by the Minister of Land, Transport and Marine Affairs through consultation with the Minister of Labor.

Article 16 (Support for Moving by Workers, etc.)

The State may provide necessary support to ensure residential stability for workers who move or live far away from their families because of employment and a local government may do so for workers who move or live far away from their families because of employment, a change of workplace, etc.

CHAPTER

Workers Livlihood Stability and Property Formation Article 17 (Support for Livlihood Stability Funds) (1) The State shall provide necessary support such as loans for medical, wedding and funeral expenses of workers and their families in order to support workers▀Ëlivlihood stability. (2) Taking into account the economic situation and the time when workers need livlihood stability funds, etc., the State may provide necessary support such as loans for living expenses in order to stabilize the livlihood of workers who do not receive their wages.

(3) Necessary matters concerning those eligible for and procedures for support for medical, wedding, funeral, and living expenses under paragraph (1) and (2) shall be prescribed by the Ordinance of the Ministry of Labor. Article 18 (Support, etc., for School Expenses)

(1) The State may provide necessary support such as scholarship or loans for school expenses in order to expand opportunities of education for workers and their children.

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(2) Necessary matters concerning those eligible for and procedures for the provision of scholarship and loans for school expenses shall be prescribed by the Ordinance of the Ministry of Labor.

Article 19 (Preferential Savings Account for Workers) The State shall operate a savings account giving preferential treatment to workers in order to support workers property formation.

Article 20 (Support for Gain-sharing, etc.)

(1) If a business achieves more than its business targets, such as profit targets for the year concerned, etc., set in consultation with workers, the employer shall make an effort to distribute the surplus to workers or use it to promote workers▀Ë welfare.

(2) If a worker in the concerned workplace invents or makes a suggestion related to his/her work or contributes to an increase in productivity and sales of the company by developing new knowledge, information and technology, the employer shall make an effort to give a corresponding reward to the worker. In this case, specific criteria for the reward shall be determined through the Labor-Management Council, etc. pursuant to the Act on the Promotion of Worker Participation and Cooperation. (3) The State or a local government may provide necessary support in a bid to activate the gain-sharing, etc., prescribed in paragraph (1) and (2).

CHAPTER

Support for Credit Guarantee for Workers

Article 21 (Credit Guarantee Support and Those Eligible Therefor) (1) With regard to monetary obligations a worker weak in capability to offer collaterals(including the unemployed who has applied for job-seeking service and workers suffering from accidents as prescribed in the Industrial Accident Compensation Insurance Act; hereinafter the same shall apply in this Chapter) has to pay as he/she has received loans for the livelihood stability and school expenses, etc., from a financial institution, the Korea Labor Welfare Corporation(hereinafter referred to as the ▀ÍCorporation▀Î) established under the Industrial Accident - 9 -

Compensation Insurance Act may guarantee the payment of the monetary obligations according to a contract with the concerned financial institution. In this case, loan business and workers eligible for such guarantee shall be prescribed by the Ordinance of the Ministry of Labor.

(2) The contract between the Corporation and a financial institution under paragraph (1) shall contain the matters described in any of the following subparagraphs:

1. Contents that guarantee the payment of obligations pursuant to paragraph (1);

2. Loan business and workers eligible for the credit guarantee;

3. Ceiling amount for the credit guarantee support per worker;

4. Reasons for and period and method of a request for the payment of guaranteed obligations;

5. Deliberation on and scope of the substitute payment and the ratio in which the Corporation and the financial institution share the amount of loss;

6. Matters to be notified to the Corporation by the financial institution concerning the operation of the credit guarantee system ; and

7. Other matters necessary for the credit guarantee for workers.

(3) If the Corporation intends to sign the contract prescribed in paragraph (1), it shall obtain an approval from the Minister of Labor. The same shall apply if the Corporation intends to modify the contents of the contract.

Article 22 (Guaranty Relationship)

(1) If the Corporation has decided to provide a credit guarantee for a worker, it shall notify the concerned worker and the financial institution from which the worker intends to receive loans of the fact.

(2) Credit guaranty relationship is established at the time when the notified financial institution offers loans to the concerned worker pursuant to paragraph (1).

Article 23 (Fee for Guarantee)

The Corporation may collect guarantee fees from a worker whose credit is guaranteed pursuant to Article 21 at an annual rate not exceeding 1/100 on the guaranteed amount as prescribed by the Presidential Decree.

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Article 24 (Obligation of Notification)

If a financial institution given a notification pursuant to Article 22 falls under any of the following subparagraphs, it shall notify the Corporation of the fact without delay:

1. In case the main liability relationship has been established;

2. In case all or part of the main liabilities become extinguished;

3. In case the worker fails to pay his/her liabilities;

4. In case the worker loses the benefit of time; and

5. In case there occur other reasons which are feared to influence the guaranteed obligations.

Article 25 (Performance etc., of Guaranteed Obligations) (1) A financial institution which engages in loan business pursuant to Article 21 (1) may request the Corporation to perform guaranteed obligations according to the same Article, if there occur reasons to request the performance of guaranteed obligations.

(2) The Corporation shall, if a financial institution requests the performance of guaranteed obligations pursuant to paragraph (1), make a substitute payment in accordance with the contract under Article 21 (2).

(3) If the Corporation performs guaranteed obligations pursuant to paragraph (2), it may exercise the right to indemnity and the exercise of the said right may be entrusted to financial institutions, etc.

(4) The financial institutions, etc., to which the exercise of the right to indemnity is entrusted pursuant to paragraph (3) may take all judicial and non-judicial actions relating to the exercise of the right to indemnity on behalf of the Corporation. Article 26 (Amount of Loss)

If the Corporation has paid guaranteed obligations, it may collect the amount of loss at a rate not exceeding 20/100 of the annual rate on the paid amount from the concerned worker as prescribed by the Presidential Decree, for the period starting from the date of payment until when the worker reimburses the amount.

CHAPTER

Employee Stock Ownership System

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Article 27 (Purpose of Employee Stock Ownership System) The purpose of the employee stock ownership system is to improve workers▀Ëeconomic and social status and enhance cooperation between labor and management by enabling workers to acquire and hold the stocks (hereinafter referred to as "company's own stocks") of a company where an employee stock ownership association is set up through the employee stock ownership association.

Article 28 (Establishment of Employee Stock Ownership Association) (1) Workers may establish an employee stock ownership association as prescribed by the Presidential Decree. In this case, the workers shall consult with the company in advance.

(2) With respect to the establishment and operation of an employee stock ownership association, the provisions of the Civil Act on corporate judicial persons shall be applied mutatis mutandis, unless otherwise provided for in this Act. Article 29 (Membership, etc., of Employee Stock Ownership Association)

(1) All workers [including the workers of a company (hereinafter referred to as the "affiliated company") which through ownership rights, controls 50/100 or more of the total stocks issued by the company concerned as prescribed by the Presidential Decree] of a company with an employee stock ownership association can join the employee stock ownership association : Provided that a person falling under any of the following subparagraphs shall not become a member of the employee stock ownership association and an existing member of the employee stock ownership association falling under these shall lose his/her membership:

1. An officer appointed at the general shareholders▀Ëmeeting of the company concerned or affiliated company thereof : Provided that if a member of the employee stock

ownership association is selected as an officer at the general shareholders' meeting, he/she can maintain his/her membership in the employee stock ownership association only in relation to the company's own stocks allocated to him/her as a member of the employee stock ownership association and the employee stock options granted pursuant to Article 32-2;

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2. A shareholder of the company concerned or in the case of a worker of the affiliated company, a shareholder of the affiliated company : Provided that minority shareholders prescribed by the Presidential Decree shall be excluded from this; and

3. Other persons prescribed by the Presidential Decree. (2) A member of an employee stock ownership association may freely withdraw from the employee stock ownership association: Provided that an employee stock ownership association member who withdrew from the employee stock ownership association may be prohibited from rejoining the association for up to a period prescribed by the Presidential Decree in accordance with the association rules prescribed in subparagraph 1 of Article 30 (2).

(3) A worker (excluding those falling under each subparagraph of paragraph (1) : hereinafter in this Act, the same shall apply.) of the affiliated company shall satisfy all of the following requirements to join the employee stock ownership association of the company (hereinafter referred to as the "controlling company") controlling the affiliated company pursuant to paragraph (1) and if the employee stock ownership association of the affiliated company is set up after he/she joins the employee stock ownership association of the controlling company, he/she shall lose his/her membership in the employee stock ownership association of the controlling company :

1. He/she shall obtain the consent of a majority of all workers of the affiliated company;

2. He/she shall obtain the consent of the employee stock ownership association of the controlling company; and

3. In case an employee stock ownership association has been set up in the affiliated company, the employee stock ownership association concerned shall be dissolved : Provided that this shall not apply in a case falling under the proviso of Article 39 (1) 4.

(4) A worker of a company shall, if there are changes to his/her membership of the employee stock ownership association due to the incorporation of the company into an affiliated company, its exclusion from an affiliated company, etc., maintain his/her membership in the employee stock ownership association prior to the changes only in relation to the company's own stocks already allocated to him/her and the employee stock options granted pursuant to Article 32-2. Inserted by Act No. 7469, Mar. 31, 2005>

Article 30 (Operation of Employee Stock Ownership Association) (1) An employee stock ownership association shall be operated in a democratic way by reflecting the opinions of all members of the association.

(2) The matters described in any of the following subparagraphs shall be determined after resolution at a general meeting of employee stock ownership association members:

1. Matters on the enactment and modification of the association rules;

2. Matters on the establishment of an employee stock ownership association fund pursuant to Article 35;

3. Matters on the budget and settlement of accounts;

4. Matters on the election of officers including the representative of the employee stock ownership association;

5. Deleted ; and

6. Other important matters. (3) An employer stock ownership association may have a meeting of delegates instead of a general meeting of employee stock ownership association members according to the association rules : Provided that the matters prescribed in subparagraph 1 and 5 of paragraph (2) shall be determined after resolution at a general meeting of employee stock ownership association members. (4) Officers and delegates such as the representative of the employee stock ownership association shall be elected in a direct, secret and unsigned vote.

(5) Other necessary matters concerning the operation of an employee stock ownership association shall be prescribed by the Presidential Decree.

Article 31 (Employee Stock Ownership Association s Exercise of Voting Rights)

(1) The representative of an employee stock ownership association shall exercise voting rights(hereinafter referred to as ▀Ívoting rights▀Î) over the agenda of the general shareholders▀Ë meeting according to opinions expressed by the members of the employee stock ownership association. The specific ways of exercising the voting rights shall be prescribed by the Presidential Decree.

(2) Notwithstanding the provision of paragraph (1), if an employee stock ownership association member demands to be - 14 -

entrusted with the voting rights, the representative of the employee stock ownership association shall entrust the member with the voting right to shares owned by the employee stock ownership association member concerned.

Article 32 (Preferential Allocation to Members of Employee Stock Ownership Association)

(1) If a listed corporation (excluding corporations listed on the KOSDAQ market) under Article 9 (15) 3 of the Capital Market Consolidation Act or a corporation which intends to be listed on the securities market under Article 9 (13) 1 of the same Act invites subscription for, or sells, its stocks pursuant to the same Act, an employee stock ownership association member shall have the right to be preferentially allocated the stocks as prescribed in Article 191-7 of the Securities Transaction Act.

(2) When a corporation other than those prescribed in paragraph (1) invites subscription for, or sells, its stocks or increases its capital with its new stocks pursuant to the Capital Market Consolidation Act, it may preferentially allocate the stocks to an employee stock ownership association member within the scope of the preferential allocation percentage prescribed in Article 191-7(1) of the Capital Market Consolidation Act, notwithstanding the provision of Article 418 of the Commercial Act. Article 32-2 (Employee Stock Option)

(1) A company in which an employee stock ownership association has been established may grant its employee stock association members the right (hereinafter referred to as the "employee stock option") to subscribe to new stocks or buy its own stocks held by the company concerned within the limits of 20/100 of the total number of issued stocks for a price (hereinafter referred to as the "exercise price") set in advance within a certain period (hereinafter referred to as the "offering period"), after resolution at a general meeting of shareholders under the conditions prescribed by the articles of incorporation : Provided that if the employee stock options are granted within the limits of 10/100 of the total number of issued stocks, it shall be granted after resolution at the board of directors under the conditions prescribed by the articles of incorporation. (2) A company (hereinafter referred to as a "company granting employee stock options") which intends to grant - 15 -

employee stock options shall have the following matters prescribed by the articles of incorporation :

1. Statements indicating that it may grant its employee stock ownership association members employee stock options;

2. Types and number of stocks to be issued or transferred as a result of exercising employee stock options;

3. Statements indicating that in certain cases, it may revoke the decision to grant employee stock options through resolution at the board of directors; and

4. Requirements for resolution at a general meeting of shareholders to grant employee stock options.

(3) If a company granting employee stock options makes a resolution at a general meeting of shareholders or the board of directors pursuant to paragraph (1), the following matters shall be included in the resolution :

1. How to grant employee stock options;

2. Matters concerning the exercise price of an employee stock option and the adjustment thereof;

3. Period for offering or exercising employee stock options; and

4. Types and number of stocks to be issued or transferred as a result of exercising an employee stock option (4) The offering period under paragraph (1) shall be six months or more but not more than two years from the date of granting the employee stock options, determined by a general meeting of shareholders or the board of directors pursuant to paragraph (3).

(5) A company granting employee stock options may set a certain exercise period during or after the offering period and allow the exercise of the employee stock options during that period. In this case, if the exercise period comes after the end of the offering period, the offering period shall be deemed to be extended notwithstanding the provision of paragraph (4). (6) A company granting employee stock options may not grant employee stock options to its employee stock ownership association members whose consecutive service period is less than what is prescribed by the Presidential Decree. (7) Employee stock options shall not be transferred to other persons : Provided that if a person granted employee stock options has died, his/her successor shall be deemed to be granted it.

(8) A company granting employee stock options may, if its employee stock ownership association member exercises his/her - 16 -

employee stock options, acquire its own stocks for the purpose of issuing them notwithstanding the provision of Article 341 of the Commercial Act : Provided that the amount of stocks acquired shall be within the limits to which dividends can be paid pursuant to Article 462 (1) of the Commercial Act and if the company acquires its own stocks in excess of the limits, it shall dispose of the excess amount within the period prescribed by the Presidential Decree.

(9) The provisions of Article 350 (2), the latter part of Article 350 (3), Article 351, Article 516-8 (1), (3) and (4) and the former part of Article 516-9 of the Commercial Act shall apply mutatis mutandis to the case where new stocks are issued as a result of exercising employee stock options.

(10) Except those prescribed in paragraphs (1) through (9), necessary matters concerning the operation of an employee stock option system, such as the procedures for granting employee stock options, revocation criteria, exercise price, offering period, option ceilings by types of employee stock ownership association members, etc., shall be prescribed by the Presidential Decree.

Article 32-3 (Preferential Allocation and Restrictions on Granting of Employee Stock Options)

Notwithstanding the provisions of Article 32 and Article 32-2 (1), a company in which an employee stock ownership association has been established shall not preferentially allocate its stocks or grant employee stock options in a way to make the sum of preferentially allocated stocks, stocks that can be acquired in the case of exercising the employee stock options and stocks already held by the employee stock ownership association and its members exceed 20/100 of the sum of new stocks (including new stocks to be issued as a result of granting employee stock options) and already issued stocks. Article 32-4 (Borrowing by Employee Stock Ownership Association) (1) An employee stock ownership association may take out a loan from the company, the shareholders and financial institutions prescribed by the Presidential Decree to acquire the company's own stocks.

(2) The company and the shareholders may make an

agreement with the employee stock ownership association to contribute money or valuable goods for the repayment of the - 17 -

loan prescribed in paragraph (1).

(3) An employee stock ownership association may offer, as collateral, the company's own stocks acquired using a loan to the lender of the loan or the loan guarantor thereof. In this case, it shall be required that as for the company's stocks corresponding to the amount of repaid loan, the security right shall be terminated upon the repayment.

(4) Detailed matters concerning borrowing by an employee stock ownership association, such as repayment methods, loan period, loan size, how to allocate stocks acquired using a loan, etc., shall be prescribed by the Presidential Decree. Article 33 (Acquisition of Company s Own Stocks by Employee Stock Ownership Association and Their Allocation) (1) An employee stock ownership association may acquire the company's own stocks through the contribution of the company's own stocks by the company, the shareholders, etc., and through the purchase, etc., of them using the employee stock ownership association fund created pursuant to Article 35.

(2) An employee stock ownership association shall allocate the company's own stocks acquired pursuant to paragraph (1) to the employee stock ownership association members concerned as prescribed by the Presidential Decree.

Article 34 (Deposit Period of Company's Own Stocks) An employee stock ownership association member shall deposit the company's own stocks allocated to him/her pursuant to Article 32 (2) in a trustee prescribed in Article 37(1) for a period prescribed by the Presidential Decree within the ranges described in any of the following subparagraphs :

1. Stocks acquired through the contribution of the company's own stocks by the company, the shareholders, etc., pursuant to Article 33 (1) and stocks acquired using financial resources prescribed in Article 35 (1) 1 : eight years;

2. Stocks acquired using financial resources prescribed in Article 35 (1) 2 : one year; and

3. Stocks acquired using financial resources prescribed in Article 35 (1) 3 through 5 : period corresponding to the one prescribed in subparagraphs 1 and 2

(2) Notwithstanding the provision of paragraph (1), an employee stock ownership association member may, if there - 18 -

occur reasons prescribed by the Presidential Decree, such as the dissolution of the employee stock ownership association or the death of its member, withdraw the company's own stocks through the employee stock ownership association even in the middle of the deposit period prescribed in paragraph (1). Article 35 (Establishment of Employee Stock Ownership Association Fund)

(1) An employee stock ownership association may create an employee stock ownership association fund using the following financial resources :

1. Money or other valuable goods contributed by the company, the shareholders, etc.;

2. Money contributed by employee stock ownership association members;

3. Loans under Article 32-4;

4. Dividends on stocks held by the employee stock ownership association but not allocated to its members; and

5. Other revenues (2) The employee stock ownership association fund under paragraph (1) shall be used to acquire the company's own stocks, repay the loans prescribed in Article 32-4 (1) and pay interests thereon : Provided that the money or other valuable goods or dividends, etc., under subparagraphs 1 and 4 of paragraph (1) shall not be used to repay loans other than the loans for the repayment of which the company or the shareholders have agreed to make contributions pursuant to Article 32-4 (2) and the money under subparagraph 2 of paragraph (1) shall not be used to repay the loans for the repayment of which the company or the shareholders have agreed to make contributions pursuant to Article 32-4 (2).

Article 36 (Support, etc. for Employee Stock Ownership Association) (1) A company and its shareholders may contribute the company's own stocks or money or other valuable goods to the employee stock ownership association where workers of the company have joined or provide supports such as making loans or guaranteeing loans to finance the purchase of the company's own stocks by the employee stock ownership association or its member who is a worker of the company. In this case, the employee stock ownership association shall operate the - 19 -

company's own stocks acquired through the contribution and support to ensure that the stocks are allocated to its members who are workers of the company.

(2) A company and its employee stock ownership association may set up an employee stock ownership administrative committee with equal numbers of members representing the company and the employee stock ownership association, respectively, as prescribed by the Presidential Decree in order to discuss the contents, conditions, etc., of support for employee stock ownership association.

(3) The provision of Article 341-3 of the Commercial Act shall not apply to stocks a company receives as a security to provide the support prescribed in paragraph (1).

Article 37 (Restriction on Transaction by Employee Stock Ownership Association)

(1) An employee stock ownership association shall deposit the company's own stocks held by itself or allocated to its members through it in a trustee prescribed by the Presidential Decree.

(2) An employee stock ownership association or its members shall not transfer or offer as a security the company's own stocks deposited pursuant to paragraph (1) : Provided that this shall not apply in cases prescribed by the Presidential Decree, including the case prescribed in Article 32-4 (3).

(3) A security right holder who is offered the company's own stocks as a security pursuant to the proviso of paragraph (2) shall not exercise the security right during the deposit period prescribed in Article 34.

(4) An employee stock ownership association shall deposit the employee stock ownership association fund created pursuant to Article 35 in financial institutions prescribed by the Presidential Decree.

(5) If an employee stock ownership association member takes out the company's own stocks according to the rules of the employee stock ownership association, the preemptive right to purchase the stocks may be given first to the employee stock ownership association and then to its members.

Article 38 (Disposition of Unlisted Corporation s Own Stocks) - 20 -

(1) If an employee stock ownership association member in an corporation (hereinafter referred to as an "unlisted corporation") which is not listed on the stock market under Article 9 (13) of the Capital Market Consolidation Act inevitably intends to dispose of the company's own stocks acquired pursuant to Article 33, the State shall make an effort to take necessary measures concerning share transaction, etc., to ensure the conversion of the stocks into cash. (2) An unlisted corporation, if the company's stocks are not listed on a stock market within three years after the establishment of the employee stock ownership association, may accumulate reserves to buy back the company's own stocks acquired by employee stock ownership association members pursuant to Article 33. (3) Notwithstanding the provision of Article 341 of the Commercial Act, an unlisted corporation may acquire its stocks held by current or retiring employee stock ownership association members, if it is deemed necessary in order to ensure the conversion of stocks into cash under paragraph (1). In this case, the acquired stocks shall be disposed of in accordance with the following methods :

1. Contribution of the stocks to the employee stock ownership association;

2. Disposition of the stocks pursuant to Article 342 of the Commercial Act; and

3. Retirement of the stocks as gains to be distributed among the shareholders according to the resolution made at a general meeting of shareholders.

Article 39 (Dissolution of Employee Stock Ownership Association) (1) An employee stock ownership association shall be dissolved, if there occurs reasons falling under any of the following subparagraphs. In this case, the liquidator shall report this, along with clearly stated reasons for the dissolution, to the Minister of Labor clearly as prescribed by the Presidential Decree. <Amended by Act No. 7469, Mar. 31, 2005> <p> <p>1. Bankruptcy of the company concerned; <p>2. Dissolution of the company concerned for the discontinuation of business; <p> - 21 - <p> <p>3. Dissolution of the company concerned for the merger, split-up, and split-up and then merger of business; <p>4. In case workers of an affiliated company joins the employee stock ownership association of the controlling company pursuant to Article 29 : Provided that this shall not apply for a period prescribed by the Presidential Decree in case the employee stock ownership association of the affiliated company or its members hold the company's own stocks or are granted employee stock options; and <p> <p>5. In case the employee stock ownership association has no officer, has not held any assets such as the company's own stocks, employee stock ownership association funds, etc., for the past three fiscal years, and are the one prescribed by the Ordinance of the Ministry of Labor. (2) If an employee stock ownership association is dissolved pursuant to paragraph (1), the property of the employee stock ownership association shall be reverted to members of the employee stock ownership association as prescribed by the rules : Provided that in case the employee stock ownership association has liabilities, the property which is left after the liabilities are cleared off shall be reverted to members of the employee stock ownership association. Article 40 (Support for Activation of Employee Stock Ownership System) <p> The State may provide necessary supports for the acquisition and holding of the company's own stocks by employee stock ownership association members, the support for the employee stock ownership association by a company, etc., and the guarantee, etc., of the conversion of the company's own stocks into cash by an unlisted corporation for the purpose of activating the employee stock ownership system. <Amended by Act No. 7469, Mar. 31, 2005> <p> Article 41 (Special Case for Listed Corporation, etc.) Notwithstanding the provisions of this Act, the relevant provisions of the Securities Transaction Act shall be preferentially applied with regard to the preferential allocation of stocks in a corporation which is listed or intends to be listed on the securities market under Article 32 (1). <Amended by Act No. 7469, Mar. 31, 2005> <Title of This Article Amended by Act No. 7469, Mar. 31, 2005> <p> - 22 - <p> Article 42 (Support for Workers Takeover of Company) In case workers take over their company through the employee stock ownership association due to the company▀Ës bankruptcy, etc., the State may provide necessary supports such as providing money needed to acquire the stocks. <p> CHAPTER <p> Support for Workers Welfare Facilities, etc. <p> Article 43 (Support for Establishment, etc. of Workers Welfare Facilities) <p> (1) The State and a local government shall make an effort to establish and operate welfare facilities for workers(hereinafter referred to as ▀Íworkers welfare facilities▀Î). In this case, the head of a local government which establishes workers welfare facilities shall consult with the Minister of Labor. (2) The Minister of Labor may set the standards for the establishment of workers welfare facilities in consideration of the type of business and the number of workers in the workplace and recommend the employer concerned to establish the facilities. <p> (3) The State may provide necessary supports, if an employer (including an employers▀Ëassociation ; hereinafter the same shall apply in this Article), a trade union (including regional branches, subchapters, etc. ; hereinafter the same shall apply.), the Corporation or a nonprofit corporation builds or acquires workers welfare facilities. <p> (4) The State may provide support for part of the expenses within the budget to a local government, an employer, a trade union, the Corporation or a nonprofit corporation which establishes and operates workers welfare facilities. <p> Article 44 (Entrustment of Operation of Employee Welfare Facilities) (1) The State or a local government may entrust the Corporation or a nonprofit organization to operate the workers welfare facilities established pursuant to Article 43(1), if it is necessary in order to efficiently operate the concerned facilities. (2) The State or a local government may, in case it entrusts the operation of workers welfare facilities pursuant to paragraph (1), subsidize part of the expenses for the operation within the budget. <p> - 23 - <p> Article 45 (Use Fees, etc.) <p> A person who establishes and operates workers welfare facilities may place some restrictions with regard to the users of workers welfare facilities or charge use fees on an unequal basis in consideration of the characteristics of workers. Article 46 (Support for Cost of Using Private Welfare Facilities) (1) In case the worker prescribed in Article 3 (3) uses privately operated welfare facilities because he/she has difficulties in using the workers welfare facilities prescribed in Article 43 (1), the State may provide support for part of the cost. <Amended by Act No. 9042, Mar. 28, 2008> <p> (2) Necessary matters concerning those eligible for the support and procedures for the support under paragraph (1) shall be prescribed by the Ordinance of the Ministry of Labor. CHAPTER <p> Workers Welfare Promotion Fund <p> Article 47 (Establishment of Fund) <p> The Minister of Labor shall establish the Workers Welfare Promotion Fund(hereinafter referred to as the ▀ÍFund▀Î) in order to secure the money necessary for workers welfare projects. Article 48 (Raising the Fund) <p> (1) The Fund shall be created from the financial resources described in any of the following subparagraphs: <Amended by Act No. 7159, Jan. 29, 2004> <p> <p>1. Contributions by the government; <p>2. Cash, goods and other properties contributed by persons other than the government; <p> <p>3. Money transferred from other funds; <p>4. loans under paragraph (2); <p>5. Fees for guarantee, amount of indemnity and losses under Articles 23, 25 and 26; <p> <p>6. Proceeds from the sale of lottery tickets which are distributed under Article 23 (1) of the Lottery Tickets and Lottery Fund Act; <p> <p>7. Properties of the Employee Welfare Fund reverted to the Fund according to the by-laws in case of the <p> - 24 - <p> dissolution of the Employee Welfare Fund established pursuant to the Employee Welfare Fund Act; <p> <p>8. Donations by an employer or an employers▀Ëassociation; <p>9. Capital created pursuant to Article 28-2 of the Basic Employment Policy Act; <p> <p>10. Profits generated from the operation of the Fund; and <p>11. Other revenues. (2) If it is necessary for the operation of the Fund, money may be borrowed from financial institutions or other funds at the expense of the Fund. <Amended by Act No. 8135, Dec. 30, 2006> <p> Article 49 (Fiscal Year) <p> The fiscal year of the Fund shall correspond to that of the government. <p> Article 50 (Management and Operation of Fund) <p> (1) The Fund shall be managed and operated by the Corporation. <p> (2) When the Corporation operates the Fund, it shall account for the Fund apart from other accounts. <p> (3) Necessary matters concerning the management and operation of the Fund shall be prescribed by the Presidential Decree. <p> Article 51 (Use of Fund) <p> The Fund shall be used for the following purposes: <p>1. Loans for workers▀Ëhousing purchase; <p>2. Loans for workers▀Ëlivlihood stability; <p>3. Scholarships and loans to workers and their children for school expenses; <p> <p>4. Expenses for supporting credit guarantee pursuant to Article 21; <p> <p>5. Support relating to the employee stock ownership system; <p>6. Financial support for the establishment and operation of workers welfare facilities; <p> <p>7. Support for cultural and leisure activities to enrich workers▀Ëlife <p> <p>8. Expenses for the medical-care activities to promote workers▀Ëhealth; <p> <p>9. Expenses for the research and development regarding workers welfare projects; <p> <p>10. Expenses for the implementation and management of unemployment measures under Article 28 of the Basic - 25 - <p> Employment Policy Act; <p> <p>11. Investment in profit-making businesses to increase the size of the Fund; <p> <p>12. Expenses for the creation, management and operation of the Fund; and <p> <p>13. Other necessary supports for the activities prescribed by the Presidential Decree to promote workers▀Ëwelfare. Article 52 (Separate Accounting, etc.) <p> (1) The funds prescribed in subparagraph 5 and 9 of Article 48 (1) shall be accounted for apart from those which are formed and operated for other business purposes. <p> (2) The funds prescribed in subparagraph 5 and 9 of Article 48 (1) shall be used for the expenses prescribed in subparagraph 4 and 10 of Article 51. <p> (3) Notwithstanding the provisions of paragraphs (1) and (2), the Corporation may, with the approval of the Minister of Labor, reciprocally divert the funds, which are separately accounted for in the Fund, to cover the expenses prescribed in subparagraph 4 of Article 51. <p> Article 53 Deleted. <Act No. 7159, Jan. 29, 2004> CHAPTER <p> Supplementary Provisions <p> Article 54 (Guidance and Inspection, etc.) <p> (1) The Minister of Labor may, if it is necessary to promote workers▀Ëwelfare, have the Corporation report matters concerning the management and operation of the Fund and the nonprofit organizations entrusted with the operation of workers welfare facilities pursuant to Article 44 (1) report matters concerning its business, accounting and property, or have his/her public official inspect the concerned account books, documents and other goods, and if it is deemed necessary, order redress in relation to its operation, etc., as prescribed by the Presidential Decree. <p> (2) If it is deemed necessary for the purpose of inspecting an employer, a institution dealing with loans, an employee stock ownership association, a trustee prescribed in Article 37, and a person offered subsidy or loans, the State or a local - 26 - <p> government may order them to report and submit materials relating to the business under this Act, and have a public official under its authority question a related person or investigate and inspect related account books, documents, etc. (3) A public official who conducts inspection pursuant to paragraph (1) and (2) shall show a certificate indicating his/her authority to a related person. <p> Article 55 (Delegation and Entrustment of Authority) The Minister of Labor may delegate or entrust part of his/her authority prescribed in this Act to the head of a local labor office, a workers welfare-related agency or organization under the conditions prescribed by the Presidential Decree. Article 56 (Return Order) <p> (1) The State or a local government may order a person who violates the provision of Article 6 to return all or part of subsidy and loans received under the conditions prescribed by the Presidential Decree. <p> (2) The State or a local government may order a person who receives subsidy or loans pursuant to this Act in a false or other fraudulent ways to return all or part of the subsidy and loans received under the conditions prescribed by the Presidential Decree. <p> (3) A person who receives a return order pursuant to paragraph (1) and (2) shall make the repayment even before the repayment deadline. <p> Article 57 (Fine for Negligence) <p> (1) A person who violates the provision of Article 6 shall be punished by a fine for negligence not exceeding three million won. <p> (2) A person who falls under any of the following subparagraphs shall be punished by a fine for negligence not exceeding one million won: <p> <p>1. A person who violates the provisions of Article 30, 31, 33 (2), 37 (1) and (2) and 39; <p> <p>2. A person who fails to report or makes a false report in violation of the order under the provision of Article 54 (1), or refuses, interferes with or evades the examination under the same paragraph; or <p> <p>3. A person who fails to report or makes a false report in violation of the order under the provision of Article 54 (2), who fails to submit documents or submits false documents, who violates other orders needed for inspection, or who - 27 - <p> refuses, interferes with or evades the examination under the same paragraph. <p> (3) The fine for negligence prescribed in paragraph (1) and (2) shall be imposed and collected by the competent authorities under the conditions prescribed by the Presidential Decree. (4) A person who is dissatisfied with the imposition of a fine for negligence as referred to in paragraph (3) may raise an objection against the person imposing the fine within 30 days from the date on which the notification of the imposition is received. <p> (5) If a person imposed with a fine for negligence pursuant to paragraph (3) raises an objection pursuant to paragraph (4), the competent authorities shall notify the competent court of this without delay, and the court receiving the notification shall judge the case of the fine for negligence in accordance with the Non-Contentious Case Litigation Procedure Act. <p> (6) If no objection is raised within the period stipulated in paragraph (4) nor is the fine for negligence paid, the fine shall be collected according to an example of the disposition of national or local taxes in arrears. <p> Addenda <Act No. 9042, Mar. 28, 2008> <p> Article 1 (Enforcement Date) <p> This Act shall enter into force on the date of its promulgation. <p> <!--sino noindex--> <!--make_database footer start--> <p class="make-database"></p> <hr class="make-database"> <small class="make-database"> <p class="make-database"> <b class="make-database"> AsianLII: </b> <a href="/asianlii/copyright.html" class="make-database">Copyright Policy</a> <b class="make-database">|</b> <a href="/asianlii/disclaimers.html" class="make-database">Disclaimers</a> <b class="make-database">|</b> <a href="/asianlii/privacy.html" class="make-database">Privacy Policy</a> <b class="make-database">|</b> <a href="/asianlii/feedback.html" class="make-database">Feedback</a><br> URL: <i class="make-database">http://www.asianlii.org/kr/legis/laws/bwwa215</i><br> </p> </small> </body> </html>