[Enforcement Date 28. Jun, 2017.] [Presidential Decree No.28162, 27. Jun, 2017., Partial Amendment]
Ministry of Employment and Labor (Retirement Pension Welfare Division) , 044-202-7559
Article 1 (Purpose)
The purpose of this Decree is to prescribe matters delegated by the Framework Act on Labor Welfare and those matters necessary for the implementation thereof.
Article 2 Deleted. <by Presidential Decree No. 25520, Jul. 28, 2014>
Article 3 (Institutions Providing Loan Services)
The phrase “financial companies, etc. specified by Presidential Decree” referred to in Article 12 (1) 2 of the Framework Act on Labor Welfare (hereinafter referred to as the “Act”), means the following financial companies: <Amended by Presidential Decree No. 23496, Jan. 6, 2012; Presidential Decree No. 25520, Jul. 28, 2014; Presidential Decree No. 27556, Oct. 25, 2016>
1. The NH Bank under the Agricultural Cooperatives Act;
2. The Suhyup Bank under the Fisheries Cooperatives Act;
3. The Korea Development Bank under the Korea Development Bank Act;
4. The Industrial Bank of Korea under the Industrial Bank of Korea Act;
5. Community credit cooperatives and their federation under the Community Credit Cooperatives Act;
6. Securities finance corporations under the Financial Investment Services and Capital Markets Act.
Article 4 (Fees for Credit Guarantee for Workers) (1) Guarantee Fees under Article 24 of the Act may be imposed at a differential rate based upon the credit ratings of the persons whose credit is guaranteed, amounts guaranteed, guarantee periods, etc.
(2) Matters necessary for the amounts and collection of guarantee fees under paragraph (1) shall be prescribed by the Minister of Employment and Labor.
Article 5 (Entrustment of Exercise of Right to Demand Reimbursement) (1) The financial companies, etc. entrusted with the right to demand a reimbursement by the Korea Workers' Compensation and Welfare Service (hereinafter referred to as the “Welfare Service”) under the Industrial Accident Compensation Insurance Act in accordance with Article 26 (3) of the Act shall be the institutions providing loan services under Article 12 of the Act and credit information companies under subparagraph 5 of Article 2 of the Credit Information Use and Protection Act.
(2) Other necessary matters, such as the entrustment fees to be paid when entrusting the right to demand a reimbursement in accordance with paragraph (1) shall be determined by the Welfare Service with the approval of the Minister of Employment and Labor.
Article 6 (Disposition on Deficits) (1) The Welfare Service may take a disposition on deficits for any claim where it becomes unable to recover the claim due to any of the following reasons, despite exercising the right to demand a reimbursement in accordance with Article 26 (3) of the Act:
1.Where it is impracticable to exercise the right to demand a reimbursement, because the debtor has died, or his/her whereabouts are unknown or finally determined exempted from liabilities in accordance with Articles 566 and 625 of the Debtor Rehabilitation and Bankruptcy Act;
2. Where the debtor has no means to make a reimbursement;
3.Where the extinctive prescription of the right to demand a reimbursement is completed;
4.Where there is no practicable benefits of proceeding with any legal proceeding, because the estimated expense for recovery exceeds the estimated amount recoverable.
(2) To take a disposition on deficits in accordance with paragraph (1), the Welfare Services shall investigate and verify the whereabouts and property of the debtor through a local government, competent tax office, or other relevant administrative agency: Provided, That this shall not apply where the amount of a claim for reimbursement is less than 100,000 won.
Article 7 (Interest in Arrears) (1) The highest interest tate (referring to 20/100 of the annual interest rate where the highest interest rate exceeds 20/100 of the annual interest rate) among overdue interest rates on a lone by the relevant financial company at the time when the Welfare Service performs the guarantee debt shall apply to interest in arrears under Article 27 of the Act.
(2) The Minister of Employment and Labor may lower the highest ceiling of the overdue interest rate under paragraph (1), based upon the market interest rate, employment situation, etc.
Article 8 (Establishment, etc. of Employee Stock Ownership Association) (1) The preparatory committee for the incorporation of an employee stock ownership association (hereinafter referred to as “preparatory committee for the incorporation of the association”) under Article 33 (1) of the Act shall conduct the following affairs:
1. Preparation of draft bylaws;
2. Consultation with the company on the matters prescribed by Ordinance of the Ministry of Employment and Labor;
3. Holding an inaugural general meeting of an employee stock ownership association (hereinafter referred to as “the association”);
4. Other affairs necessary for the establishment of the association.
(2) The preparatory committee for the incorporation of the association shall hold an inaugural general meeting of the association, attended by a majority of workers, at which the bylaws of association are to be finally finalized and the executive officers, including the representative, are to be elected.
(3) The preparatory committee for the incorporation of the association shall conclude a contract to entrust management of employee stocks with a trust institution under Article 43 (1) of the Act, within three weeks after completing the procedure under paragraph (2).
(4) Within three weeks after concluding a contract to entrust management of employee stocks with a trust institution in accordance with paragraph (3), the preparatory committee for the incorporation of the association shall notify the Minister of Employment and Labor of the fact, attaching a copy of the bylaws of the association under paragraph (1), etc., as prescribed by Ordinance of the Ministry of Employment and Labor.
(5) The Minister of Employment and Labor may issue a written verification of the fact notified by the preparatory committee for the incorporation of the association in accordance with paragraph (4), as prescribed by Ordinance of the Ministry of Employment and Labor.
Article 9 (Controlled Company)
A controlled company under Article 34 (1) 2 of the Act (hereinafter referred to as “controlled company”) shall be any of the following entities:
1. An unlisted company, at least 50/100 of the total number of issued stocks of which are owned by the stock company in which the association is established (hereinafter referred to as “company implementing an employee stock ownership plan”);
2.An unlisted company, at least 50/100 of the total number of issued stocks of which are owned by an unlisted company under subparagraph 1.
Article 10 (Eligibility for Membership in Employee Stock Ownership Association) (1) The phrase “minority stockholders specified by Presidential Decree” referred to in the proviso to Article 34 (2) 2 of the Act means the stockholders who are employees belonging to the relevant company implementing an employee stock ownership plan, controlled company or contracted company under Article 34 (1) 2, and own stocks equivalent to 1/100 (referring to 3/100 in the case of the employees belonging to a small and medium business under Article 2 (1) of the Framework Act on Small and Medium Business Enterprises) of the total amount of issued stocks, or to 300 million won, whichever is the lesser. In such cases, such amount shall be calculated based on face value. <Amended by Presidential Decree No. 25520, Jul. 28, 2014>
(2) The phrase “persons specified by Presidential Decree” referred to in Article 34 (2) 4 of the Act means the following persons: <Amended by Presidential Decree No. 28162, Jun. 27, 2017>
1.The largest stockholder under subparagraph 6 (a) of Article 2 of the Act on Corporate Governance of Financial Companies. In such cases, “financial company” shall be deemed “company”;
2. Specially related person of the largest stockholder under Article 3 (1) 1 (a) through (g) of the Enforcement Decree of the Act on Corporate Governance of Financial Companies;
3. Workers employed on a daily basis under Article 20 of the Enforcement Decree of the Income Tax Act.
Article 11 (Content of Bylaws of Association)
The bylaws of the association under Article 35 (2) 1 of the Act shall provide for the following matters:
1. Purpose;
2. Name;
3. Locations of the principal office and branch offices;
4. Matters concerning executive officers of the association;
5. Matters concerning the methods for exercising voting rights;
6. Matters concerning the creation and use of a fund for employee stock ownership association under Article 36 of the Act (hereinafter referred to as “association fund”);
7. Matters concerning the acquisition and allocation of employee stocks of the association;
8. Matters concerning the withdrawal of employee stocks;
9. Matters concerning the disposal of residual property upon dissolution of the association.
Article 12 (Holding of General Meeting) (1) The representative of the employee stock ownership association shall hold a general meeting at least once every year in accordance with Article 35 (4) of the Act: Provided, That where there is no matter to be resolved upon under Article 35 (2) of the Act in the relevant year, public notice of the operational status of the association in accordance with the bylaws may replace holding a general meeting.
(2) Where at least 1/5 of all members of the employee stock ownership association (hereinafter referred to as “association member”) demand the holding of a general meeting, by specifying the matters to be referred to the general meeting, the representative of the association shall hold a general meeting within three weeks.
(3) Paragraph (2) shall apply mutatis mutandis to convening assemblies of delegates under Article 35 (3) of the Act. In such cases, “general assembly” shall be construed as “assembly of delegates,” and “association members” as “delegates,” respectively.
Article 13 (Composition and Operation of Steering Committee for Employee Stock Ownership Plan) (1) A steering committee for the employee stock ownership plan under Article 35 (6) of the Act (hereafter referred to as “steering committee” in this Article) shall consist of the members representing the company implementing an employee stock ownership plan and the members representing the association, and shall have at least two but not more than ten members, respectively.
(2) Matters necessary for the organization, operation, etc. of the steering committee shall be determined in consultation between the company implementing an employee stock ownership plan and the association.
(3) The company implementing an employee stock ownership plan and the association shall enter into an agreement on the results of consultation to facilitate the matters which undergo consultation in accordance with Article 35 (6) of the Act.
Article 14 (Operation of Association) (1) Where allocating employee stocks in accordance with Articles 36 (4), 37, and 38 of the Act or granting employee stock options (hereinafter referred to as “employee stock options”) in accordance with Article 39 of the Act, low-income workers and long-serving workers shall be treated preferentially.
(2) The association may preferentially allocate the employee stocks acquired by financial resources under Article 36 (1) 1 of the Act to any of the following association members, through an agreement with the contributors of such financial resources: <Newly Inserted by Presidential Decree No. 26908, Jan. 19, 2016>
1. Association members who belong to an exemplary long-serving human resources group;
2.Association members who have contributed, or are able to contribute, to the establishment, management, technical innovation, etc. of the company;
3.Other association members who have contributed to enhanced productivity, increased sales revenue, etc. of the company.
(3) In any of the following cases where granting employee stock options in accordance with Article 39 of the Act, employee stock options may be preferentially granted to the relevant association members: <Newly Inserted by Presidential Decree No. 25520, Jul. 28, 2014>
1. Case where such grant is intended to promote the lengthy service of exemplary human resources;
2. Case where such association members are contributing or are able to contribute to the establishment, management, technical innovation, etc. of the company;
3.Other cases where such association members have contributed to enhanced productivity, increased sales revenue, etc. of the company; and where the company implementing an employee stock ownership plan and the employee stock ownership association have consulted with each other in the steering committee for the employee stock ownership plan under Article 13 (1).
(4) The fiscal year of the association shall be the same fiscal year as that of the relevant company implementing an employee stock ownership plan.
Article 15 (Treatment of Dividends) (1) Dividends (including stock dividends; hereafter the same shall apply in this Article) on the stocks allocated to the accounts of the association members shall be paid to the association members to which such accounts belong.
(2) Dividends on the stocks held in the accounts of the association shall be attributed to the association.
Article 16 (Safekeeping or Depository Financial Companies) (1) The phrase “financial company, etc. specified by Presidential Decree” referred to in Article 36 (2) of the Act means the following:
1. Banks under the Banking Act;
2. Insurance companies under the Insurance Business Act;
3. Securities finance companies under the Financial Investment Services and Capital Markets Act;
4. Mutual savings banks under the Mutual Savings Banks Act;
5. Other financial companies established in accordance with the relevant Act to conduct depository business.
Article 17 (Use of Association Fund) (1) When using the association fund in accordance with Article 36 (3) of the Act, the association shall use the fund accumulated until the end of the immediately preceding fiscal year (excluding any amount used to pay the refunds and interest of loans under Article 42 (1) of the Act) so as to acquire employee stocks within six months after the relevant fiscal year begins: Provided, That this shall not apply where any ground specified by Ordinance of the Ministry of Employment and Labor exists, such as the designation of such employee stocks as issues for administration.
(2) Notwithstanding the main sentence of paragraph (1), where the association members enter into an agreement with the association to contribute a certain amount to the association fund for a period of at least one year but not more than three years, and contribute such amount in accordance with the agreement, the association shall use the money (where the company implementing an employee stock ownership plan enters into an agreement with the association to contribute money together in response to the contribution of the association members, such money shall be included therein) which is contributed in accordance with the agreement to acquire the employee stocks within six months after the beginning of the fiscal year immediately after the fiscal year in which the agreed period ends. <Newly Inserted by Presidential Decree No. 26908, Jan. 19, 2016>
Article 18 (Acquisition of Employee Stocks by Association)
Where the association acquires employee stocks for the association members, it shall endeavor to make such acquisition in the interests of all association members.
Article 19 (Allocation of Employee Stocks by Association) (1) Where the association intends to allocate the employee stocks acquired in accordance with Article 37 of the Act, it shall comply with the following standards:
1.The following employee stocks must be allocated to the accounts of the association members immediately after their acquisition:
(a) Employee stocks acquired either through contribution to employee stocks by the company, stockholders, etc., or by means of the finances referred to in Article 36 (1) 1, 2, and 5 of the Act;
(b) Employee stocks acquired using the loans which belong to the financial resources referred to in Article 36 (1) 3 of the Act and are borrowed without entering into an agreement under Article 42 (2) of the Act;
(c) Employee stocks acquired through capital increase without compensation for the employees stocks allocated to the accounts of the association members;
2.Both the employee stocks must be acquired by means of the loans borrowed by entering into an agreement under Article 42 (2) of the Act among the financial resources referred to in Article 36 (1) 3 of the Act, and the employee stocks acquired through capital increase without compensation for the first-mentioned employee stocks shall be held in the accounts of the association, and if any loan is repaid, the employee stocks equivalent to the repaid amount of the loan shall be immediately allocated to the accounts of the association members;
3.The employee stocks acquired by means of the financial resources referred to in Article 36 (1) 4 of the Act must be held in the accounts of the association, but, if the first loan whose due date of repayment arrives is repaid, be allocated to the accounts of the association members by adding such employee stocks to the employee stocks equivalent to the repaid amount of the loan.
(2) When allocating the employee stocks acquired by means of the resources referred to in Article 36 (1) 1 and 5 of the Act, where any association member at the time of the creation of the relevant fund retires before the acquisition date of the employee stocks on any ground specified by Ordinance of the Ministry of Employment and Labor, such as the reaching of his/her retirement age, the employee stocks shall be allocated to such association members.
Article 19-2 (Scope of Preferential Allocation to Members of Employee Stock Ownership Association) (1) The phrase “stock-listed corporation specified by Presidential Decree” referred to in Article 38 (1) of the Act means a corporation whose stocks are listed on the securities market under Article 176-9 (1) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hereafter referred to as “securities market” in this Article).
(2) The phrase “securities market specified by Presidential Decree” referred to in Article 38 (1) of the Act means the securities market under paragraph (1).
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
Article 20 (Employee Stock Options) (1) Where calculating the total limit of the stocks regarding which employee stock options may be granted in accordance with the main sentence of Article 39 (1) of the Act, the calculation shall be made by including the following numbers of stocks:
1.Number of stocks granted in accordance with the proviso to Article 39 (1) of the Act;
2.Number of the stocks to be issued or transferred where exercising employee stock options not exercised as of the resolution date under the main sentence of, and the proviso to, Article 39 (1) of the Act, among the employee stock options granted before that resolution date.
(2) The phrase “continuous service period specified by Presidential Decree” referred to in Article 39 (6) of the Act means one year.
(3) The phrase “period specified be Presidential Decree” referred to in the proviso to Article 39 (8) of the Act means three years from the date of acquiring stocks.
(4) A company intending to grant employee stock options (hereinafter referred to as “company granting employee stock options”) shall conclude a contract providing for the following matters with the association. In such cases, the association shall keep the relevant contract so that the association members can inspect it and shall inform relevant association members of the main provisions of such contract, the numbers of the employee stock options granted to respective association members, and other related matters : <Amended by Presidential Decree No. 25520, Jul. 28, 2014>
1. Matters concerning the association members to be granted employee stock options;
2. Matters concerning the exercise price of employee stock options and the adjustment of such price;
3. period for provision and period for exercise of employee stock options;
4. Methods and procedure for exercising employee stock options;
5. Purport to the effect that the transfer, provision of securities, etc. of employee stock options are limited;
6. Deadline for a company to grant employee stock options after employee stock options are exercised;
7.Types and number of stocks to be issued or transferred as a result of the exercise of employee stock options;
8. Matters concerning the cancellation of the granting of employee stock options.
(5) The exercise price of employee stock options shall be decided to be 70/100 or more of the evaluated price determined by Ordinance of the Ministry of Employment and Labor: Provided, That where stocks are issued and provided, and the price at which the stocks options are exercised is lower than the par value thereof, the par value shall be the exercise price. <Amended by Presidential Decree No. 25520, Jul. 28, 2014>
(6) A company granting employee stock options may grant the stocks in units of three months, six months, or one year; and then determine the periods for exercise by unit period, and a period for exercise shall be within seven days from the last day of any period for provision or the last day of any unit period. <Amended by Presidential Decree No. 25520, Jul. 28, 2014>
(7) The number of employee stock options an association member may exercise within each period for exercise shall be the number calculated by equally dividing the number of employee stock options granted during the relevant among the whole association members. In such cases, the number of employee stock options not exercised during the relevant period for provision thereof shall not be transferred to the next period for exercise.
(8) Where an association member becomes disqualified for membership, he/she shall not exercise any employee stock options.
(9) A company granting employee stock options may support the association members so that they may, by means of salary reduction, etc., accumulate in the association fund the money necessary for the exercise of employee stock options.
Article 21 (Loan Borrowing by Association) (1) The phrase “financial companies, etc. specified by Presidential Decree” referred to in Article 42 (1) of the Act shall be as follows:
1. Banks under the Banking Act;
2. Insurance companies under the Insurance Business Act;
3. Securities finance companies under the Financial Investment Services and Capital Markets Act;
4. Mutual savings banks under the Mutual Savings Banks Act;
5. Corporations for an intra-company labor welfare fund under Article 52 (2) of the Act;
6. Other financial companies established in accordance with the relevant Act to provide credit and engage in fund depository business.
(2) In borrowing a loan in accordance with Article 42 (2) of the Act, the association shall comply with the following requirements:
1.The company implementing employee stock ownership plan and the association shall enter into a written agreement on the borrowing and repayment of the loan. In such cases, a resolution shall be first obtained at the board of directors of the company implementing employee stock ownership plan;
2.The total amount of loans shall not exceed the total salary amount (referring to the salary amount subject to income tax; hereafter the same shall apply in this subparagraph) of the association members as of the immediately preceeding fiscal year, and the loans of one fiscal year shall not exceed the amount calculated by multiplying the 10/100 of the total salary amount of the association members as of the immediately preceeding fiscal year by the borrowing period (referring to the number of the years during which the loans are borrowed, and a period falling short of one year shall be calculated as one year);
3.The borrowing period shall be the term of at least three years but not exceeding seven years, and even in cases of newly borrowing a loan for the repayment of an existing loan, the borrowing period shall not exceed the remainder of the borrowing period of the existing loan;
4.It shall be required to repay at least 10/100 of the residual amount of a loan of the end of the immediately preceeding year every year during the borrowing period of the loan.
Article 22 (Trust Institution) (1) The phrase “trust institution prescribed by Presidential Decree” means a corporation prescribed by Ordinance of the Ministry of Employment and Labor among securities finance corporations authorized in accordance with Article 324 of the Financial Investment Services and Capital Markets Act.
(2) The association shall deposit the employee stocks obtained by the association or association members in a trust institution within one month from the acquisition date prescribed by Ordinance of the Ministry of Employment and Labor.
Article 23 (Deposit Period of Employee Stocks) (1) The phrase “period specified by Presidential Decree” in the part other than each subparagraph of Article 43 (2) of the Act means the relevnat period classified as follows:
1. Employee stocks acquired by means of the financial resources referred to in Article 36 (1) 1 or 5 of the Act: A period of at least four years but not exceeding eight years, determined in consultation with their contributors;
2. Employee stocks acquired by means of the financial resources referred to in Article 36 (1) 2 of the Act: One year;
3. Employee stocks acquired by means of the loans borrowed without entering into an agreement under Article 42 (2) of the Act, among financial resources referred to in Article 36 (1) 3 of the Act: One year;
4.Employee stocks acquired by means of the loans borrowed pursuant to an agreement entered into under Article 42 (2) of the Act and are allocated to the accounts of the association members in accordance with Article 37 of the Act, among financial resources referred to in Article 36 (1) 3 of the Act: One year;
5. Employee stocks acquired by means of the financial resources referred to in Article 36 (1) 4 of the Act and are allocated to the accounts of the association members in accordance with Article 19 (1) 3 of the Act: One year;
6.Employee stocks acquired by contributions of the association members where a company implementing an employee stock ownership plan contributes 50/100 of the amount contributed by the association members, cooperatively in line with the contribution of the association members in accordance with the proviso to Article 43 (2) 2 of the Act: A period of at least one year but not exceeding four years determined based upon the company implementing the employee stock ownership plan;
7.Employee stocks acquired through capital increase without compensation for the employee stocks allocated to the accounts of the association members: The remainder of the deposit period of the employee stocks entitled to such capital increase without compensation: Provided, That the employee stocks shall not be deposited where the remainder of the deposit period is less than three months as of the delivery date of new stocks for capital increase without compensation.
(2) The employee stocks acquired by exercising the right of subscription of new stocks which accrues from the employee stocks deposited in accordance with each subparagraph of paragraph (1) may be not deposited.
Article 24 (Furnishing of Deposited Employee Stocks as Collateral)
The phrase “cases necessary for the financial and economic life of such member of employee stock ownership association as prescribed by Presidential Decree” referred to in Article 43 (3) 2 of the Act means the following cases: Provided, That among the employee stocks referred to in Article 23 (1) 1 and 7, those employee stocks, the remainder of the deposit period of which exceeds one year, are excluded: <Amended by Presidential Decree No. 26908, Jan. 19, 2016>
1.Where the association furnishes as collateral the employee stocks acquired by the association by means of loans in accordance with Article 42 (3) of the Act, to the financing institution of the relevant loans and the guarantee institution for the financing of the relevant loans ;
2. Where any association member borrows a loan by furnishing as collateral the employee stocks allocated to the accounts thereof in order to purchase the employee stocks;
3.Where any association member borrows funds for life stabilization by furnishing as collateral th
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