Framework Act on the Construction Industry

A construction business is divided into the comprehensive construction business, the specialized construction business, and others, depending on the type and scale of the works.

A person who intends to engage in a construction business must register with the Minister of Land, Infrastructure and Transport by business type.

To register a construction business, all statutory requirements must be satisfied, including capital, technical capability, possession of an office, and membership in a mutual-aid association.

Common Registration Requirements

However, where only minor construction works are performed, the construction works may be carried out without registration of a construction business.

Under Chapter 2, Section 2 of the Construction Business Management Regulations, holding two or more construction business types of the same kind is prohibited.

Even where, by way of exception, such overlapping holding arises due to causes such as a transfer or merger, a report of business closure or cancellation of registration must be filed without delay.

A violation of this is deemed to constitute carrying out a construction business without registration of a construction business, or after registration by improper means, and may result in the following punishment.

Under Article 9-3 (1) of the Framework Act on the Construction Industry, a person who has newly registered a construction business must complete 8 hours of ethics and practical training for the construction business within 6 months from the date of registration.

In the case of a corporation, at least one of the registered officers must complete the training.

If the new training is not completed within 6 months after the registration of a new license, the following administrative fine may be imposed.

Under Article 9-2 of the Framework Act on the Construction Industry, where there is a change in registered particulars such as the trade name, location, or representative after registration, a report of change must be filed within 30 days.

In particular, cases in which an administrative fine is imposed for failure to report a change of location to the competent administrative agency occur frequently, so caution is required.

Level of Disposition for Failure to Report Within the Deadline

A construction company must maintain the registration criteria (capital, technicians, equipment, office, etc.) at all times, and a violation results in the following administrative disposition.

Under Article 49 of the Framework Act on the Construction Industry, the Ministry of Land, Infrastructure and Transport conducts a fact-finding survey of construction companies every year.

If, at this time, the requested related documents are not submitted without justifiable grounds, the following disposition follows.

Articles 81 to 83 and Article 99 of the Framework Act on the Construction Industry

Under Article 14 (2) of the Framework Act on the Construction Industry, where a business suspension disposition has been imposed, the ordering party of the relevant construction works must be notified of that fact immediately.

Failure to comply may result in an administrative fine of up to KRW 5 million (Article 99, subparagraph 1 of the Framework Act on the Construction Industry).

Under Article 21 of the Framework Act on the Construction Industry, lending a construction business registration certificate or registration booklet to another person, or carrying out construction works under a borrowed name, is strictly prohibited, and arranging such conduct is also unlawful.

If detected, the following disposition and punishment may be imposed.

Under Article 21-2 of the Framework Act on the Construction Industry, borrowing another person's technical qualification certificate or technical career certificate in order to satisfy the construction business registration criteria is unlawful, and the following disposition may be imposed.

Where a construction company becomes aware of a violation, an immediate response is essential.

Violations such as registering overlapping business types or falling short of the registration criteria may lead not only to an administrative disposition but also to future restrictions on bidding and a downgrade in credit rating, so a system for correction, explanation, and reporting must be activated promptly, in addition to preventive measures, when a violation occurs.

In particular, even minor matters such as a change of location or representative may result in an administrative fine due to a delay in reporting, so the maintenance of internal management processes is essential.

In addition, intentional violations such as lending a qualification certificate or a name lead to cancellation of registration and criminal punishment, so prevention through self-inspection and ethics training is important.

Practical Checkpoints

Our law firm has many attorneys, including construction specialist attorneys registered with the Korean Bar Association and specialist attorneys with an average of more than 10 years of experience.

Through this, we are able to provide substantive legal advisory across the entire range of procedures, from responding to administrative dispositions arising from violations, to supplementary measures for satisfying the registration criteria, objections to sanctions such as administrative fines and business suspensions, and the prevention of cancellation of registration.

If you find it difficult to resolve a violation on your own, or if you judge the risk to be significant, we recommend that you proceed with the response procedures more accurately and efficiently with the assistance of a construction specialist attorney.