CONTENTS
- 1. Client Suspected of Violating the Framework Act on the Construction Industry
- 2. Explanation of the concept of violation of the Framework Act on the Construction Industry
- - Conduct constituting a violation of the Framework Act on the Construction Industry
- - Level of punishment for a violation of the Framework Act on the Construction Industry
- 3. Key points for responding to suspicion of violating the Framework Act on the Construction Industry
- - Specialist construction attorneys responding to suspicion of violating the Framework Act on the Construction Industry
- 4. Result of the response to suspicion of violating the Framework Act on the Construction Industry
- - Daeryun Law Firm's one-stop response service
1. Client Suspected of Violating the Framework Act on the Construction Industry
This is the account of a client who came to this firm, saying that he was facing a police investigation on suspicion of violating the Framework Act on the Construction Industry.
The client, as a construction business owner, intended to carry out the interior renovation work of an office through a private contract.
A private contract refers to a contract in which the ordering party directly selects and concludes with a specific company without a bidding procedure, and it is frequently used for urgent or small-scale construction work.
Just before drawing up the contract, he received notice from the competent administrative agency that this construction work required a registration certificate for the painting business and the waterproofing business.
A painting and waterproofing business registration certificate is a construction business registration certificate that is essential for professionally performing architectural finishing work such as the painting of walls and ceilings and the waterproofing of exterior walls and rooftops, and it is a qualification mandatorily required by the Framework Act on the Construction Industry.
If such construction work is performed without registration, it becomes subject to an administrative disposition or criminal punishment.
However, the client did not have enough time to complete the registration procedure and was in a situation where he could not delay the construction.
In the end, he borrowed another construction operator's painting and waterproofing business registration certificate and proceeded with the construction by indicating that construction operator as the subject of the construction on the contract. Afterward, he received notice from the competent police station that he was being investigated on suspicion of violating the Framework Act on the Construction Industry.
2. Explanation of the concept of violation of the Framework Act on the Construction Industry
The Framework Act on the Construction Industry is a framework statute enacted to secure the quality of construction works and to promote the sound development of the construction industry.
Its principal contents are as follows.
· Construction business registration: Anyone who wishes to be awarded or to perform works above a certain scale must register a construction business by category of business, and unregistered construction is prohibited.
· Restrictions on subcontracting and lending of name: The act strictly prohibits unauthorized subcontracting to another constructor or performing works by borrowing another person's construction business registration certificate.
· Fair trade and safety: It protects the transparency and safety of construction sites through the preparation of contracts, safety management, quality assurance, and other measures.
Conduct constituting a violation of the Framework Act on the Construction Industry
As in the client's case, performing works by borrowing another person's construction business registration certificate constitutes a violation of the Framework Act on the Construction Industry.
· Violation of the prohibition on lending of name: Lending one's construction business registration certificate to another person, or carrying out construction using a borrowed certificate
· Unregistered construction: Performing works without having registered a construction business for the relevant category of business
· Registration or contracting by improper means: Concluding a contract or performing works by false or improper means
Because such conduct may result in administrative dispositions and criminal punishment for both the ordering party and the constructor, verification of the registration certificate and adherence to lawful procedures before contracting are essential.
Level of punishment for a violation of the Framework Act on the Construction Industry
Type of violation | Penalty provision | Details |
Unregistered construction | Imprisonment of up to 5 years or a fine of up to 50 million won | Being awarded or performing construction works without registration |
Lending of name | Carrying on a construction business under another person's name | |
Registration or contracting by improper means | Registration and contracting by false or improper means |
3. Key points for responding to suspicion of violating the Framework Act on the Construction Industry
If you have violated the Framework Act on the Construction Industry, you should respond promptly through the following measures.
Specialized works such as painting works and waterproofing works are subject to registration obligations under the Framework Act on the Construction Industry; however, depending on the scope, amount, and scale of the works, registration may be exempted in some cases.
You should compare the actual content and scale of the works against the statute and enforcement rules to confirm whether they are subject to registration, and secure materials such as design drawings, statements of work, and estimates that substantiate the scope of the works.
2. Gathering grounds to deny intent in lending of name or unregistered construction
If ‘intent’ to carry out works by borrowing another person's name is established, a heavier level of punishment may be imposed.
You should secure circumstantial evidence from emails, text messages, and meeting minutes at the time of the contract indicating that you ‘were not aware of the need for registration,’ and emphasize the absence of intent.
If there was intent, it is advantageous to explain the unavoidable circumstances that arose in order to avoid delay of the works.
3. Preparation of statements before the investigation
The statements given in the initial investigation determine the direction of the investigation.
By organizing anticipated questions and answers with a specialist construction attorney and requesting accompaniment to the investigation so that the attorney communicates directly with the investigative agency, you can prevent unfavorable statements.
4. Parallel response to administrative dispositions
Apart from the criminal proceedings, administrative dispositions such as registration cancellation or business suspension may proceed.
Simultaneously with the police investigation, you should submit advance explanatory materials to the competent local government and prepare materials and procedures in anticipation of an administrative appeal or administrative litigation.
5. Subsequent prevention and improvement of internal systems
Efforts to prevent recurrence also have a positive effect on the outcome of the investigation and trial.
You should prepare an internal manual for managing construction contracts and conduct training, and promptly proceed with the registration and licensing procedures for the necessary categories of business.
Specialist construction attorneys responding to suspicion of violating the Framework Act on the Construction Industry
After receiving contact for a police investigation at an early stage, the client determined that there were too many risk factors to respond alone and came to our firm.
Daeryun's specialist construction attorneys responded to the case through the following strategies.
1. Absence of ‘intent’
While acknowledging that the client had used another person's painting and waterproofing business registration certificate, we emphasized that this was not an intentional lending of name for the purpose of profit, but an unavoidable measure taken to avoid delay of the works.
2. Presentation of evidence
We submitted consultation records, emails, and text messages showing that the client learned of the need for registration only immediately before the contract.
We proved with accounting records that, because the construction payment was identical to the original estimate, there was no economic benefit obtained from the lending of name.
3. Uncertainty as to the registration obligation for the scope of the works
We highlighted that the main content of the works in question was interior work, and that the painting and waterproofing works constituted only a part, so it was not clear whether the works were subject to the painting business registration obligation.
4. Voluntary correction and efforts to prevent recurrence
We emphasized that, from the early stage of the police investigation, the client immediately implemented subsequent corrective measures, including halting additional works, re-performing the works with the client's own personnel and equipment, and commencing the procedure for new registration of the painting business.
5. Accompaniment to the police investigation and preparation of statements
We organized anticipated questions before the investigation and supported the client in preparing and rehearsing a written statement.
During the investigation, the attorney accompanied the client to protect the client's rights and to prevent unfavorable statements.
4. Result of the response to suspicion of violating the Framework Act on the Construction Industry
With the assistance of the specialist construction attorneys, the investigative agency determined that the suspicion of violating the Framework Act on the Construction Industry was not established and, with respect to the client, ultimately rendered a decision of non-referral on the ground of no suspicion of crime.
The Framework Act on the Construction Industry contains very detailed and complex provisions, ranging from registration requirements by category of business, restrictions on subcontracting, the prohibition on lending of name, unregistered construction, and standards for the placement of engineers, to administrative disposition procedures.
In particular, as in this client's case, if works are carried out by borrowing another person's registration certificate, the person will be investigated for suspicion of violating the Framework Act on the Construction Industry in the criminal proceedings, and in the administrative proceedings there is a risk of simultaneously receiving administrative dispositions such as business suspension or registration cancellation from the competent local government.
In other words, because a single case can develop into a composite matter that must be contested through criminal and administrative proceedings in parallel, there are structurally many limitations to responding alone without an attorney.
Daeryun Law Firm's one-stop response service
Based on its experience in handling construction cases on a specialized basis, Daeryun Law Firm provides a one-stop service that conducts criminal-penalty defense and administrative response simultaneously.
From the early stage of the police investigation, an attorney accompanies the client in person to prevent unfavorable statements, and presents tailored strategies such as denying intent and a profit-seeking purpose and narrowing the scope of the violating works.
Even if a business suspension or registration cancellation disposition is issued, we continue the response through an administrative appeal and administrative litigation.
In addition, even after the case, in order to prevent recurrence, we provide tailored consulting covering registration requirements by category of business, contract structures, and internal management manuals, thereby reducing corporate management risk.
In cases under the Framework Act on the Construction Industry, a single statement at the police investigation stage directly affects whether criminal punishment follows and the level of any administrative disposition.
In particular, where, as with the client, works have actually been carried out by borrowing another person's license, results such as non-referral or non-prosecution can be obtained only by acknowledging the facts while arguing that the elements of the offense are not satisfied.
If you are currently under suspicion of violating the Framework Act on the Construction Industry, we recommend that you defend yourself through Daeryun's one-stop response system, which can handle criminal and administrative matters at the same time.
Daeryun's specialist construction attorneys will accompany you from the beginning to the end of the case and serve as a dependable partner in protecting the client's rights and the company's management foundation.
This content is based on actual case studies of Daeryun Law LLC with some adaptations, and the copyright belongs to our firm.
Unauthorized reproduction, duplication, or distribution and other copyright infringements may result in legal action under applicable laws.
