Closing a Company in South Korea: How to Shut Down and Retain Key Talent

1. Introduction: Why Companies Close Entities (But Keep Talent)

Mid‑sized Singaporean companies (500–2,000 employees) often opt to close a company in South Korea during cost-cutting, restructuring, or strategic pivots. Yet, the local workforce remains a vital asset—holding market knowledge, customer relationships, and operational experience. With the right strategy, you don’t have to lose them.

Leveraging an Employer of Record (EOR) South Korea solution empowers you to retain employees without entity, hire in South Korea without entity, and seamlessly manage employee transfer after entity closure, protecting your regional presence and preserving essential capabilities.

2. What Happens When You Close a Company in South Korea

A. Legal & Compliance Obligations

Shutting down your Korean subsidiary involves:

1. Board resolution and creditor filing 
2. Appointment of liquidator, registered with the court 
3. Public notice of liquidation via court and official gazette 
4. Settlement of liabilities: employee wages, tax, pensions, creditor debts 
5. Issuance of tax clearance from National Tax Service 
6. Final deregistration with the court once all conditions are met 

Timeline typically spans 6–12 months, depending on complexity and audit burdens.

B. Obligations to Employees

Under the Labor Standards Act and related statutes:

• Notice period: at least 30 days or equivalent pay in lieu 
• Severance pay (retirement allowance): at least 30 days' average salary per year of service 
• Final wages and unused leave must be paid within 14 days 
• Mass redundancy requirements: consult unions or labor authorities for large-scale layoffs 

Non-compliance can result in disputes, fines, or penalties under Korean labor law.

3. Risks of Talent Loss During Entity Closure

• Operational gaps and slowed service delivery 
• Loss of IP and institutional knowledge 
• Client relationship risk – familiar voices leave 
• High cost of re-establishment later 

4. Retaining Employees Without a Legal Entity: What Are Your Options?

1. Freelancers/Contractors – fast but risky due to misclassification and lack of protections 
2. Set up a new entity – takes months and significant investment 
3. Employer of Record (EOR) – the best approach: compliant, fast, risk-free for talent retention 

With an EOR, you can hire in South Korea without entity, retain employees without entity, and execute employee transfer after entity closure seamlessly.

Explore our Employer of Record South Korea service.

5. How EOR Helps You Retain Employees in South Korea

EOR Explained in Plain Terms

AYP becomes the legal employer in South Korea, handling:

• Employment contracts, payroll, social security
• Wages, severance, benefits management
• Compliance filing and HR operations

You retain operational control—your team works under your guidance while AYP manages legal obligations.

Transition Process

1. Plan: Identify key employees 
2. Terminate current contracts with proper notice 
3. Onboard immediately under AYP’s EOR contracts 
4. Ensure continuity: no change in role, salary, entitlements 
5. Operate: AYP handles payroll and legal compliance, you manage performance 

Smooth employee transfer after entity closure is possible with minimal disruption.

AYP’s Strengths

• Rapid onboarding – 3–5 business days 
• Korea labor compliance expertise
• ISO-certified regional provider
• Proven track record in risk mitigation and workforce retention

6. Case Study: Retaining Talent During Closure

Company: Singapore-based IT services provider

Korean Team: 15 engineers/support staff

Challenge: Close Korean entity without losing talent or disrupting support

Solution: AYP EOR engagement prior to termination

Results:

• 100% retention under EOR 
• Seamless transition with legal compliance
• No service disruption
• Official liquidation completed in 9 months

“AYP’s support let us close the company and keep our Korea team intact—no loss, no headache.” — Regional Head of Operations

7. Key Considerations Before You Close an Entity

• Timing: Begin EOR onboarding first 
• Legal compliance: Align notice, severance, final pay, and pension contributions 
• Clear communication: Reassure staff about continuity and benefits 
• HR handover: Finalize payroll, pension files for smooth transition 

8. Conclusion: Close with Confidence, Keep Your Team

Shutting your South Korea entity doesn’t necessitate losing your workforce. By using an EOR:

• You streamline costs and compliance
• Retain vital talent and institutional knowledge
• Preserve service continuity and customer satisfaction
• Stay ready for future market opportunities

AYP’s EOR South Korea solution enables you to close a company in South Korea, retain employees without entity, and maintain operational readiness.

9. Call to Action: Speak to AYP’s Local Experts

Ready to exit South Korea—without losing your team?

✅ Book a free EOR + entity closure consultation

✅  Get a complimentary cost simulation

✅ Let AYP onboard your team in days, not months

Retain Your Team Without a Local Entity →