Regulations Hinder Public-Interest Activities... "Abolish Permit System and Establish Public Interest Commission"

Good Regulation Citizens Forum and Korea Nonprofit Organization Evaluation Institute Hold National Assembly Forum
Call for Sweeping Overhaul of Regulations on Nonprofit and Public-Interest Corporations
Emphasize: "The State's Management- and Control-Centered Approach Must Change"

Nonprofit and public-interest corporations play a role in supplementing public services across various sectors of society, but critics say the current regulatory framework is excessively complex and rigid, hindering public-interest activities. Criticism has mounted that regulations designed to prevent misconduct by a small number of people are also restricting the many well-intentioned citizens and companies, obstructing the growth of the public-interest ecosystem.

Good Regulation Citizens Forum and the Korea Nonprofit Organization Evaluation Institute held the "2026 National Assembly Forum on Rationalizing Regulations for Nonprofit and Public-Interest Corporations" at the National Assembly Members' Office Building on Oct. 30, under the theme "How Can We Untangle the Regulatory Web That Makes Doing Good Difficult?" They called for a sweeping overhaul of the regulatory framework for nonprofit and public-interest corporations.

South Korea currently has 26,161 nonprofit corporations under the Civil Act and 4,058 public-interest corporations, but there is effectively no government body overseeing them all. The relevant government agencies handle the establishment of corporations, while the Ministry of Economy and Finance and the National Tax Service oversee the designation of public-interest corporations and tax benefits, and the Ministry of the Interior and Safety and local governments handle fundraising. With responsibilities divided among multiple agencies, nonprofit corporations must meet the standards and procedures of several different institutions, from establishment through operation.

South Korea's environment for establishing nonprofit corporations is also considered internationally uncompetitive. According to the "Doing Good Index 2026," published by the Centre for Asian Philanthropy and Society (CAPS), only 19% of South Korean organizations said it was easy to register an organization. That is about half the Asian average of 37%. South Korea was also the only one of the 17 countries surveyed with dozens of agencies responsible for approving organizational establishment.

Excessive Administrative Discretion From the Outset... Vague Standards for Endowment Assets

At the forum, the permit system for establishing nonprofit corporations was identified as the biggest problem. Lee Ryeonju, chair of the Regulatory Petitions Committee at Good Regulation Citizens Forum, criticized the excessive administrative discretion exercised from the establishment stage onward. Nonprofit corporations must obtain approval from different government agencies depending on their purpose, but there is not even a consistent standard for determining which agency is responsible. The forum heard of a case in which it took up to two years just to determine which agency had jurisdiction.

Bae Wongi, head of the Nonprofit Organization Evaluation Institute, is interviewed by The Asia Business Daily at the institute's office in Gangnam-gu, Seoul. 2026.9.8 Photo by Kim Hyunmin

Standards for endowment assets were also identified as a problem. In some regions, a corporation can be established without any endowment assets, while other regions require as much as KRW 50 million, resulting in widely varying standards. In effect, whether the same nonprofit corporation can be established depends on which ministry or local government has jurisdiction.

The regulatory burden experienced in practice is even more severe. Kim Deoksan, head of the Association of Public Interest Corporations, said that when one nonprofit organization applied for establishment approval, the responsible agency rejected its application on the grounds that it lacked a "financial foundation." However, the agency provided no clear standard for how much in assets would be sufficient.

The organization filed a request for information disclosure and was told that "there is no set amount for endowment assets." The founders ultimately had to keep increasing their contributions and pursue both an administrative appeal and an administrative lawsuit. Kim said that a review of 18 central government ministries found that only one, the Ministry of Unification, had officially established a minimum endowment asset requirement for setting up a corporation.

The regulatory burden continues even after establishment. Corporations must obtain permission or approval from the responsible agency when amending their articles of incorporation or appointing executives, and administrative procedures centered on seals, such as notarizing meeting minutes, remain in place. Fundraising expenses are capped at 15% of the amount raised, and corporations must report virtually the same information twice each year to the responsible agency and the National Tax Service, using different forms.

It is also difficult for corporations to restructure autonomously. Mergers and divisions, common among businesses, are effectively impossible for nonprofit corporations because there is no clear legal basis for them. Critics say the law has failed to keep pace with efforts to adjust areas of activity or reorganize in response to social change.

Kim Deoksan, president of the Association of Public Interest Corporations, is being interviewed by The Asia Business Daily at his office in Mapo-gu, Seoul. September 9, 2026. Photo by Kim Hyunmin.

Experts emphasized that, above all, the state's management- and control-centered approach must change. Kang Youngcheol, chair of Good Regulation Citizens Forum, said, "Those on the ground who are subject to regulation have already proposed numerous improvements, but regulators are not taking action," underscoring the need for substantive institutional reform.

Bae Wonki, director of the Korea Nonprofit Organization Evaluation Institute, also said the current system is rooted in the Joseon Civil Ordinance during Japanese colonial rule and Article 32 of the 1958 Civil Act, arguing that "the outdated framework of requiring government approval must be reconsidered." He stressed that the system should move away from the state's advance control of public-interest activities and toward trusting the autonomy of civil society.

Proposal to Adopt a Rules-Based System and Establish an Independent "Public Interest Commission"

Alternatives were also proposed at the forum. Participants called for consistent establishment standards applicable to all responsible government agencies and, in the longer term, replacing the permit system for nonprofit corporations with a rules-based system that would allow organizations to be established once they meet specified requirements. Other proposed reforms included replacing the approval system for public-interest corporation executives with a notification system, easing fundraising regulations, improving rules on profit-making activities, and introducing a system for corporate mergers and divisions.

Jang Yoonju, team leader at the Donation Culture Research Institute of the Beautiful Foundation, said, "Substantive policy design is important when reforming regulations on the establishment of nonprofit corporations," adding that "the grounds for denying applications should be clearly specified, and statistics on approvals and denials should be made public."

Some also called for abolishing the current system of responsible government agencies and establishing an independent body, a "Public Interest Commission," dedicated to public-interest policy and oversight. The commission is expected to unify the complex and fragmented current management system by promoting public-interest activities, conducting risk-based oversight, resolving disputes, and overseeing information disclosure and the standardization of rules.

Lee Heesook, a senior attorney at Dongcheon, said, "Along with replacing the permit system with a rules-based approach, we need to establish an independent policy and oversight body covering the entire nonprofit sector, and amend the Local Subsidy Act and the Support for Nonprofit Civil Organizations Act, which restrict support for operating expenses."

This content was produced with the assistance of AI translation services.