CHAPTER I GENERAL PROVISIONS
The purpose of this Act is to provide for matters necessary for the operation of local government-invested or -funded institutions to justify the management of such institutions and increase transparency in their operation, thereby expanding services to local residents.
| Article 2 (Scope of Application, etc.) |
| (1) | This Act shall apply to local government-invested and -funded institutions established by a local government, and designated and publicly notified as a local government-invested or -funded institution pursuant to Article 5 (hereinafter referred to as "local government-invested and funded institution"). In such case, a local government-invested institution shall be where ownership (referring to the methodology and calculation criteria provided for by Presidential Decree) of the local government exceeds 10/100. |
| (2) | This Act shall not apply to any of the following institutions: <Amended on Dec. 3, 2019> |
| 1. | The following local public enterprises provided for by Article 2 and Chapters 3 and 4 of the Local Public Enterprise Act (hereinafter referred to as "local public enterprise") : |
| (a) | A local government-directly operated enterprise; |
| (b) | A local government-invested public corporation; |
| (c) | A local public corporation; |
| 3. | An institution whose members are local governments or public officials affiliated with the local governments, which is established with an objective of developing relationship between local governments and increasing welfare, etc. of public officials affiliated with the local governments; |
| 4. | An incorporated association under the Civil Act. |
| (3) | Articles 9, 10-3, 11, 12, 14, 15, 15-2, 15-3, 16, 17, 17-2, 17-3, 18 (3) and (4), 19, and 22 (1) shall not apply to a local government-invested institution, in which the ownership by the local government is less than 50/100: Provided, That in any of the following cases, an exception shall be provided: <Amended on May 29, 2016; Dec. 3, 2019; Jun. 9, 2020> |
| 1. | Where the local government is the largest shareholder and is able to dominate the institution by exercising stockholders' rights, etc. in view of the distribution of ownership; |
| 2. | Where the local government is involved in the appointment (including approval, request, etc.) of the head of the institution or a majority of members of the board of directors of the institution in accordance with statutes, Municipal Ordinances or the articles of incorporation; |
| 3. | Where the local government approves the budget or a project plan of the institution in accordance with statutes, Municipal Ordinances or the articles of incorporation. |
| (4) | Notwithstanding the main clause of paragraph (3), Articles 9, 12, 15-2, and 15-3 shall apply to a local government-invested institution, in which the ownership by a local government is at least 25/100. <Newly Inserted on Dec. 3, 2019> |
| (5) | Except as otherwise provided in other statutes, this Act shall apply to local government-invested or -funded institutions. <Amended on Dec. 3, 2019> |
| Article 2-2 (Application of Matters concerning Local Government-Invested or -Funded Institutions Established with Special Account for Educational Expenses) |
For a local government-invested or -funded institution established with the special account for educational expenses in this Act, "the head of the local government" or "the Special Metropolitan City Mayor, a Metropolitan City Mayor, a Special Self-Governing City Mayor, a Do Governor, or a Special Self-Governing Province Governor" shall be construed as "the superintendent of education; "Vice Mayor or Vice Governor of the Special Metropolitan City, a Metropolitan City, a Special Self Governing City, a Do, or a Special Self-Governing Province (referring to the Vice Mayor or Vice Governor who exercises general supervision over administrative affairs)" as "Deputy Superintendent of Education of the Special Metropolitan City, a Metropolitan City, a Special Self Governing City, a Do, or a Special Self-Governing Province (referring to the first Deputy Superintendent where at least two Deputy Superintendents exist)"; "the Minister of the Interior and Safety" and "the head of a competent agency" as "the Minister of Education"; and "the Ministry of the Interior and Safety" as "the Ministry of Education".
[This Article Newly Inserted on Dec. 3, 2019]
| Article 3 (Basic Principles of Management) |
| (1) | Local government-invested or -funded institutions shall endeavor to increase efficiency in management and improve public welfare of local residents. |
| (2) | Local governments shall guarantee autonomy in the operation of local government-invested or -funded institutions, and endeavor not to impede on fair and free market order. |
CHAPTER II INVESTMENTS AND FUNDS BY LOCAL GOVERNMENTS, DESIGNATION, PUBLIC NOTIFICATION, ETC.
| Article 4 (Investments and Funds by Local Governments, Projects Qualified for Investments and Funds, etc.) |
| (1) | A local government may establish a company under the Commercial Act or an incorporated foundation under the Civil Act or the Act on the Establishment and Operation of Public Interest Corporations by providing investments or funds equivalent to the total amount of capital or property of the company or by providing investments or funds jointly with a person (including a foreigner or foreign corporation) other than the local government to efficiently implement any of the following projects: |
| 1. | Projects contributing to the improvement of welfare of residents in the fields of culture, arts, scholarship, sports, medical care, etc.; |
| 2. | Projects deemed to contribute to increasing income of local residents, developing the local economy and stimulating and promoting local development. |
| (2) | Where the proportion of investments or funds by a local government is calculated pursuant to paragraph (1) and where local government-invested or -funded institutions or local public enterprises provide investments or funds, the local government shall be deemed to have made such investments or funds. <Amended on Dec. 3, 2019> |
| (3) | Following matters concerning local government-invested or -funded institutions shall be provided for by Municipal Ordinance of relevant local governments: |
| 1. | Purpose of establishment; |
| 2. | Main business and projects; |
| 3. | Grounds for and methods of investments or funds; |
| 4. | Other basic matters concerning the operation, etc. of institutions. |
| Article 5 (Designation as Local Government-Invested or -Funded Institution, Public Notification thereof, etc.) |
The Minister of the Interior and Safety shall consult with the head of a competent agency (referring to the head of a central administrative agency in charge of the duties relating to the business performed by a local government-invested or -funded institution pursuant to relevant statutes; hereinafter the same shall apply) within one month after each fiscal year begins and the head of a local government [referring to the Special Metropolitan City Mayor, Metropolitan City Mayor, Special Self-Governing City Mayor, Do Governor or Special Self-Governing Province Governor (hereinafter referred to as "Mayor Governor") or the head of a Si/Gun/Gu (referring to the head of an autonomous Gu; hereinafter the same shall apply) that has established a local government-invested or -funded institution; hereinafter the same shall apply], and make public notification after he/she designates a new local government-invested or -funded institution, to which this Act is applicable pursuant to Article 2, cancels the designation or designates an institution after converting the designation: Provided, That during a fiscal year, a public notification may be effectuated after he/she designates a new local government-invested or -funded institution, cancels the designation or designates an institution after converting the designation: <Amended on Nov. 19, 2014; Jul. 26, 2017> | 1. | Where a local government-invested or -funded institution is established: New designation; |
| 2. | Where this Act is not applicable to a local government-invested or -funded institution due to consolidation, closure or spin-off or the amendment, repeal, etc. of relevant statutes, or where changing the designation is necessary: Cancellation of designation or designation after change. |
| Article 6 (Operational Deliberation Committees of Local Government-Invested or -Funded Institution) |
| (1) | The local government shall establish an operational deliberation committee of the local government-invested or -funded institution (hereinafter referred to as "deliberation committee") to deliberate and make decisions on the following matters concerning the operation, etc. of a local government-invested or -funded institution: |
| 1. | Validity of establishment and operation of the local government-invested or -funded institution under Article 7 (1); |
| 2. | Dismissal or request for dismissal of executive officers of the local government-invested or -funded institution under Article 9 (4); |
| 3. | Selection of an institution to be excluded from business performance evaluations under Article 29 (1) 3; |
| 4. | Selection of an institution subject to management diagnosis under Article 30 (1) and (2); |
| 5. | Necessary measures as a result of management diagnosis under the subparagraphs of Article 30 (3); |
| 6. | Selection of an institution to be excluded from the measures under Article 30 (4); |
| 7. | Other matters specified by Presidential Decree concerning the operation of a local government-invested or -funded institution. |
| (2) | The deliberation committee shall consist of not more than 15 members, including a chairperson who shall be appointed or commissioned by the head of a local government from among persons with extensive education and experience in the operation and management of a local government-invested or -funded institution, and the number of members who are public officials shall not exceed 1/4 of the total number of members. |
| (3) | The Special Metropolitan City Vice Mayor, Metropolitan City Vice Mayor, Special Self-Governing City Vice Mayor, Do Vice Governor or Special Self-Governing Province Vice Governor (referring to the Vice Mayor or Vice Governor in charge of administrative services), or the vice head of a Si/Gun/Gu (referring to an autonomous Gu) shall be appointed to the position of chairperson of the deliberation committee. |
| (4) | The term of office of a member who is not a public official shall be two years, and may serve a consecutive term once. |
| (5) | In addition to matters provided for in paragraphs (1) through (4), other matters necessary for the composition and operation of the deliberation committee shall be specified by Presidential Decree. |
| Article 7 (Examination of Validity of Establishment and Operation of Local Government-Invested or -Funded Institution, Consultation before Establishment, etc.) |
| (1) | Where a local government intends to establish an institution by providing investments or funds (including a local government-invested or -funded institution that is permitted the choice to opt out of consultation pursuant to paragraph (2) 2) or to provide additional investments of an amount equivalent to or more than the amount specified by Presidential Decree or to provide funds of an amount greater than that of the previous year, it shall in advance examine the validity, etc. of establishment and operation of the institution, subject to the deliberation and resolution by the deliberation committee. In such cases, the local government shall make public the result of the following matters: <Amended on May 29, 2016; Dec. 3, 2019> |
| 1. | Propriety of investments and projects by the local government; |
| 2. | Effect on the welfare of residents; |
| 3. | Other matters specified by Presidential Decree, such as the effect on the local economy, etc. |
| (2) | Where a local government intends to establish an institution by providing investments or funds, the Mayor and Do Governor shall, prior to the announcement of the enactment of a Municipal Ordinance bill under Article 4 (3) following the procedures under paragraph (1), have consultation with the Minister of the Interior and Safety; and the head of a Si/Gun/Gu shall have consultation with the relevant Mayor Do Governor: Provided, That where any of the following is applicable, consultation is at the discretion of such Mayor/Governor: <Amended on Nov. 19, 2014; Jul. 26, 2017; Dec. 3, 2019> |
| 2. | Where a local government intends to establish an institution with an investment or contribution amount that does not satisfy the requirement specified by Presidential Decree. |
| (3) | Where a local government intends to establish an institution by providing investments or funds, it shall request a specialized institution that meets the requirements prescribed by Presidential Decree, such as professional human resources and investigation and research capabilities, to examine the validity, etc. of the establishment of the institution pursuant to paragraph (1). <Newly Inserted on Dec. 3, 2019> |
| (4) | Matters necessary for examining the validity, etc. of establishment and operation of local government-invested or -funded institutions, making public the results of such examination, and consultation before establishment under paragraphs (1) and (2) shall be provided for by Presidential Decree. <Amended on Dec. 3, 2019> |
CHAPTER III OPERATION OF LOCAL GOVERNMENT-INVESTED OR -FUNDED INSTITUTIONS
Section 1 Articles of Incorporation
| Article 8 (Articles of Incorporation) |
| (1) | The articles of incorporation of local government-invested or -funded institutions shall set forth the following matters: Provided, That such institutions shall not set forth matters that do not correspond to the type, character or details of the business of local government-invested or -funded institutions: |
| 4. | Amount of capital or funds; |
| 5. | Matters concerning issuance of shares; |
| 6. | Matters concerning stockholders meetings; |
| 7. | Matters regarding executive officers and employees; |
| 8. | Operation of the board of directors; |
| 9. | Scope, details and implementation of projects; |
| 10. | Budget and accounting; |
| 11. | Change of the articles of incorporation; |
| 12. | Matters concerning dissolution; |
| 13. | Other matters specified by Presidential Decree. |
| (2) | A local government-invested or -funded institution shall prepare the articles of incorporation under paragraph (1) and undertake prior consultations with the head of the local government within three months from the designation as a local government-invested or -funded institution. The same shall apply where the institution intends to amend the articles of incorporation. |
Section 2 Personnel Affairs, etc. concerning Executive Officers and Employees
| Article 9 (Executive Officers) |
| (1) | A local government-invested or -funded institution shall have directors including the head of an institution and an auditor (including an audit committee; hereafter the same shall apply in this Article) as executive officers: Provided, That provisions relating to executive officers with the exception of directors and auditor shall be specified by the articles of incorporation in consideration of the type, character and details of the business of a local government-invested or -funded institution. |
| (2) | The executive officers (excluding where public officials affiliated with a local government are ex officio executive officers) of a local government-invested or -funded institution shall be recruited through a competitive hiring process open to all applicants. |
| (3) | Executive officers of a local government-invested or -funded institution shall comply with the following matters concerning liabilities and responsibilities as specified by statutes, the articles of incorporation, etc.: |
| 1. | Conscientious performance of official duties shall be undertaken; |
| 2. | Damage to the relevant institution shall not be caused deliberately or by gross negligence; |
| 3. | Any act that harms competence irrespective of duties shall not be performed. |
| (4) | Where an executive officer of a local government-invested or -funded institution does not observe or neglects the duties and responsibilities under paragraph (3), the head of a competent agency or the head of the local government may dismiss such executive officer or request the appointing authority to dismiss such executive officer upon deliberation and resolution by the deliberation committee and request the institution to file a claim for damages against such executive officer. |
| (5) | The head of a local government-invested or -funded institution shall not represent the institution in matters in which conflicts of interests between the institution and such head are recognized. In such case, the auditor shall represent the institution. |
| Article 10 (Grounds, etc. for Disqualification for Executive Officers) |
| (1) | No person who falls under any of the following shall be qualified for an executive officer of a local government-invested or -funded institution: <Amended on Dec. 3, 2019> |
| 3. | A person who commits embezzlement and a breach of trust prescribed in Articles 355 and 356 of the Criminal Act and for whom two years have not passed since a fine of at least three million won declared by a court became final; |
| 4. | A person for whom two years have not passed since he/she was dismissed pursuant to Article 9 (4). |
| (2) | Where an executive officer falls under any of the subparagraphs of paragraph (1) or is found to falls under any of such subparagraphs at the time of appointment, resignation from office shall be mandated. |
| Article 10-2 (Separate Sentence of Punishment of Fines) |
Where a sentence of fines is imposed on an executive officer of a local government-invested or -funded institution for concurrent crimes that involve a crime specified in Article 10 (1) 2 or 3 and any other crime, a separate sentence shall be imposed for each crime, notwithstanding Article 38 of the Criminal Act. [This Article Newly Inserted on Dec. 3, 2019]
| Article 10-3 (Restrictions on Dual Office Holding by Executive Officers and Employees) |
| (1) | No full-time executive officer or employee of a local government-invested or -funded institution shall engage in duties for the purpose of profit-making other than his/her duties: Provided, That where a full-time executive officer obtains permission from the appointing authority and an employee obtains permission from the head of the institution, he/she may concurrently engage in duties for non-profit purposes. |
| (2) | The scope of duties for the purpose of profit-making referred to in paragraph (1) shall be prescribed by Presidential Decree. |
[This Article Newly Inserted on Dec. 3, 2019]
| Article 11 (Performance Contracts with Heads of Local Governments) |
| (1) | The heads of local governments shall conclude a performance contract with the heads (excluding cases in which public officials affiliated with local governments are ex officio heads) of local government-invested or -funded institutions, which include matters concerning the objectives of management to be achieved during the term of office, remuneration, etc. and prepare within one month from the beginning of each fiscal year, a written performance contract relating to the attainment of the detailed objectives of management for the relevant year. |
| (2) | When remuneration for the following year is to be established, the degree of achievement of the details on a written performance contract under paragraph (1) shall be reflected. |
| (3) | Detailed matters concerning performance contracts under paragraph (1) and the preparation, evaluation, etc. of written performance contracts shall be provided for by Municipal Ordinance of local governments. |
| Article 12 (Recruitment of Employees) |
| (1) | When a local government-invested or -funded institution recruits new employees, such recruitment shall be conducted through an open competitive recruitment examination to guarantee all persons an equal opportunity and to recruit superior personnel. |
| (2) | For a vacancy in a position or field of service that is difficult to recruit through the open competitive recruitment examination, the local government-invested or -funded institution may recruit specialists and persons with vast experience through an open competitive examination for the recruitment of experienced employees by which employees are recruited through a competitive process among candidates after publicly notifying the examination to persons who have work experience and qualification corresponding to the job requirements. |
| (3) | To guarantee a fair opportunity to all candidates, a local government-invested or -funded institution shall not put unreasonable restrictions on sex, physical condition, appearance, educational background, age, etc. or discriminate against candidates when the institution recruits new employees pursuant to paragraphs (1) and (2). |
| (4) | A local government-invested or -funded institution shall confer the detailed procedures for recruiting employees and methods thereof under paragraphs (1) through (3) in the internal rules. |
| Article 13 (Education and Training of Executive Officers and Employees) |
| (1) | A local government-invested or -funded institution shall conduct education and training of executive officers and employees so as to increase business performance of the institution and the public welfare of local residents. |
| (2) | Matters necessary for conducting education and training, etc. referred to in paragraph (1) shall be provided for by Presidential Decree. |
| Article 14 (Remuneration, etc. for Executive Officers and Employees) |
| (1) | The business performance of a local government-invested or -funded institution shall be reflected in the remuneration for executive officers and employees, and the remuneration shall be administered within budgetary limit according to the grounds for payment specified by the statutes, the articles of incorporation or internal rules. |
| (2) | The head of the local government with regard to remuneration for executive officers and employees of local government-invested or ?funded institutions shall, if necessary, determine detailed operational methods, and standards and procedures therefor within the scope of accounting-related regulations of the local government, and notify the institutions thereof. |
| Article 15 (Operation of Organization, Quota of Staff, etc.) |
A local government-invested or -funded institution shall determine matters concerning the organization and quota of staff by the articles of incorporation or internal rules, and operate within such scope.
| Article 15-2 (Measures against Persons Who Commit Misconduct) |
| (1) | A local government-invested or ?funded institution shall endeavor to strengthen ethical management, such as transparent and impartial personnel operation. |
| (2) | Where an executive officer of a local government-invested or ?funded institution has committed or is suspected of having committed any misconduct prescribed by Presidential Decree such as misconduct providing or receiving money or valuables, a sex offense, or employment misconduct (hereinafter referred to as "misconduct"), and where such misconduct is deemed to have discouraged ethical management under paragraph (1), the head of the competent local government shall request an investigation agency such as the prosecution or the police, and an audit and inspection agency such as the Board of Audit and Inspection (hereafter in this Article referred to as “investigation agency, etc.”) to conduct an investigation or an audit and inspection in regard to the relevant executive officer of the institution. In such cases, the head of the local government may suspend the duties of the relevant executive officer or request the head of the institution to do so. |
| (3) | Where necessary upon the investigation or the audit and inspection conducted by an investigation agency, etc. under paragraph (2), the Minister of the Interior and Safety may request the head of the competent local government to dismiss the relevant executive officer of a local government-invested or -funded institution, and the head of the local government may dismiss the executive officer or request the head of the institution to do so. |
| (4) | Where the conviction of an executive officer of a local government-invested or -funded institution becomes final in relation to employment misconduct from among types of misconduct and where the executive officer is subject to aggravated punishment under Article 2 of the Act on the Aggravated Punishment of Specific Crimes, the head of the competent local government may disclose the executive officer’s personal information, his or her misconduct, etc., following deliberation and resolution by a deliberative and decision-making body of the local government which is prescribed by Presidential Decree. |
| (5) | Where the conviction of an executive officer or employee of a local government-invested or -funded institution becomes final in relation to employment misconduct from among types of misconduct and where a person has passed an examination for employment, or has been promoted or appointed, due to the relevant employment misconduct, the head of the competent local government may request the head of the institution to revoke such passing, promotion, or appointment or take unfavorable personnel action against such person (hereafter in this Article referred to as “revocation of passing an examination, etc.”). In such cases, the head of the institution shall notify the relevant person of the details thereof and the reasons therefor to give him/her the opportunity to vindicate himself/herself. |
| (6) | Matters necessary for the specific details of and procedures, etc. for disclosure of a list under paragraph (4) and those necessary for the criteria for and details of revocation of passing an examination, etc., the procedures for vindication, etc. under paragraph (5) shall be prescribed by Presidential Decree. |
[This Article Newly Inserted on Dec. 3, 2019]
| Article 15-3 (Personnel Audit, etc.) |
| (1) | For the purposes of eradication, etc. of employment misconduct from among types of misconduct, the head of a local government may conduct an audit of whether the personnel operation of a local government-invested or -funded institution is appropriate (hereafter in this Article referred to as “personnel audit”), as prescribed by Presidential Decree, and may request the institution to submit related documents if necessary. |
| (2) | If any illegal or unlawful fact is found upons a personnel audit, the head of a local government shall, without delay, request the head of the relevant local government-invested or -funded institution to make a correction thereof and to take personnel action, etc. against the relevant person. |
| (3) | Upon receipt of a request under paragraph (2), the head of a local government-invested or -funded institution shall comply with the request immediately unless there is good cause, and shall notify the head of the relevant local government of the results thereof. |
[This Article Newly Inserted on Dec. 3, 2019]
Section 3 Budgets and Accounting
The fiscal year of a local government-invested or -funded institution shall follow the fiscal year of the local government.
| Article 17 (Principles, etc. of Accounting) |
| (1) | A local government-invested or -funded institution shall conduct accounting of transactions on occurrence to provide for transparency of business performance and financial condition. |
| (2) | A local government-invested or -funded institution may conduct accounting by classifying the field of business. |
| (3) | Where a local government-invested or -funded institution intends to conclude a contract, the contract shall be provided for through an open competitive process: Provided, That qualification of participants may be restricted in consideration of the objective, character, size, etc. of the contract or designate participants for bidding or conclude a negotiated contract. |
| (4) | A local government-invested or -funded institution may restrict qualification of a person who is considered to harm fair competition or the proper implementation of a contract from participation in a bid for up to two years. In such case, except for cases in which extenuating circumstances are deemed to exist, the head of the relevant institution shall request the head of the local government to have the contract deliberation committee referred to in Article 32 of the Act on Contracts to which a Local Government is a Party deliberate on whether to put restrictions on the participation of such person in the bidding process. |
| (5) | No local government-invested or -funded institution shall conclude a negotiated contract with a person who is restricted to participate in the bidding process pursuant to paragraph (4): Provided, That this shall not apply where extenuating circumstances occur, such as the lack of an appropriate contractor or manufacturer except for the person who is restricted to participate in bidding pursuant to paragraph (4). |
| (6) | Other matters necessary for accounting, standards and procedures for concluding contracts, restrictions on participation in bidding, etc. under paragraphs (1) through (5) shall be provided for by Presidential Decree. |
| Article 17-2 (Submission of Pledge of Integrity) |
| (1) | To enhance transparency and fairness in contracts, the head of a local government-invested or -funded institution shall require participants in the bidding process or the other parties to negotiated contracts to submit a pledge of integrity. |
| (2) | A pledge of integrity under paragraph (1) shall include the following matters: |
| 1. | Matters regarding the prohibition of giving direct or indirect gratitude, donation, money and valuables, entertainments, or preferential treatment in employment in the process of bidding, successful bidding, or conclusion and implementation of a contract (including the process at the time of or after completion of works or supply of goods); |
| 2. | Matters regarding the prohibition of any act that interferes with free competition in bidding or any unfair act, such as collusion for successful bidding of a specific person; |
| 3. | Other matters prescribed by Presidential Decree to enhance transparency and fairness in contracts. |
[This Article Newly Inserted on Jun. 9, 2020]
| Article 17-3 (Cancellation, Termination, etc. of Contract upon Breach of Pledge of Integrity) |
Where a participant in the bidding process or the other party to a negotiated contract fails to comply with the details of a pledge of integrity under Article 17-2, such as giving direct or indirect gratitude, donation, money and valuables, entertainments, or preferential treatment in employment to any executive officer or employee of a local government-invested or -funded institution in the process of bidding, successful bidding, or conclusion or implementation of the contract, the institution shall revoke the determination of the successful bidder or cancel or terminate the contract except in any of the following cases | 1. | Where revoking the determination of the successful bidder or canceling or terminating the contract is particularly prohibited by other statutes; |
| 2. | Cases prescribed by Presidential Decree, such as where revoking the determination of the successful bidder or canceling or terminating the contract makes it impracticable to achieve the purpose of the contract or causes losses to the local government-invested or -funded institution. |
[This Article Newly Inserted on Jun. 9, 2020]
| Article 18 (Preparation, etc. of Budget) |
| (1) | A local government-invested or -funded institution shall formulate a business plan, etc. for each fiscal year, and prepare a budget accordingly before the fiscal year begins. |
| (2) | When a local government-invested or -funded institution sets or changes a budget, such fact shall be reported to the head of the local government without delay. |
| (3) | Where a budget reported pursuant to paragraph (2) is in violation of statutes or deemed necessary in consideration of accounting-related provisions, etc. of a local government, the head of the local government shall order a correction. |
| (4) | Where the head of a local government orders a correction to the budget pursuant to paragraph (3) local government-invested or -funded institutions shall comply unless any special circumstances exist. |
| (5) | Except as provided in paragraphs (1) through (4), other matters necessary for the preparation of a budget, the provision of a report thereon, etc. shall be provided for by Presidential Decree. |
| Article 19 (Settlement of Accounts) |
A local government-invested or -funded institution shall complete the settlement of accounts within two months after the end of each fiscal year, prepare a statement of accounts, and submit it to the head of the relevant local government without delay. In such cases, a local government-invested or -funded institution meeting the standards prescribed by Presidential Decree, such as the total amount of assets, the amount of liabilities, the number of employees, and profits, shall submit a statement of accounts accompanied by an audit report made by an auditor appointed from among persons who are the auditors defined in subparagraph 7 of Article 2 of the Act on External Audit of Stock Companies. <Amended on Dec. 3, 2019>
Section 4 Financial Support, Dissolution, etc.
| Article 20 (Financial Support) |
| (1) | Where a local government deems necessary for projects under the subparagraphs of Article 4 (1), investments, funds, or subsidies may be provided to the relevant local government-invested or -funded institution. |
| (2) | Notwithstanding paragraph (1), a local government shall not provide financial support to a local government-invested or -funded institution that satisfies or is expected to satisfy under Article 24. |
| (3) | Matters necessary for providing investments, funds or subsidies, the management thereof, etc. shall be provided for by Presidential Decree. |
| Article 21 (Bearing Expenses for Projects Performed by Proxy) |
| (1) | Local government-invested or -funded institutions may implement projects of the State or local governments by proxy. In such cases, expenses necessary for implementing the projects shall be borne by the State or local governments. |
| (2) | The scope of expenses for duties of the State, methods and procedures for bearing expenses among the expenses to be borne by the State under paragraph (1) shall be provided for by Presidential Decree: Provided, That the scope of expenses for duties of local governments, methods and procedures for bearing expenses, among the expenses to be borne by local governments under paragraph (1) shall be provided for by Municipal Ordinance. |
| Article 22 (Issuing Bonds, etc. by Local Government-Invested Institutions) |
| (1) | Where a local government-invested institution issues bonds or borrows money from financial institutions, etc. (including loans from abroad; hereafter the same shall apply in this Article), approval shall be obtained from the head of the local government. In such cases, the limit of bond issuance shall be determined by Presidential Decree. |
| (2) | Where a local government-invested institution issues bonds or borrows money from financial institutions, etc., the local government may guarantee repayment. In such case, the local government shall not guarantee repayment in excess of the amount of investment except for cases of recovery from disasters or other cases provided for by Presidential Decree. |
[This Article Wholly Amended on May 29, 2016]
| Article 23 (Exercise of Stockholders Right by Local Governments) |
The head of a local government or an affiliated public official designated by the head of a local government shall exercise the rights of a stockholder on shares in a local government-invested institution, which are owned by the local government.
| Article 24 (Requests for Dissolution, etc. of Local Government-Invested or -Funded Institution) |
| (1) | Where ownership of a local government in a local government-invested institution is below 10/100 the head of the local government shall promptly take the necessary measures, such as disposing of all shares held by the local government after resolution by the local council, acquiring shares from others, etc. |
| (2) | The head of the local government shall take necessary measures, such as requesting for dissolution where any of the following occurs to a local government-invested or -funded institution: |
| 1. | Where a reason for dissolution, such as the accomplishment of objective of establishment, the period of existence expires, a reason for dissolution specified by Municipal Ordinance or articles of incorporation arises; |
| 2. | Where such institution merges with another entity or goes bankrupt; |
| 3. | Where a reason for dissolution arises according to a court order or judgment; |
| 4. | Where the institution is determined to be subject to a voluntary request or dissolution or to privatization pursuant to Article 30 (3) 3 after conducting management diagnosis pursuant to Article 30 (1). |
| (3) | Procedures for dissolution of local government-invested or -funded institutions to be dissolved pursuant to paragraph (2), methods thereof, etc. shall be as specified by relevant statutes and the articles of incorporation of the relevant institutions. |
Section 5 Guidance, Supervision, etc.
| Article 25 (Guidance, Supervision, etc.) |
| (1) | The head of a local government may guide or supervise a local government-invested or -funded institution on the following projects: |
| 1. | Projects delegated by the local government to the institution pursuant to statutes or Municipal Ordinance; |
| 2. | Projects specified by Presidential Decree, which are directly related to the duties of the local government. |
| (2) | The head of a local government-invested or -funded institution shall consult with the head of the local government on the following matters: |
| 1. | Changes in the organization and quota of staff; |
| 2. | Matters concerning the enactment, amendment and repeal of provisions concerning important matters specified by Presidential Decree, such as recruitment and dismissal of executive officers and employees, remuneration system, etc. |
| Article 26 (Inspections, Reports, etc.) |
| (1) | The head of a local government may inspect the business of a local government-invested or -funded institution and matters concerning accounting and property thereof and request a report of necessary matters. |
| (2) | The head of a local government shall inspect the business, accounting, and property of a local government-invested or -funded institution at least every three years for any of the following: |
| 1. | An institution in which ownership by the local government is at least 50/100; |
| 2. | An institution meeting the requirements under Article 2 (3) from among institutions in which ownership by the local government is less than 50/100. |
| Article 27 (Notification of Operational Guidelines) |
The Minister of the Interior and Safety may determine operational guidelines applicable to all local government-invested or -funded institutions, notify the guidelines to the heads of local governments or the heads of local government-invested or -funded institutions for the following matters: <Amended on Nov. 19, 2014; Jul. 26, 2017; Dec. 3, 2019>
| 1. | Matters concerning organizational operations, quota of staff and personnel management; |
| 2. | Matters concerning the preparation and execution of budgets and operation of expenses; |
| 3. | Matters concerning accounting and settlement of accounts. |
CHAPTER IV EVALUATION OF BUSINESS PERFORMANCE, DISCLOSURE, ETC.
| Article 28 (Evaluation of Business Performance) |
| (1) | The head of a local government shall evaluate the business performance for the previous year of local government-invested or -funded institutions falling for the following within six months from the end of each fiscal year and notify the result to the Minister of the Interior and Safety: <Amended on Nov. 19, 2014; Jul. 26, 2017> |
| 1. | An institution that receives a support fund (referring to the amount calculated by the methods and standards provided for by Presidential Decree; in the case of an institution that is directly delegated with the business of the local government or is granted monopolistic business rights pursuant to statutes or Municipal Ordinance, revenues from the delegated business or monopolistic business rights shall be included therein) from the local government which is at least 1/2 of its total revenue; |
| 2. | An institution in which the ownership of the local government is at least 25/100 of the capital or property of the institution; |
| 3. | An institution falling under the subparagraphs of Article 2 (3) from institutions in which ownership by the local government is less than 25/100 of the capital or property of the institution. |
| (2) | Where the head of a local government with regard to ownership by a local government under paragraph (1) 2 intends to perform an act that modifies the proportion of ownership in the capital or property of the relevant institution from at least 25/100 to below 25/100, a resolution shall be obtained from the local council in advance. |
| (3) | The head of a local government-invested or -funded institution shall submit the following matters to the head of the local government within three months from the end of each fiscal year for the evaluation of business performance for the previous year under paragraph (1) for the following matters: |
| 1. | Progress and performance of the main business; |
| 2. | Status of the organization, personnel affairs and financial management; |
| 3. | Statement of accounts for the preceding year; |
| 4. | Business performance for the recent three years; |
| 5. | Degree of achievement of the performance contract under Article 11 (1); |
| 6. | Other matters relating to the evaluation of business performance, which are provided by Presidential Decree. |
| Article 29 (Institutions to Be Excluded from Evaluation of Business Performance and Coordination of Time for Evaluation) |
| (1) | Notwithstanding Article 28, the head of a local government may determine not to evaluate business performance of a local government-invested or -funded institution falling under any of the following, or coordinate the time for evaluation of business performance: <Amended on Nov. 19, 2014; Jul. 26, 2017> |
| 1. | An institution subject to evaluation of business performance pursuant to other Acts; |
| 2. | An institution whose accounting period under Article 19 is less than one year; |
| 3. | An institution where conducting an evaluation of business performance is deemed inappropriate or where determination is provided to not evaluate business performance upon consultation with the Minister of the Interior and Safety, and a deliberation and resolution by the deliberation committee. |
| (2) | The results of business performance evaluations under other Acts may be used for a local government-invested or -funded institution where business performance is not evaluated pursuant to paragraph (1) 1. In such case, an institution satisfying paragraph (1) 1 shall submit the results of the evaluation to the head of relevant local government. |
| Article 30 (Implementation, etc. of Management Diagnosis) |
| (1) | The head of a local government may conduct management diagnosis of a local government-invested or -funded institution to which any of the following reasons occurs as a result of evaluating business performance pursuant to Article 28 (1) upon deliberation and resolution by the deliberation committee: |
| 1. | Where the institution fails to start operations after three years from the date of establishment as at the end of the previous year; |
| 2. | Where the institution has reported net losses for not less than five consecutive years as at the end of the previous year (excluding cases in which supplementation of deficit, etc. is specified by other Acts); |
| 3. | Where profit has decreased for not less than two consecutive years by at least 1/2 compared with the previous year without any special reasons. |
| (2) | Where net loss or profit for the current period is calculated to select local government-invested or -funded institutions subject to management diagnosis pursuant to paragraph (1) and the period is less than the period under subparagraphs 2 and 3 of the same paragraph on the basis of the previous year and the head of a local government may determine whether to conduct management diagnosis upon deliberation and resolution by the deliberation committee. |
| (3) | The head of a local government may request the head of a local government-invested or -funded institution where deemed necessary as a result of management diagnosis under paragraph (1) to take the following measures upon deliberation and resolution by the deliberation committee. In such cases, the head of the local government-invested or -funded institution in receipt of such request shall conscientiously implement the measures: |
| 1. | Measures of personnel affairs, such as reduction in remuneration and incentives of relevant executive officers of the institution; |
| 2. | Reduction in the size of business, reorganization and coordination of human resources; |
| 3. | Request for dissolution of the institution or promotion of privatization; |
| 4. | Other measures necessary for the improvement of management. |
| (4) | Notwithstanding paragraph (3), the head of a local government may choose not to take measures under paragraph (3) against a local government-invested or -funded institution upon deliberation and resolution by the deliberation committee: |
| 1. | An institution for which guarantee of autonomy and neutrality from the State or the local government is provided for by relevant statutes as necessary in the performance of its functions; |
| 2. | An institution for which three years have not passed since the establishment as at the end of previous year; |
| 3. | An institution on which the deliberation committee has deliberated and for which the deliberation committee has passed a resolution that adjusting the functions of the institution is inappropriate in consideration of the character, etc. of the duties of the institution. |
| Article 31 (Enactment of Municipal Ordinance Relating to Evaluation of Business Performance and Management Diagnosis) |
Detailed matters concerning selection of local government-invested or -funded institutions subject to evaluation of business performance and management diagnosis, methods, procedures, etc. for management diagnosis under Articles 28 through 30 shall be provided for by municipal ordinance of relevant local governments.
| Article 32 (Management Disclosure) |
| (1) | A local government-invested or -funded institution shall disclose the following matters on its website (hereinafter referred to as "management disclosure"): <Amended on Dec. 3, 2019> |
| 1. | Objectives of management, budget and operational plan for the relevant year; |
| 2. | Statement of accounts for the previous year; |
| 3. | Status of executive officers and operational personnel for the previous year; |
| 4. | Personnel budget for the previous year and implementation thereof; |
| 5. | Degree of achievement of the performance contract under Article 11 (1); |
| 6. | Outcomes of evaluation of business performance under Article 28; |
| 7. | Outcomes of audit by an independent institution, matters to request for measures and results of implementation; |
| 8. | Other important matters prescribed by Presidential Decree concerning the financial status, including capital and changes in obligations, and management. |
| (2) | Matters necessary for the time, frequency, etc. of management disclosure shall be prescribed by Presidential Decree. |
| Article 33 (Integrated Disclosure) |
| (1) | The Minister of the Interior and Safety may standardize significant matters among the matters regarding management disclosure by local government-invested or -funded institutions under the subparagraphs of Article 32 (1) and disclose such significant matters in an integrated manner (hereinafter referred to as "integrated disclosure"). <Amended on Dec. 3, 2019> |
| (2) | The Minister of the Interior and Safety may request a local government-invested or -funded institution to submit necessary materials for integrated disclosure. In such cases, the institution in receipt of such request shall comply therewith except in extenuating circumstances.<Newly Inserted on Dec. 3, 2019> |
| (3) | Where a local government-invested or -funded institution falls under any of the following, the Minister of the Interior and Safety may request the head of the relevant local government to take measures necessary for correction: <Newly Inserted on Dec. 3, 2019> |
| 1. | Where it fails to faithfully fulfill the obligation to submit materials under paragraph (2) or submits false materials; |
| 2. | Where it fails to faithfully fulfill the obligation to make management disclosure; |
| 3. | Where it discloses false information when making management disclosure. |
| (4) | Matters necessary for the standards, time, methods, etc. with regard to integrated disclosure shall be prescribed by Presidential Decree. <Amended on Dec. 3, 2019> |
[Title Amended on Dec. 3, 2019]
CHAPTER V SUPPLEMENTARY PROVISIONS
| Article 34 (Legal Fiction as Public Officials for Purposes of Applying Penalty Provisions) |
| Article 34-2 (Notification of Initiation or Completion of Investigation, etc. by Investigation Agencies, etc.) |
When any of the following agencies initiates or completes an investigation into a case related to the duties of the executive officers or employees of a local government-invested or -funded institution, it shall notify such initiation or completion and the results of the investigation to the head of the relevant local government-invested or -funded institution within 10 days from the date of initiation or completion of the investigation:
| 1. | The Board of Audit and Inspection; |
| 2. | The prosecution, the police, and other investigation agencies; |
| 3. | The head of the relevant local government. |
[This Article Newly Inserted on Dec. 3, 2019]
| Article 35 (Cooperation in Submission, etc. of Relevant Documents) |
| (1) | To assure the transparency of management and financial soundness of local government-invested or -funded institutions, the Minister of the Interior and Safety may have the heads of local governments or the heads of local government-invested or -funded institutions make notification of necessary matters or submit relevant documents. In such cases, those recipients of such notification or request to submit relevant documents shall comply therewith unless any extenuating circumstances exist. <Amended on Nov. 19, 2014; Jul. 26, 2017> |
| (2) | For the efficient administration of duties under this Act, the Minister of the Interior and Safety may establish and operate a system by which such duties are electronically processed. <Amended on Nov. 19, 2014; Jul. 26, 2017> |
| Article 36 (Reporting to National Assembly) |
The Minister of the Interior and Safety shall integrate the results of the evaluation of business performance under Article 28 (1) and submit such results to the competent standing committee of the National Assembly. <Amended on Nov. 19, 2014; Jul. 26, 2017; Dec. 3, 2019>
| Article 37 (Application of the Commercial Act and Civil Act with Necessary Modifications) |
In addition to those statutory instruments specified by this Act concerning local government-invested or -funded institutions, the Commercial Act shall apply mutatis mutandis to local government-invested institutions and the Civil Act shall apply mutatis mutandis to local government-funded institutions insofar as the Commercial Act and Civil Act is not contrary to this Act.
ADDENDA <Act No. 12507, Mar. 24, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation: Provided, That Article 24 (1) shall enter into force one year and six months after the date of enforcement. Article 2 (Applicability concerning Reasons for Disqualification of Executives)
Article 10 shall apply to cases where an executive of a local government-invested or -funded institution satisfies a reason for disqualification under paragraph (1) of the same Article after this Act enters into force. Article 3 (Applicability concerning Management Diagnosis)
Article 30 (1) shall begin to apply from the fiscal year on which the date of enforcement of this Act occurs. Article 4 (Exceptions to Application concerning Ownership in Local Government-Invested or -Funded Institution)
| (1) | The proviso to Article 2 (3) shall not be applicable to an institution established before this Act enters into force and designated for the first time under this Act as a local government-invested or -funded institution. |
| (2) | Articles 26 (2) 2 and 28 (1) 3 shall not be applicable to an institution established before this Act enters into force and designated for the first time under this Act as a local government-invested or -funded institution. |
Article 5 (Exceptions to Enactment of Relevant Municipal Ordinances, such as Establishment of Local Government-Invested or -Funded Institution, etc.)
A local government, which has not enacted a Municipal Ordinance under Article 4 (3) from among local government-invested or -funded institutions before this Act enters into force, shall enact a Municipal Ordinance under the same paragraph within six months after this Act enters into force. Article 6 (Transitional Measures concerning First Designation as and First Public Notification of Local Government-Invested or -Funded Institution)
| (1) | Notwithstanding Article 5, the Minister of the Interior and Safety shall consult with the heads of competent agencies and the heads of local governments concurrently with the enforcement of this Act, designate local government-invested or -funded institutions to which this Act is applicable and make public notice. <Amended by Act No. 12844, Nov. 19, 2014> |
| (2) | The heads of local government-invested or -funded institutions who have not concluded a performance contract under Article 11 (1) with the heads of local governments as at the time this Act enters into force from among the heads of local government-invested or -funded institutions to which this Act begins to apply following the designation and public notification under paragraph (1) shall conclude a performance contract pursuant to Article 11 (1) within one month from the date this Act enters into force; where the remaining term of office of the heads of local government-invested or -funded institutions is less than six months, a performance contract may not concluded under the same paragraph. |
| (3) | The budget of a local government-invested or -funded institution, to which this Act begins to apply following the designation and public notification under paragraph (1), for the fiscal year to which the enforcement date of this Act belongs shall be deemed to have been prepared and determined pursuant to Article 18. |
| (4) | Where a local government guarantees the repayment of bonds issued or loans obtained by local government-invested or -funded institutions to which this Act begins to apply following the designation and public notification under paragraph (1) the local government shall be deemed to have guaranteed repayment pursuant to Article 22. |
| (5) | Where a local government conducts evaluation of business performance and management diagnosis on an institution to which this Act applies following the designation and public notification under paragraph (1) for the fiscal year on which the enforcement date of this Act occurs from among local government-invested or -funded institutions, the local government shall be deemed to have conducted evaluation of business performance and management diagnosis for the fiscal year on which the enforcement date of this Act occurs pursuant to Articles 28 and 30. |
Article 7 (Transitional Measures concerning Consultation before Establishment of Local Government-Invested or -Funded Institution)
Where the enactment of a Municipal Ordinance bill to establish local government-invested or -funded institution is announced as at the time this Act enters into force the head of the local government shall be deemed to have had consultation before establishment under Article 7 with the head of relevant agency. Article 8 (Transitional Measures concerning Preparation of the Articles of Incorporation)
A local government-invested or -funded institution before this Act enters into force and designated as a local government-invested or -funded institution pursuant to this Act shall be deemed to have consulted with the head of the local government on the articles of incorporation pursuant to Article 8 (2). Article 9 (Transitional Measures concerning Persons Placed under Adult Guardianship, etc.)
Persons placed under adult guardianship or limited guardianship under Article 10 (1) 1 shall be deemed to include persons who are pronounced incompetent or quasi-incompetent and for whom the pronouncement remains valid pursuant to Article 2 of Addenda of the Civil Act as partially amended by Act No. 10429. Article 10 Omitted.
ADDENDA <Act No. 12844, Nov. 19, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That with regard to the Acts amended pursuant to Article 6 of the Addenda the parts that amend Acts promulgated before this Act enters into force but of which the enforcement date has not yet transpired shall enter into force on the date on which the respective Acts enter into force. Articles 2 through 7 Omitted.
ADDENDA <Act No. 14196, May 29, 2016>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability concerning Examination of Validity of Establishment and Operation of Local Government-Invested or -Funded Institution, Consultation before Establishment, etc.)
The amended provision of Article 7 (1) shall to begin apply from the investment or contribution made in the fiscal year 2017.
ADDENDA <Act No. 14839, Jul. 26, 2017>
Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation: Provided, That with regard to the Acts amended pursuant to Article 5 of the Addenda, the parts that amend the Act promulgated before this Act enters into force but of which the enforcement date has not yet arrived shall enter into force on the date on which the respective Acts enter into force. Articles 2 through 6 Omitted.
ADDENDA <Act No. 16665, Dec. 3, 2019>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability to Grounds for Disqualification of Executive Officers)
The amended provisions of Article 10 (1) 2 shall also apply to executive officers in office who are subject to punishment for crimes committed after this Act enters into force. Articles 3 (Applicability to Separate Sentence of Punishment of Fines)
The amended provisions of Article 10-2 shall begin to apply to persons who commit a crime prescribed in Article 10 (1) 2 or 3 on or after the date this Act enters into force. Article 4 (Applicability to Measures against Persons Who Commit Misconduct)
The amended provisions of Articles 15-2 and 15-3 shall begin to apply to misconduct committed under the amended provisions of Article 15-2 (2) after this Act enters into force. Article 5 (Applicability to Submission of Statement of Accounts)
The amended provisions of Article 19 shall begin to apply to the settlement of accounts for the fiscal year in which the enforcement date of this Act falls. Article 6 (Notification of Initiation or Completion of Investigation, etc. by Investigation Agencies, etc.)
The amended provisions of Article 34-2 shall begin to apply to investigations initiated on or after the date this Act enters into force. Article 7 (Transitional Measures concerning Local Government-Invested or -Funded Institutions Established with Special Accounts of Educational Expenses)
Acts done by the Minister of the Interior and Safety to local government-invested or -funded institutions established with the special accounts of educational expenses before this Act enters into force shall be deemed acts done by the Minister of Education, and acts done by the Special Metropolitan City Mayor, a Metropolitan City Mayor, a Special Self-Governing City Mayor, a Do Governor, or a Special Self-Governing Province Governor shall be deemed acts done by the superintendent of education.
Article 8 (Transitional Measures concerning Examination of Validity of Establishment and Operation of Local Government-Invested or -Funded Institutions)
Notwithstanding amended provisions of Article 7 (3), the previous provisions shall apply where an examination of the validity, etc. of the establishment of a local government-invested or -funded institution is underway as at the time this Act enters into force. Article 9 (Transitional Measures concerning Grounds for Disqualification of Executive Officers)
The previous provisions shall apply where a person who is an executive officer of a local government-invested or -funded institution as at the time this Act enters into force becomes subject to disqualification on any ground referred to in the amended provisions of Article 10 (1) 2 or 4 that arise before this Act enters into force, notwithstanding the same amended provisions.
ADDENDA <Act No. 17389, Jun. 9, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability to Submission, etc. of Pledge of Integrity)
The amended provisions of Articles 17-2 and 17-3 shall begin to apply to bids publicly announced or notified on or after the date this Act enters into force: Provided, That where a negotiated contract is concluded pursuant to the proviso of Article 17 (3), such amended provisions shall begin to apply to contracts concluded on or after the date this Act enters into force.