Liability of Persons who have Lent their Names

Liability of Persons who have Lent their Names

In Korea, the person who is actually the subject of rights and obligations, often differs from the nominee such as the holder of licenses or business registrations. Sometimes those with assets use these nominee/proxies to attempt to avoid liability.

As such, under certain conditions, a counterparty to a transaction is protected, under the Korean Commercial Act, by acknowledging the liability of not only the party to the transaction, the name borrower, but also the nominee (name lender). See: Korea’s Real Name Transaction Act Strengthened for additional details on nominee holders of bank accounts.

“Liability of Persons who have Lent their Names” clause, found in the Commercial Act of Korea notes:

Any person who has permitted another person to carry on business using his/her name or trade name shall be liable jointly and severally with the person borrowing his/her name in respect of any obligations arising from a transaction in favor of a third party who has effected such transaction in the belief that such person borrowing the name is the business owner.

Commercial Act of Korea, Article 24.

Under the Commercial Act of Korea, the name lender is liable jointly and severally with the name borrower.

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