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ENFORCEMENT DECREE OF THE SOCIAL ENTERPRISE PROMOTION ACT

ENFORCEMENT DECREE OF THE SOCIAL ENTERPRISE PROMOTION ACT

Enacted by Presidential Decree No. 20141, Jun. 29, 2007 Presidential Decree No. 20681, Feb. 29, 2008

Article 1 (Purpose)

The purpose of this Decree is to prescribe matters delegated by the Act on the Promotion of Social Enterprises and those necessary for the enforcement thereof.

Article 2 (Specific Criteria for the Disadvantaged) The disadvantaged (hereinafter referred to as "the disadvantaged") as defined in subparagraph 2 of Article 2 of the Act on Social Enterprise Promotion (hereinafter referred to as the "Act") refers to those falling under any of the following subparagraphs:

1. A person whose average monthly household income is 60/100 of nationwide average monthly household income or less;

2. An aged person as specified in subparagraph 1 of Article 2 of the Employment Promotion for the Aged Act;

3. Disabled persons as defined in the Act on Employment Promotion and Vocational Rehabilitation for Disabled Persons;

4. Victims of sexual traffic as specified in the Act on the Prevention of Sexual Traffic and Protection, etc. of Victims Thereof; or

5. Other persons including long-term unemployed persons recognized as the disadvantaged by the Minister of Labor in consideration of employment situation, etc.

Article 3 (Types of Social Service)

"Other service proportionate to this, whose area is prescribed by the Presidential Decree" in subparagraph 3 of Article 2 of the Act shall fall under any of the following subparagraph:

1. Childcare service;

2. Art, tourism and sporting service;

3. Forest conservancy and management service;

4. Nursing and housework assistance service; and

5. Other services recognized by the Minister of Labor after the deliberation of the Social Enterprise Support Committee (hereinafter referred to as "the Support Committee") according - 2 -

to Article 4 of the Act.

Article 4 (Deliberation Matters of the Support Committee) "Other matters necessary for the support of social enterprise determined by the Presidential Decree" in Article 4 (1) 4 of the Act shall fall under any of the following subparagraph:

1. Matters concerning the annual implementation plan according to the Basic Plan for Social Enterprise Support (hereinafter referred to as "the basic plan") under Article 5 of the Act;

2. Matters concerning the selection of an entrusted agency for support business under Article 10 (2) of the Act;

3. Matters concerning the recognition of service under subparagraph 5 of Article 3;

4. Matters concerning the realization of a social purpose under Article 9 (2); and

5. Other matters deemed necessary by the Chairman of the Support Committee or required by a member of the

Support Committee.

Article 5 (Composition of Members of the Support Committee) A "public officials of the related central administrative agency determined by the Presidential Decree" in Article 4 (2) of the Act shall be a public official belonging to the senior civil service, and a person who carries out business related to social enterprise under subparagraph 1 of Article 2 of the Act (hereinafter referred to as a "social enterprise") at a central administrative agency falling under any of the following subparagraph:

1. Ministry of Strategy and Finance;

2. Ministry of Education, Science and Technology;

3. Ministry of Culture, Sports and Tourism;

4. Ministry of Health, Welfare and Family;

5. Ministry of Labor;

6. Ministry of Gender Equality and Family; or

7. Deleted Article 6 (Matters Included in the Basic Plan)

"Other matters as determined by the Presidential Decree for the purpose of promotion of and support for social enterprises" in Article 5 (2) 4 of the Act refer to those falling under any of the following subparagraphs:

1. Matters concerning laying the foundation for social enterprise support;

2. Matters concerning nurturing management workforce of a - 3 -

social enterprise and education and training of social enterprise workers;

3. Matters concerning the finance necessary for pursuing the basic plan; and

4. Other matters concerning major policy measures related to social enterprises

Article 7 (Establishment and Implementation of the Basic Plan, etc.) (1) The Minister of Labor, if necessary for the establishment and implementation of the basic plan and the annual implementation plan according to the basic plan under Article 5 (4) of the Act, may ask the head of a related central administrative agency or the head of a local government for cooperation such as the provision of related information, data, etc.

(2) The head of a related central administrative agency or the head of a local government, who is requested for cooperation under paragraph (1), shall cooperate.

Article 8 (Organization Form of a Social Enterprise) The "form of organization determined by the Presidential Decree such as a non-profit private organization, etc." in Article 8 (1) 1 of the Act refers to those falling under any of the following subparagraphs:

1. A public-service corporation under Article 2 of the Act on the Establishment and Operation of Public-Service Corporations

2. A non-profit private organization under Article 2 of the Support for Non-Profit Private Organizations Act;

3. A social welfare foundation under subparagraph 2 of Article 2 of the Social Welfare Services Act;

4. A cooperative according to Article 2 of the Consumer Cooperative Act; and

5. Other non-profit organizations under other acts Article 9 (Specific Determination Criteria for the Realization of a Social Purpose)

(1) The determination criteria whether the main purpose of the organization concerned shall be to realize a social purpose under the latter part of Article 8 (1) 3 of the Act shall be as prescribed in the following subparagraphs:

1. When the main purpose of the organization concerned is to provide jobs for the disadvantaged, the employment proportion of the disadvantaged among the total workers shall be 50/100 or more;

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2. When the main purpose of the organization concerned is to provide social service under subparagraph 3 of Article 2 of the Act (hereinafter referred to as "social service") for the disadvantaged, the proportion of the disadvantaged who receive social service among the total service recipients shall be 50/100 or more; or

3. When the main purpose of the organization concerned is to provide jobs and social service for the disadvantaged, the employment proportion of the disadvantaged among the total workers and the proportion of the disadvantaged who receive social service among the total service recipients shall be 30/100 or more respectively.

(2) When it is difficult to decide whether a social purpose is realized under each requirement according to subparagraphs of paragraph (1) notwithstanding paragraph (1), the decision shall be made by the Minister of Labor after the deliberation of the Support Committee.

Article 10 (Criteria for Income Through Business Activities) "Profits made by business activities shall be more than the criteria determined by the Presidential Decree" in subparagraph 5 of Article 8 of the Act refers to the case in which the total income through business activities of the organization concerned during six months just before the month of the day when the social enterprise applies for certification under Article 8 (3) is 30/100 or more of the total labor cost (which refers to the cost for workforce invested in service and production) spent by the organization during the same period.

Article 11 (Matters to be Included in the Articles of Association, etc.) "Other matters as determined by the Presidential Decree" in subparagraph 10 of Article 9 of the Act refer to those falling under any of the following subparagraphs:

1. Matters concerning a branch of a social enterprise;

2. Matters concerning the finance of a social enterprise; and

3. Matters concerning the accounting of a social enterprise. Article 12 (Entrustment of Operation Support Business) (1) "A government-invested agency or a private organization determined by the Presidential Decree" in Article 10 (2) of the Act refers to agencies or organizations falling under any of the following subparagraphs:

1. An agency which is designated as a public agency under Article 4 of Act on the Operation of Public Agencies (limited to a government-invested agency);

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2. A private organization falling under any of the following subparagraphs:

A. A management consulting company with three full-time consultants or more;

B. A corporation with personal and technical abilities for professional consultation, etc. on technology, tax, labor and accounting areas;

C. An annexed research institution of universities and colleges (private universities and colleges only) under subparagraph 1 of Article 2 of the Higher Education Act; and

D. A social enterprise or a private organization whose support record for a non-profit corporation or non-profit organization which creates jobs in public service areas is one year or more under Article 18-3 of the

Framework Act on employment Policy.

(2) The Minister of Labor, when entrusting support business to an agency or an organization prescribed in paragraph (1) according to Article 10 (2) of the Act, may provide whole or partial expenses for the execution of entrusted business of the entrusted agency or organization within the limit of the budget. Article 13 (Delegation of Authority)

The Minister of Labor shall delegate the authority concerning the following subparagraphs to the head of an employment security agency under Article 20 of the Act:

1. Receipt of certification application of a social enterprise under Article 8 (3) of the Act;

2. Acceptance of an alteration report in the articles of association, etc. according to Article 9 (2) of the Act;

3. Financial assistance for a social enterprise providing social service according to Article 14 of the Act;

4. Receipt of a business report, and an order to submit a report necessary for the business and a related document and a corrective order according to Article 17 of the Act;

5. Cancellation of certification and hearing under Article 18 of the Act; and

6. Imposition and collection of fine for negligence according to Article 21 of the Act.

Article 14 (Imposition of Fine for Negligence)

(1) If the Minister of Labor intends to impose a fine for negligence pursuant to Article 21 (3), he shall notify the person subject to the fine for negligence of the fact of violation, the - 6 -

amount of the fine for negligence, etc. in writing after investigating and confirming the offense.

(2) If the Minister of Labor intends to impose a fine for negligence, he shall give the person subject to the fine for negligence 10 days or more to make statements verbally or in writing (including an electronic document). In this case, if no statement is made until the set deadline, it shall be considered that there is no statement to make.

(3) If the Minister of Labor intends to set the amounts of fines for negligence, he shall consider the degree of the offense, the motive and results of the offense, etc., but the imposition criteria is shown in the Table.

(4) The procedures for collecting a fine for negligence shall be determined by the Ordinance of the Ministry of Labor. Addenda Article 1 (Enforcement Date)

This Decree shall enter into force from July 1, 2007. Article 2 (Special Cases Concerning Application of Specific Determination Criteria on the Realization of a Social Purpose)

With respect to the case falling under any of the following subparagraphs, notwithstanding the subparagraphs of Article 9 (1), it shall be regarded as the realization of a social purpose not later than December 31, 2008:

1. When the main purpose of the organization concerned is to provide jobs for the disadvantaged, the employment proportion of the disadvantaged among the total workers shall be 30/100 or more;

2. When the main purpose of the organization concerned is to provide social service for the disadvantaged, the proportion of the disadvantaged who receive social service among the total service recipients shall be 30/100 or more; or

3. When the main purpose of the organization concerned is to provide jobs and social service for the disadvantaged, the employment proportion of the disadvantaged among the total workers and the proportion of the disadvantaged who receive social service among the total service recipients shall be 20/100 or more respectively.

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[Table] Imposition Criteria for Fines for Negligence by Type of Offense (Relating to Articles 14 (3))

Offense

Legal

Provision

Amount of

Fine for

Negligence

1. A person who fails to comply with a corrective order under Article 17(3) of the Act

A. A person who habitually refuses and avoids the compliance of a corrective order

B. Others who refuse and avoid the fulfillment of a corrective order

Article 21(1)1

of the Act

7 million won

3million won

2. A person who uses use the title of social enterprise or a similar title in violation of Article 19 of the Act Article 21(1)2

of the Act

5million won

3. A person who fails to comply with his/her duty to report the alteration of the articles of association, etc. under Article 9(2) of the Act

A. A person who habitually refuses and avoids the report on alteration in the articles of association, etc. B. Others who refuse and avoid the report on alteration in the articles of association, etc.

Article 21(2)1

of the Act

3million won

1million won

4. A person who is negligent in his/her duty to draw up and submit a business report under Article 17 (1) the Act or draws up a business report in false or other fraudulent ways

A. A person who is habitually negligent in his/her duty to draw up and subm it a business rep ort or

h abitually draws up a business report in false or other fraudulent ways

B. Others who are negligent in their duty to draw up and submit a business report or draw up a business report in false or other fraudulent ways

Article 21(2)2

of the Act

3million won

1million won

5. A person who fails to make a report or submit a document according to Article 17(2) of the Act or does so in false ways

A. A person who habitually refuses and avoids an order to make a report or submit a document or habitually makes a report or submits a document in false ways B. Others who refuse and avoid an order to make a report or submit a document

Article 21(2)3

of the Act

3million won

1million won

Note : In case imposing fine for negligence, a person who imposes fine for negligence may reduce or raise the fine within the limit of a half of the amount of the fee, considering the motive, result, etc. of the - 8 -

offense: Provided that in case of raising the fee, he/she shall not exceed the maximum of the fee under Article 21 of the Act. Addenda Article 1 (Enforcement Date)

This Decree shall enter into force on the date of promulgation.

Articles 2 through 4 Omitted.

Articles 5 (Revision of Other Laws)

(1) through (12) Omitted.

(13) Parts of the Enforcement Decree of the Social Enterprise Promotion Act shall be revised as follows :

Paragraph 1 through 6 of Article 5 shall be as follows, and Paragraph 7 shall be deleted.

1. Ministry of Strategy and Finance;

2. Ministry of Education, Science and Technology;

3. Ministry of Culture, Sports and Tourism;

4. Ministry of Health, Welfare and Family;

5. Ministry of Labor;

6. Ministry of Gender Equality and Family; or (14) through (20) Omitted.