The civil law countries, like Korea and Japan, traditionally are not hospital to the existence of NPOs, where there does not exist inherent right to associate unless such rights are explicitly provided in basic laws. In countries where many laws regulating NPOs, such as in Korea and Japan, such laws limit the rights of NPOs, providing only limited general rights to form NPOs outside the fields that are authorized separately. Therefore, establishment of NPOs depends on government's decision. There is no way to regulate the discretion of the agencies in deciding whether to permit a NPO to become a legal person. Additionally, there are inconsistencies and discrepancies among different government agencies in their granting of permission. With respect to nonprofit activities, regulation of required activities is strict in the sense that each NPO must focus only on its declared activities.
The special law, like the NPO Law in Japan or the Act Concerning Establishment and Operation of Nonprofit Corporation in Korea, is able to facilitate incorporation process of nonprofit organizations that are involved in those activities listed in the law. But the law is enacted as a special law under the Civil Code, not as a general law governing incorporation of nonprofit organizations. Under the Civil Code and other special laws related to nonprofit corporations, the approval process of incorporation and interference of government agency are still effective for those nonprofit corporations under the laws. In fact, there exists differential treatment of nonprofit organizations regarding incorporation. According to the special law, incorporation would be much easier and simpler and, therefore, most of nonprofit organizations are expected to be incorporated through the law, rather than the Civil Code. Therefore, those established under the Civil Code or other special laws would be treated in a different way from those under the NPO Law.
In many countries including Korea, formal registration is a prerequisite to function and enjoy the rights of a legal entity. The Civil Code or the special laws provide the specific procedures and requirements for establishment of a nonprofit corporation. In case of Korea, the relevant law restricts establishment of nonprofit corporation, whether in form of foundation or association, by limiting its activities to scholarship or support or payment of research expenses, art and science, or charity. It is not necessary for a nonprofit organizations to be registered as a legal person in order to pursue nonprofit activity. Nonprofit organizations may also be formed as unincorporated one. Formation of this type of nonprofit organizations is not prohibited, but it is not allowed to enjoy the general rights or benefits of legal person because the nonprofit organizations are not legally registered. As a result, nonprofit organizations without legal person status is limited in pursuing nonprofit activity. Tax exemption or reduction privilege is usually given to nonprofit corporation only with registration. The relevant government agency at which an NPO is registered has all the power over establishment. A relevant agency should review the application and make final decisions or give conditions to which establishment of a nonprofit corporation is permitted. Permission or rejection of establishment heavily depends on discretionary judgement of the relevant government ministry without any way to check it. Also, in making decision on whether to permit or reject the application of establishment of nonprofit corporation, there are inconsistencies among different government agencies. Government agencies apply different criteria or requirement for application despite of stipulations of the relevant law. Nonprofit corporations have to be registered at relevant agencies, depending on their nonprofit activities, even though they are established under the same law. Different central government agencies apply different rules and regulations when reviewing the application for establishment.
