Amid South Korea’s unprecedented birth rate crisis, a social welfare foundation in Muju, North Jeolla Province, has taken legal action regarding asset forfeitures following a mandated daycare center closure. As dwindling enrollment forces nurseries to shut down, single-purpose social welfare foundations face stringent laws requiring them to surrender remaining assets to the state or local governments upon dissolution.
The Muju Daycare Center Closure and Unconstitutionality Petition
Although the National Assembly previously amended the Childcare Act to allow asset retention after settling government subsidies, these revisions only apply to foundations that applied for dissolution after the amendment took effect. Consequently, institutions that closed earlier remain excluded, prompting legal battles. On November 14, legal sources revealed that A Social Welfare Foundation, which previously operated a daycare center in Muju, filed an unconstitutionality petition with the Jeonju District Court.
The petition challenges Article 27, Paragraph 1 of the Social Welfare Services Act and Addendum Article 3 of the revised Childcare Act. The foundation’s legal representatives argue that forcing founders to surrender privately acquired assets without compensationβdespite the facility closing due to unavoidable demographic declinesβviolates the principle of proportional limitation on fundamental rights.
Surge in Nationwide Daycare Closures Due to Low Birth Rates
Between 2019 and 2025, a staggering 11,307 daycare centers closed across South Korea due to plunging birth rates and rural depopulation. According to the Korea Social Security Information Service, there were only 1,074 social welfare foundation-run daycare centers remaining out of 25,082 total facilities as of June. Operators contend that penalizing founders who invested personal capital or land into public-interest facilities severely restricts their freedom of occupation.
While Muju County argues that the foundation voluntarily submitted asset disposition plans agreeing to transfer ownership, the foundation maintains that these administrative documents merely reflected mandatory procedures rather than voluntary donations. The court’s decision on whether to refer the matter to the Constitutional Court is expected to set a critical precedent for numerous other closed childcare facilities facing similar asset confiscation disputes.
