As South Korea's unprecedented low birth rate hollows out rural communities, childcare facilities are closing down at an alarming rate. However, for social welfare-backed daycare centers, shutting doors brings an unexpected legal nightmare: the potential loss of private property.

Under the current Social Welfare Services Act, non-profit daycare operators face mandatory reversion clauses, requiring them to forfeit all remaining assets to the state or local government upon dissolution. A recent legal battle in Muju, North Jeolla Province, has brought this contentious issue to the forefront of constitutional scrutiny.

The Muju Dispute: Founder's Assets at Stake

On November 11, Social Welfare Corporation A—which formerly operated a daycare center in Muju—petitioned the Jeonju District Court to request a formal constitutional review adjudication from the Constitutional Court. The move comes as Muju County pursues an ownership transfer lawsuit against the corporation to seize the center's land and buildings, valued at roughly 518 million won.

Corporation A opened its doors in 1997, peaking at 120 enrolled children. Yet, compounding pressures of rural depopulation and plummeting birth rates forced the facility to suspend operations in 2020 and officially dissolve by 2022.

While the National Assembly introduced an amendment to the Child Care Act last November to ease these burdens—permitting dissolving facilities to distribute residual assets to similar non-profits or recover depreciated subsidy values—the relief applies strictly to corporations filing for dissolution after May 12 of this year. Corporation A, having dissolved earlier, remains excluded, sparking the legal showdown.

Arguments: Public Interest vs. Fundamental Rights

Legal representatives for Corporation A argue that applying a blanket forfeiture rule without evaluating the source of the assets—such as privately contributed land or funds from historical private property compensation—violates constitutional principles such as the prohibition of excessive restriction (overbreadth doctrine) and the principle of equality.

"While state subsidies should certainly be settled and returned, seizing land and private compensation funds contributed entirely by the founder without compensation goes too far," argued Kim Jung-beom, the legal counsel representing Corporation A. Furthermore, critics point out glaring discrepancies with private school laws, which grant educational institutions greater flexibility over residual assets when facing enrollment declines.

Conversely, Muju County maintains that the corporation willingly agreed to surrender its assets during the initial 2022 dissolution approval process, pointing to property disposal plans submitted by the operators themselves.

A Broader Crisis Across the Nation

The case highlights a widespread systemic challenge. According to data from the Korea Social Security Information Service, over 11,300 daycare centers nationwide have closed over the past six years (2019–2025). In North Jeolla Province alone, the average enrollment rate for social welfare-run daycare centers sits at a fragile 38.14%, well below the national average.

Legal analysts note that if the local court grants the constitutional review request, it could set a critical precedent for dozens of other closed or struggling welfare corporations facing similar asset forfeitures nationwide. If dismissed, Corporation A is expected to take its case directly to the Constitutional Court via a constitutional complaint.

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