TITLE : FAQ on FDI in Korea 2023 (Q46~Q50)
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■ FAQ on FDI in Korea 2023 (Q46~Q50)
FDI Notification&Registration
Q46 When a foreign investor remits investment funds in Korean won from a foreign country, can it still be recognized as foreign investment?
A46 In order to be recognized as foreign direct investment,investment funds should be remitted in foreign currency froma foreign country and exchanged into Korean won in Korea.It is because a certificate of purchase of foreign currency or acertificate of deposit of foreign currency should be submittedfor the registration of a foreign-invested company.
- Nowadays, many foreign banks hold Korean won bank accounts inKorean banks. When a foreign investor visits a bank in his/her countryto remit investment funds, the bank may suggest that the investorexchange the foreign currency funds into Korean won in their bankon the condition that the Korean won funds will be withdrawn in theircorresponding bank in Korea. The foreign investor should reject this offerand transfer the funds in foreign currency.
Q47 Is there a penalty provision for a failure to execute an investment after notifying foreign investment?
A47 Notification of foreign investment is mandatory, but there areno penalty provisions for failure to notify foreign investment.Therefore, when it is inevitable to change the information ofthe notified matters, a notification of change of informationcan be filed any time.
- Changes requiring notification of change of information
- The trade name, ame or nationality of the foreign investor
- Foreign investment amount, foreign investment ratio and form ofinvestment
- Business that the investor intends to engage in
- Transferor of stocks, etc.
- Types of investment, purpose of investment, address of the foreigninvested company, etc.
Q48 A foreigner intends to acquire 20% of the total shares of a domestic unlisted company and the acquisition cost is about KRW 90 million. Is it impossible for the foreigner to acquire the shares because the investment does not meet the requirement under the Foreign Investment Promotion Act?
A48 Such investment can be carried out under a different law.Where a foreigner (non-resident) acquires local currencydenominated stocks or shares of an unlisted or unregistereddomestic corporation from a resident as an object ofinvestment prescribed by the Foreign Investment PromotionAct and such acquisition does not constitute foreigninvestment prescribed by the Act, it should be reported tothe head of a foreign exchange bank (Article 7-32 of theRegulation on Foreign Exchange Transactions).
- If the investment cannot be notified under the Foreign Investment Promotion Actbecause the amount of investment is less than KRW 100 million, a notification ofacquisition of stocks by a non-resident should be filed to a foreign exchange bankpursuant to Article 7-32 of the Foreign Exchange Transactions Regulations.
Q49 What procedures and documents are required for a foreign investor intending to transfer its shares to a Korean national or a foreigner?
A49 When a foreign investor transfers the stocks, etc. acquiredpursuant to the Foreign Investment Promotion Act to anotherperson (a Korean national or a foreigner), the acquiring foreigneror foreign-invested company should report the acquisition ofthe stocks, etc. and register change of information of foreigninvested company to a delegated agency within 60 days of thesigning of the stock transfer contract.
- When the foreign investor transfers the stocks to a foreigner:
- The acquiring foreigner: Two copies of the form of notification offoreign investment by acquisition of stocks, etc. or contribution(certificate of nationality and stock transfer contract to be attached)
- The foreign-invested company: An application for alteration ofregistration of a foreign-invested company (the original certificate ofregistration of a foreign-invested company should be returned and ashareholder register should be attached)
- When the foreign investor transfers the stocks to a Korean national:
- The foreign-invested company should apply for alteration ofregistration of foreign-invested company to reflect the transfer of thestocks of the foreign investor. However, if the entire stocks held bythe foreign investor are transferred, registration of foreign-investedcompany shall be cancelled.
- The foreign-invested company: An application for alteration ofregistration of foreign-invested company (the original certificate ofregistration of a foreign-invested company should be returned and ashareholder register should be attached)
Q50 What is the reporting procedure for notifying foreign investment in case of a merger between foreign-invested companies?
A50 Where foreign-invested company B acquires another foreigninvested company C and foreign-invested company C ceasesto exist
- The merged company C should file for cancellation of registration of aforeign-invested company (reason: merged by another company andextinguished).
- Foreign investor A of the merged company C should notify the acquisitionof the stocks of the surviving corporation B depending on the mergerratio. (The original amount of foreign investment shall be succeeded.)(Article 5 (2) 3 of the Foreign Investment Promotion Act)
- The surviving corporation B should notify modifications to theregistration of a foreign-invested company.
* In this case, foreign investor A’s investment in foreign-invested companyB does not entail an actual capital infusion and the amount of foreigninvestor A’s investment in the merged foreign-invested company C shallbe succeeded.