TITLE : FAQ on FDI in Korea 2023 (Q51~Q56)
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■ FAQ on FDI in Korea 2023 (Q51~Q56)
FDI Notification&Registration
Q51 What are the administrative procedures under the Foreign Investment Promotion Act in case of splitting a foreign-invested company?
A51 When foreign-invested company A establishes new companyB through a corporate split (a spin-off)*, this results in acapital reduction for the surviving foreign-invested companyA. In this case, the foreign investor of company A should altera registration of a foreign-invested company pursuant toArticle 21 of the Foreign Investment Promotion Act to reflectthe reduced amount of capital for the foreign investor andsubtract the amount from the foreign investment amount.
- The foreign investor of new company B is also the foreign investor offoreign-invested company A and should notify the acquisition of thestocks of the new company B with the investment amount correspondingto the amount reduced by the spin-off and register the new company Bas a foreign-invested company pursuant to Article 5 (2) 3 of the ForeignInvestment Promotion Act.
- Company splits are divided into spin-offs and split-offs. Only spin-offswhere paid-in capital (at par value) is divested are subject to notificationunder the Foreign Investment Promotion Act.
- Spin-offs: All of the existing shareholders (including the foreigninvestor) of foreign-invested company A receive the stocks of newcompany B, equivalent to the number of total stocks and the amount oftotal capital reduce from the spin-off, in proportion to their shareholdingratios of foreign-invested company A. New company B is requiredto notify the reduced number of stocks and the reduced investmentamount for the foreign investor pursuant to the Foreign InvestmentPromotion Act.
- Split-offs: New company B is not subject to notification under theForeign Investment Promotion Act because foreign-invested companyA owns 100% of the stocks of new company B as its subsidiary withoutany reduction in the total par value of paid-in capital
Q52 What are the notification and registration procedures for foreign investment when foreign investor A is merged by foreign company (or existing foreign investor) B and ceases to exist?
A52 If foreign investor A is acquired by foreign company (orexisting foreign investor) B, B will succeed to be the newshareholder (or share increase) of foreign-invested companyC. Therefore, an application for alteration of registration offoreign-invested company should be filed.
- By merging A, foreign company (or foreign investor) B shall succeed tobe the shareholder of foreign-invested company C without a separateacquisition of stocks. Therefore, notification of acquisition of stocks, etc.(Form 1) is not required.
- Foreign-invested company C (or foreign investor B) should apply foralteration of registration of foreign-invested company (Form 17)
- Reason for alteration: Change of the foreign investor
- Required documents: A modified shareholder register, documentscertifying the merger, a certificate of nationality of B (not required foran existing foreign investor), and the existing certificate of registrationof foreign-invested company (to be returned)
- The registration of alteration is required pursuant to Article 21 (3) 4 of the ForeignInvestment Promotion Act as it is the case of a change to the “trade name,name or nationality of the foreign investor“ as prescribed in Article 2 (3) 2 of theEnforcement Rule of the Foreign Investment Promotion Act.
Q53 What are the notification and registration procedures for foreign investment when foreign investor A invests in kind all of the stocks of foreign-invested company C in foreign company B?
A53 If foreign investor A invests in kind the entire stocks of foreigninvested company C in foreign company B, foreign companyB should acquire the stocks of foreign-invested company Cthrough succession by notifying the acquisition of stocks, etc.and foreign-invested company C should apply for registrationof alteration to reflect the change of foreign investor.
- Because foreign company B acquires the stocks of foreign-investedcompany C through the investment of foreign investor A, it should file areport on the acquisition of stocks, etc. (Form 1)
- Method of acquisition (Paragraph 19) Others - A’s investment in kind ofC’s stocks
- Required documents: A certificate of nationality of B, and documentsverifying the investment in kind
- Foreign-invested company C (or foreign company B) should apply forregistration of alteration (Form 17).
- Reason for registration of alteration: Change of foreign investor
- Required documents: The modified shareholder register, the existingcertificate of registration of foreign-invested company (to be returned)
Q54 What are the notification and registration procedures for foreign investment when foreign investor A invests in kind all of the stocks of foreign-invested company B in domestic company C?
A54 What are the notification and registration procedures for foreigninvestment when foreign investor A invests in kind all of thestocks of foreign-invested company B in domestic company C?
- Foreign-invested company B should cancel the registration of foreigninvested company through registration of alteration (Form 17)
- Reason: Domestication
※ This constitutes a case “where a foreign investor has transferred all of thestocks, etc. owned by himself or herself to a Korean corporation or company”as prescribed in Article 21 (4) 2 of the Foreign Investment Promotion Act.
- Reason: Domestication
- As foreign investor A invests in kind all of the stocks of foreign-investedcompany B in domestic company C, foreign investor A should file areport on the acquisition of stocks, etc. of domestic company C (Form 1)
- Object of investment: Domestic stocks
※ Constitutes “stocks owned by foreigners under the Foreign InvestmentPromotion Act or the Foreign Exchange Transactions Act” as prescribed inArticle 2 (11) 2 of the Enforcement Decree of the Foreign Investment PromotionAct) (satisfies the requirements of investment of not less than KRW 100 millionand acquisition of not less than 10% of the total voting stocks) - Required documents: Certificate of nationality of A, appraisal report onthe stocks of foreign-invested company B
- Object of investment: Domestic stocks
- Domestic company C (or foreign investor A) should apply for registrationof foreign-invested company (Form 17)
- Reason: New foreign investment
- Required documents: Certificate of corporate registration, certificateof business registration, and shareholder register (or documentscertifying the stock transfer
Q55 What are the notification and registration procedures for foreign investment when foreign investor A transfers all of the stocks of foreign-invested company C to its overseas parent company B in the form of dividend in kind?
A55 If foreign investor A transfers all of the stocks of foreigninvested company C to its overseas parent company B in theform of dividend in kind, overseas parent company B can acquirethe stocks of foreign-invested company C through successionby notifying the acquisition of stocks, etc. and foreign-investedcompany C should apply for registration of alteration due to thechange of foreign investor.
- Because foreign company B receives the stocks of foreign-investedcompany C owned by foreign investor A in the form of dividend in kind,foreign company B should notify the acquisition of stocks, etc. (Form 1)
- Method of acquisition (Article 19) Others - C’s stocks paid as dividendin kind by A
- Required documents: Certificate of nationality of B and documentsverifying the dividend in kind
- A or foreign parent company B need to apply for registration of changeof foreign-invested company (Form 17)
- Reason for registration of alteration: Change of foreign investor
- Required documents: A modified shareholder register, the existingcertificate of registration of foreign-invested company (to be returned)
Q56 My company has a foreign-invested company registration certificate issued by KOTRA and wishes to register change of information of registration of foreign-invested company at its primary bank instead of KOTRA for the sake of convenience. What is the procedure for this?
A56 It is possible to change the management institution for foreigninvestment and this is referred to change of delegated authority.You can submit the application form for change in delegatedauthority to the original institution by using attached Form 2:Application for change in delegated authority of the standards forhandling business affairs related to foreign investment.