[Consulting] FLIP

FLIP means that a domestic startup establishes a foreign corporation, and the domestic corporation becomes a subsidiary of the newly established foreign corporation. When a FLIP is performed, the location of the parent company or holding company changes to a foreign country, but the composition of the shareholders remains the same as in the US corporation. In this process, core personnel and the headquarters naturally end up located abroad, making it easier to conduct business in that country.

Furthermore, it can secure favorable conditions for investment from foreign venture capital (VC), especially US VCs. In some cases, a FLIP is carried out as a condition of investment after prior consultation with a specific VC. Company A received investment from a famous US VC and was advised that to target the US market and enter the global market, it would need to oversee its business through a US corporation. Accordingly, Company A sought out Law firm Veat and commissioned a US FLIP.

Law firm Veat handled complex foreign exchange and overseas securities trading reporting procedures, such as direct overseas investment reporting and securities acquisition reporting. Since the concept of FLIP itself is still relatively unfamiliar domestically, not only employees at the head office of commercial banks that approve the reporting but also officials in charge of foreign exchange trading reporting at the Bank of Korea and the Ministry of Strategy and Finance had differing opinions on the clear procedures and requirements for reporting. In particular, in the case of Company A, reporting officials had never seen such cases and the reporting process was delayed for several days, regarding whether the conditions for acquiring preferred shares were met, whether resident foreigners were subject to reporting, and whether foreign exchange banks were designated for each shareholder.

Accordingly, Law firm Veat presented the regulations of the Foreign Exchange Transaction Act and the Foreign Exchange Transaction Guidelines to the officials, conveying whether the reporting requirements were met, and the reporting was carried out as the relevant officials accepted this. Ultimately, Company A successfully completed a FLIP, established a parent company in the US, and was able to accelerate its efforts to target the US market.

Thank you.

Law firm Veat