Foreign investment reporting and foreign investment enterprise registration, essential requirements for practitioners.
Article posted in 2025-04-15 15:15:46 | VEAT
Law firm Veat received a request from an open market (hereinafter referred to as "client") to proceed with foreign investment reporting and registration of a foreign investment enterprise.
Company A, a domestic open market platform rapidly growing targeting the global market, decided to attract investment from a foreign investor and entrusted Law firm Veat, specializing in foreign exchange transaction reporting, with legal advice regarding foreign investment reporting and registration of a foreign investment enterprise.
In this process, Law firm Veat comprehensively reviewed whether the investment qualifies as foreign investment under laws such as the "Foreign Investment Promotion Act" (hereinafter referred to as "Foreign Investment Act"), the Foreign Exchange Transaction Act, and other related laws, and performed a swift reporting and registration procedure.
Furthermore, Law firm Veat meticulously analyzed the investor's nationality, domestic residence, residency status, source of funds, investment method, and applicable laws before carefully judging the necessity of foreign investment reporting. Based on the results, the firm prepared various documents for foreign investment reporting and registration of a foreign investment enterprise, and accurately and promptly proceeded with the entire process, including practical correspondence with related agencies.
Additionally, Law firm Veat provided advice on risks and reporting obligations related to subsequent foreign exchange transactions, supporting the client in checking for regulatory burdens that could be encountered in the process of attracting foreign investment.
Points to note when judging foreign national investment as a reporting target
According to the Foreign Investment Promotion Act, if an investment qualifies as foreign investment, the investor must report the investment to the Minister of Trade, Industry and Energy and register the foreign investment enterprise. It's important to note that foreign investment reporting is not triggered merely by the fact that "a foreigner invested," but rather that a thorough review is needed to determine whether the investment action meets the requirements of a foreign investment as recognized by the relevant laws.
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"Foreign Investment Promotion Act" Definitions: The following terms when used in this Act shall have the meanings as follows. 4. “Foreign investment” means any of the following: a. A foreigner establishes a continuing economic relationship with a Korean corporation or enterprise (including a corporation in the process of incorporation, hereinafter the same in this Article) with the purpose of participating in the management activities of such corporation or enterprise, or to acquire shares or interests (hereinafter “shares, etc.”) in accordance with the Presidential Decree, 1) Acquiring newly issued shares, etc. b. Provided by any of the following entities to a foreign investment enterprise loan (long-term loan) of over 5 years (based on the term of the initial lending agreement); 1) Overseas parent company of a foreign investment enterprise c. A foreigner donates (contributes) to a Korean corporation or enterprise engaged in scientific and technological fields with the purpose of establishing a continuing cooperative relationship with a non-profit corporation that meets the standards prescribed by Presidential Decree for research personnel, facilities, etc., d. A foreign investment enterprise utilizes undistributed earnings for the purpose of establishing or expanding factories, etc., as prescribed by Presidential Decree (In this case, the foreign investment enterprise shall be regarded as a foreign entity and the foreign investment amount shall be the amount used multiplied by the foreign investment ratio stipulated in Article 22, Paragraph 3); e. Other contributions to a non-profit corporation of a foreigner that are recognized as foreign investment by the Foreign Investment Committee (hereinafter “Foreign Investment Committee”) in accordance with the standards prescribed by Presidential Decree for the business content of the non-profit corporation. |
According to Article 2 of the Foreign Investment Promotion Act, if a foreign national acquires a certain amount or more of shares in a Korean corporation or provides a long-term loan, etc., establishing a continuing economic relationship, it is deemed a foreign investment, and in principle, a foreign investment benefit is available only when the investment amount is over 100 million KRW.
Even if the investor does not reside in Korea, he or she can be considered as a foreign investment and may be subject to foreign investment reporting if the investor meets certain requirements. However, a point that is easily overlooked by many companies is the judgment of investment by foreign nationals residing in Korea.
Even if the investor has a foreign nationality in form, if he or she invests based on funds formed in Korea while residing in Korea, it does not constitute "import and export of foreign exchange" under the Foreign Exchange Transaction Act, and may not be subject to foreign investment reporting or foreign exchange transaction reporting.
That is, instead of uniformly proceeding with foreign investment reporting simply because the investor is a foreigner, it is essential to examine the investor's actual circumstances and the flow of funds based on a legal review.
Law firm Veat: Your partner for foreign investment reporting, providing support from legal interpretation to agency correspondence
Attracting foreign investment is an important opportunity for startups, small and medium-sized enterprises, and large corporations to cooperate with global capital. However, in this process, it is important to properly carry out foreign investment reporting and registration of a foreign investment enterprise to prevent sanctions due to non-compliance with relevant laws, and to ensure smooth and efficient procedures for receiving funds and reporting to financial institutions.
In particular, the applicable laws may vary depending on the investor's residency status, source of funds, and purpose of investment, so it is recommended that you consult with a legal professional with extensive practical experience in foreign exchange reporting.
Law firm Veat provides foreign investment reporting and legal advice on foreign exchange reporting for a wide range of entities, from early-stage startups to large corporations, and provides legal support to ensure that the investment attraction process proceeds smoothly and stably based on accumulated practical experience and expertise.
If you need help with foreign investment reporting or registration of a foreign investment enterprise, please feel free to contact the overseas investment reporting center of Law firm Veat.
This case study can also be found on the Law firm Veat blog.
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Law firm Veat