Legal review of lending funds through Loan Agreements with overseas investors.

Law firm Veat received a request from data-driven company A (hereinafter "Client") to review the legal aspects of foreign exchange transaction reporting necessary for lending funds through a Loan Agreement with an overseas investor.

The Client intended to enter into a Loan Partnership Contract with an overseas investor under the condition of borrowing a specific amount of funds for 7 years. The foreign exchange reporting center of Law firm Veat reviewed whether foreign exchange transaction reporting was required when a domestic corporation borrows foreign currency funds from an overseas investor.

The foreign exchange reporting center of Law firm Veat explained that the transaction must be reported in accordance with foreign exchange transaction regulations, and while it may vary depending on the internal regulations of a designated foreign exchange bank, there is a high probability of post-reporting for each borrowing if the funds are typically paid in installments over a certain period.

Also, if the Client has already conducted overseas investment in accordance with the "Foreign Investment Promotion Act," it may be subject to pre-reporting and registration as a foreign investment enterprise, and it may also apply to cases where a local corporation or overseas branch borrows funds for use abroad. Therefore, we informed them that separate foreign exchange transaction reporting laws such as the "Foreign Investment Promotion Act" may apply or additional reporting may be necessary.

Importance of Foreign Exchange Transaction Reporting and Overseas Investment Reporting

If a resident corporation engages in profit-making activities and wishes to borrow foreign currency funds from a non-resident, it must report the transaction to the head of a designated foreign exchange bank within one month from the date of receipt of the funds (Article 7-14(1)(3) of the Foreign Exchange Transaction Regulations of the Foreign Exchange Transaction Act).

Prior to July 4, 2023, it was subject to pre-reporting, but has been changed to post-reporting after the revision.

Foreign exchange transaction reporting is necessary to minimize legal risks that may arise from monetary lending transactions with overseas investors and to ensure transparent transactions. Foreign exchange reporting is closely related not only to the "Foreign Exchange Transaction Act" but also to the "Foreign Investment Promotion Act," which is a law related to overseas investment. We recommend that you carefully review with legal professionals who have a deep understanding of the reporting practices and relevant laws related to foreign exchange transactions and overseas investment.

The foreign exchange transaction reporting attorneys of Law firm Veat thoroughly review the matter to assist in the smooth progress of foreign exchange transaction reporting, including determination of reporting eligibility, preparation of necessary documents, and reporting agency.

The foreign exchange reporting center of Law firm Veat has helped the Client’s successful foreign exchange reporting based on years of experience and expertise to solve complex legal issues related to foreign exchange transactions and overseas investment. As a result, the Client was able to reduce unnecessary time and costs and prevent violations, allowing for efficient overseas investment.

If you require professional and efficient legal advice regarding difficulties related to foreign exchange transaction reporting and overseas investment reporting, please contact the foreign exchange reporting center of Law firm Veat to proceed with smooth overseas investment in a complex regulatory environment.

Thank you.

Sincerely,

Law firm Veat