Permission for foreign investment
Foreign investment that requires permission- If a foreigner intends to make foreign investment in a company operating a defense industry under Subparagraph 9 of Article 3 of the Defense Acquisition Program Act by acquiring stock or stake already issued by an enterprise run by a Korean corporation or a national of the Republic of Korea (hereinafter referred to as “existing stocks, etc.”) despite the foreign investment report, it must obtain prior permission from the Ministry of Trade, Industry and Energy (former part of Article 6 (1) of the Foreign Investment Promotion Act and Articles 6 (1) and 7 (1) of the Enforcement Decree of the Foreign Investment Promotion Act).
※ Foreigners who are required to report foreign investment must include the following affiliated persons (Article 6 (1) of the Enforcement Decree of the Foreign Investment Promotion Act).
① Spouse and lineal ascendants and descendants of the relevant foreigner (including lineal ascendants and descendants of the spouse of the relevant foreigner)
② A foreign corporation where the relevant foreigner and persons in such relationship as prescribed in ① or ③ hold together at least 50% of the total number of issued stocks or the total equity investment, or a foreign corporation which is virtually being controlled by the relevant foreigner and said persons
③ Employees of the relevant foreigner and persons prescribed in ② or ④ (referring to executives in the case of a corporation, trade employees, other employed persons through an employment contract, or persons who maintain their livelihood by means of money or property of an individual in the case of an individual)
④ A foreign corporation where such a corporation prescribed in ②, the relevant foreigner, and such persons prescribed in ① and ③ hold together at least 50% of the total number of issued stocks or the total equity investment
Notification of the decision on permission- The Ministry of Trade, Industry and Energy, upon receipt of such request for permission, shall determine whether to grant permission and notify the applicant of the result within 15 days. However, the period may be extended once by up to 15 days in inevitable circumstances (Article 6 (2) of the Foreign Investment Promotion Act and Article 7 (2) of the Enforcement Decree of the Foreign Investment Promotion Act).
- The Ministry of Trade, Industry and Energy may attach conditions if deemed necessary when granting permission (Article 6 (4) of the Foreign Investment Promotion Act).
Restrictions on the exercise of voting rights, etc. of unauthorized stocks, etc.- A person who has acquired stocks, etc. without permission or in violation of conditions shall not exercise his/her voting rights based on such stocks, etc. (Article 6 (5) of the Foreign Investment Promotion Act).
- The Ministry of Trade, Industry and Energy shall order a person who has not obtained permission or acquired stocks, etc. in violation of the conditions to transfer the stocks, etc. to a Korean national or a Korean corporation within one month from the date he/she becomes aware of the violation (Article 6 (6) of the Foreign Investment Promotion Act and the former part of Article 7 (8) of the Enforcement Decree of the Foreign Investment Promotion Act).
- In such cases, the transfer period shall be the period determined by the Ministry of Trade, Industry and Energy for up to six months, but the transfer period may be extended by up to six months in extenuating circumstances (Article 6 (6) of the Foreign Investment Promotion Act and the latter part of Article 7 (8) of the Enforcement Decree of the Foreign Investment Promotion Act).
Modification on permission- When a foreigner changes any of the following matters, such as the ratio of foreign investment, he/she shall obtain permission from the Ministry of Trade, Industry and Energy (latter part of Article 6 (1) of the Foreign Investment Promotion Act and Article 2 (3) of the Enforcement Rules of the Foreign Investment Promotion Act).
· Foreign investment ratio, foreign investment amount
· Name and nationality of a foreign investor
· Name and address of a foreign-invested company
· Business run or to be run by a foreign-invested company
· Transferor of shares or stakes (limited in acquiring existing stocks, etc. under Item A (ⅱ) of Subparagraph 4 of Article 2 (1) of the Foreign Investment Promotion Act)
· Loan provider, loan amount, and loan conditions (only in cases of loans under Item B of Subparagraph 4 of Article 2 (1) of the Foreign Investment Promotion Act)
· Contribution amount and conditions (limited to contributions to nonprofit corporations under Items C and E of Subparagraph 4 of Article 2 (1) of the Foreign Investment Promotion Act)
· Any other modification in the foreign investment report, application for permission, or application for registration of a foreign-invested company