Even if a company that registered as a foreign-invested company no longer satisfies the FDI conditions due to transfer of shares or capital reduction, its investment shall still be recognized as FDI.

[Article 2 (2) of the Enforcement Decree of the Foreign Investment Promotion Act]

※ In this case, the company is only allowed to have passive and limited rights despite maintenance of qualification as a foreign-invested company. Therefore, the company must be aware of reduced or eliminated support including but not limited to extension of stay period for its executives and staff

Where two or more foreigners make a joint investment, the amount invested must be at least KRW 100 million per person.

Article 2 (3) of the Enforcement Decree of the Foreign Investment Promotion Act

The loan period shall be calculated by considering the grace period and the period of the loan to be repaid in installments or prepayments, while the repayment period shall be calculated by multiplying the proportion of the loan to the total amount equal to the period of each installment or prepayment. ⇒ Concept of weighted average term to maturity

Example) What is the repayment period if a foreign-invested company borrows USD 10 million from its parent company for eight years and pays back the loan at a rate equal to USD 2 million per year for five years starting from four years after? The weighted average repayment period of six years is met.

Article 2 (2) of the Enforcement Rules of the Foreign Investment Promotion Ac

Investment in non-voting preferred stocks is not recognized as FDI which requires notification since foreign investors must acquire at least 10% of stocks with voting rights when notifying their investment for the first time.
However, when the same investor acquires preferred stocks after completing the FDI notification process, it is recognized as an increase in the total investment amount and thus, the total investment amount and its ratio increases

It is recognized as a foreign direct investment only if the foreign investor directly invests.
Foreign-invested companies are classified as domestic corporations, and thus investments in other domestic corporations by foreigninvested companies cannot be considered foreign direct investment.

Investment associations such as the Small and Medium Enterprise Establishment Investment Association do not have a corporate personality and are therefore organizations, not corporations.
However, in many cases foreign investors invest in 10% or more of such associations' shares. Do such cases constitute FDI as prescribed by the Foreign Investment Promotion Act?

• Small and Medium Enterprise Establishment Investment Association, Korea Venture Fund, Specialized Parts and Materials Investment Association, Agricultural and Food Investment Association, etc.
• Article 64 of the Act on Special Measures for the Promotion of Venture Business, Article 53 of the Act on Special Measures for the Promotion of Specialized Enterprises, etc., for Materials and Components, Article 24 of the Act on Formation and Operation of Agricultural, Fisheries and Food Investment Funds, etc

In the event of a merger, the entity must notify the merger under Article 11 of the Monopoly Regulation and Fair Trade Act, as is the case of a domestic company.

• Size of applicable companies
  • Notifying company (foreign investor): KRW 300 billion or more in total assets or sales
  • Partner company (domestic company): KRW 30 billion or more in total assets or sales
• Mergers requiring notification
  • Where a company holds at least 20% (or at least 15% in the case of a listed corporation) of the total number of shares (excluding non- voting shares) issued by another company
  • Where an individual who holds at least 20% (15% in the case of listed companies) of the shares issued by another company becomes the largest shareholder by acquiring additional shares of that company
  • Where an executive officer of a large company concurrently holds an executive officer position in another company
  • In the case of a corporate merger
  • Where a company takes over the business
  • Where the company participates in the establishment of a new company and becomes the largest shareholder thereof

※ Notification following the merger is permitted when a foreign investor’s total assets or sales is KRW 300 billion or more although a large company with total assets or sales of KRW 2 trillion or more is required to notify the merger prior to it taking place (prohibition of action). However, even in cases requiring pre- merger notification, FDI notification can be made through a delegated agency such as a foreign exchange bank (not a violation of prohibition of action)

Capital goods include industrial facilities, materials for test operation, and technical services which are not for sale and create added industrial value.
Materials (excluding those for test operation) and raw materials are not included

• Machinery, apparatus, facilities, equipment, parts, and accessories as industrial facilities (including vessels, motor vehicles, aircraft, etc.), livestock, breeds or seeds, trees, fish and shellfish which are necessary for the development of agriculture, forestry, and fisheries, and raw materials
• Raw materials and reserve stocks deemed necessary for initial testing (including pilot projects) of facilities as recognized by the relevant Minister and fees for transportation and insurance required for the introduction thereof and other know-how or service necessary therefor

Article 2 (1) 9 of the Foreign Investment Promotion Ac

Domestically sourced funds are not recognized as FDI.

According to Article 28 (2) of the Local Tax Act, a company whose type of business makes it unavoidable to establish facilities in a large city may pay 0.4% of the paid-in capital as registration license tax.
The applicable business types are specified in Article 26 (1) of the Enforcement Decree of the Local Tax Act

An application containing the foreign investor registration including personal information should be filed to the Governor of Financial Supervisory Service in advance in a manner prescribed by the Governor of Financial Supervisory Service when the investor intends to acquire or dispose of existing stocks or stocks to be listed for the first time.
Foreign investor registration is not required where an investor seeks to acquire or dispose of stocks related to FDI, except in cases where stocks are acquired in a stock market.

It is possible to change the foreign-invested company management institution, which is referred to as a change in the delegated agency.
A foreign-invested company that intends to change its delegated authority should prepare an application for change* of delegated authority and apply to the original delegated authority.
To file an application, use attached Form 2 of the rules on handling of foreign investment matters (application for change of delegated agency

FDI notification is not legally binding. If there is a change in the investment plan, a change of information may be notified (including withdrawal of notification)

Where the investment amount falls short of KRW 100 million and therefore FDI cannot be notified according to the Foreign Investment Promotion Act, a non-resident’s securities acquisition report should be made under the Foreign Exchange Transactions Act (Article 7-32 of the Foreign Exchange Transactions Regulations).

There is a system in place which allows the company to receive additional funds for incorporation from the parent company and then pay it back.
According to Subparagraph 6 of Article 4-3 of Foreign Exchange Transactions Regulations, expenses by non-residents for the establishment of a foreigninvested company under the Foreign Investment Promotion Act are refundable

Previously, due to the Commercial Act stating that "Shareholders are not able to counter the company by offsetting payment", it was only possible to prepare loans and make stock payments through repayment procedures, or to convert the loans to investment through investment-in-kind after obtaining the approval of the court.
However, as Article 334 of the Commercial Act banning the countervailing of shareholders was deleted, it is now possible to convert long-term loans directly to equity capital without court approval

Online notification is currently not available, but KOTRA’s overseas investment hub offices provide FDI notification service for the convenience of investors. A list* of KOTRA’s overseas investment hubs is provided on the Invest KOREA website

Article 29 of the Commercial Registration Act regulates that a company name which is identical to a company name registered by another company for the same type of business cannot be registered in the same Special Metropolitan City, Metropolitan City, Special Self-governing City, City (including an administrative city) or county (excluding a county within a metropolitan city)

Although the contract does not need to be attached, a confirmed address is needed.
The contract should, however, be submitted when filing a business registration after the registration of incorporation is completed.

A business investment (D-8) visa is issued to indispensable professional specialists who are dispatched from the overseas headquarters to be engaged in the management, business administration or production and technology of a foreign-invested company, as prescribed by the Foreign Investment Promotion Act.
A dispatch (D-7) visa is issued to indispensable professional specialists who are dispatched to domestic branches or offices with at least a year of experience in foreign public institutions, organizations, or headquarters, branches, or offices