Foreign direct investment (hereafter referred to as “FDI) in Republic of Korea has continuously increased. I’ve been often asked about how to invest in Korea by foreign investors. In this post, I’d like to briefly introduce the process of FDI.
First, what is FDI? Based on the first paragraph of the Article 2 of Foreign Investment Promotion Act, foreign investment means a foreign investor’s acquiring shares or stocks of a Korean corporation, a foreigner’s establishing or managing a Korean corporation and a foreign parent company’s lending money to a Korean corporation for more than five years.
Second, when investing in a Korean corporation, a foreign investor will need a Korean business partner. Accordingly, FDI usually involves with entering into an investment agreement, for instance, a joint venture company agreement. If you are a foreign investor, please closely look into the terms of the agreement on the management issues.
Second, if you are to establish or manage a corporation with staying in Korea, you will have to get D8 visa. There are several sub-categories of D8 visa according to your investment type. Therefore, it is necessary to check out the requirements of the visa you are to receive. Basically, if you are to establish or manage a Korean corporation, you will be required to invest 100,000,000 KRW to it.
Third, it is required to make a report on foreign investment with details of a foreign capital inflow to a foreign exchange bank. The capital shall be transferred as a foreign currency in order to be acknowledged as a foreign investment.
Fourth, if a foreign investor establishes a new corporation in Korea, the process of establishment is quite complicated from drafting articles of association to electing directors. Or if a foreign investor is to acquire shares of an established corporation, it is necessary to check out if it is possible under current articles of association of the corporation, and if necessary, it is required to change the articles of association.
Fifth, whether a corporation is established or the shares or stocks of established are acquired by a foreign investor, commercial registration is needed.
Sixth, after the completion of investment, a corporation which is invested shall be reported to a foreign exchange bank in order for it to registered as a foreign-capital invested company. Additionally, the changes on the company including its name, address and ration of share shall be reported if there are any after the registration.
I’d give you an overall view of the flow of FDI in Korea so the detailed explanation on the process is not provided in this post. If you have any further inquiries, please send me an email (email@example.com). My office is located near Seoul District Court and Gyodae subway station in Seoul.
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