Foreign Direct Investment
Foreign investment refers to investing for the purpose of establishing long-term interests within a company, or exerting a considerable amount of influence on a domestic company and its management. Foreign investment may include the acquisition of stocks or shares, establishment of branches and offices, provision of long-term loans, and contributions to a non-profit corporation.
Foreign Investment Promotion Act
The Korean government has several legislations, with the Foreign Investment Promotion Act providing the framework, in place to attract foreign investment and make the foreign investment process more convenient (other relevant legislations: Restriction of Special Taxation Act, Foreign Exchange Transactions Act, Act on Designation and Management of Free Trade Zones, Special Act on Designation and Management of Free Economic Zones, etc.). Together, these legislations define conditions for liberalized foreign investment, outline investment procedures for foreign investors, support foreign investment, designate foreign investment zones, manage foreign investments, and provide the legal basis for the Foreign Investment (Working) Committee.
Promoting and Regulating Foreign Investment
Foreigners are free to invest in Korea, except under special circumstances. The Korean government supports foreign direct investment with better protection extended to foreign investors who directly invest in Korea compared to those that invest indirectly. However, some sectors such as the public sector may be excluded from foreign investment or face restrictions pertaining to the permitted investment ratio.
Foreign Investment Process
The foreign investment process consists of four stages: reporting foreign investment; remittance of investment funds; registration of the established corporation and registration of business entity; and registration of a foreign investment company.
Once a foreign entity completes its investment, the domestic company receiving the investment must apply for registration as a new foreign investment company. In addition, if there is a reason to change the registered details of a foreign investor's equity, a reason to register any change in the foreign investment company, or a reason to terminate the foreign-invested company's registration due to liquidation, the foreign investment company must report the relevant investment details and apply to change/terminate its registration.