“Securities Acquisition Declaration – This must be done correctly depending on the type of foreign exchange transaction.”

Law Office Inpyeong has been successfully advising and representing foreign non-residents on the procedures and regulations for acquiring unlisted shares or convertible bonds of Korean domestic corporations, as well as reporting and registration.

Today, we will summarise the most frequently asked questions on the acquisition of securities by foreign non-residents.

Question) What is the procedure for a foreign non-resident to acquire unlisted shares or convertible bonds of a domestic company?

Answer) If a foreign non-resident wishes to acquire unlisted or unregistered shares or interests of a domestic corporation in Korea, different procedures must be followed depending on the percentage of shares that the foreign non-resident is acquiring.

If a foreign non-resident acquires 10% or more of the unlisted shares of a domestic corporation, and the acquisition constitutes a foreign investment under the Foreign Investment Promotion Act, a foreign investment report must be filed under the Foreign Investment Promotion Act.

In this case, no notification procedure under the Foreign Exchange Transaction Regulations is required.

If a foreign non-resident acquires unlisted shares of a domestic corporation from a resident for the purpose of investment as defined in the Foreign Investment Promotion Act, but does not qualify as a foreign investment as defined in the Foreign Investment Promotion Act, the acquisition must be notified to the foreign exchange bank in accordance with the Foreign Exchange Transaction Regulations. However, if a foreign non-resident acquires bonds other than stocks or shares of a domestic corporation off-market, he or she must report the acquisition to the Bank of Korea.

If you are a non-resident who has converted a monetary receivable under a loan agreement into an equity investment, The reason for the acquisition of the securities must include a detailed description of the offset against the debt, and the accompanying securities purchase agreement must contain a set-off clause. In this case, instead of a separate setoff agreement, it can be reported as a reason letter or a securities purchase agreement containing the setoff details, and additional documents such as separate sales report materials may be required depending on the case.

The filing procedures and documentation required for non-resident acquisition of unlisted shares or convertible securities can vary in each case, making it difficult for individuals to determine where and how to file.

At Inpyeong Law Firm, our lawyers with more than 15 years of experience in financial matters directly consult with clients and provide legal advice tailored to each case, as well as filing and agency services. Please feel free to contact us as we have experience and know-how in various cases of foreign exchange transaction reporting, securities acquisition reporting, and overseas investment reporting.

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