SOUTH KOREA Law and Practice Contributed by: Dongwook Kang, Chris Kim, Seung-Wan Chae and Jongwoo Kim, Bae, Kim & Lee LLC
Institutional Private Funds IPFs must take the form of an investment limited part - nership company. Members of an investment limited partnership company consist of at least one member with unlimited liability (unlimited liability member) and at least one limited member with limited liability (limited liability member) to third-party creditors of the invest - ment limited partnership company. Investors partici - pate in the company as limited liability members. The manager must be the unlimited liability member of the investment limited partnership company. 2.2 Regulatory Regime for Funds The FSCMA is the primary body of law regulating the investment funds industry in South Korea. The main regulator is the Financial Services Commis - sion (FSC). Many of the supervisory responsibilities of the FSC are delegated to the Financial Supervisory Service (FSS), the enforcement arm of the FSC, which is responsible for day-to-day supervision and regula - tion of the financial industry, including: • fund registration and reporting of fund establish - ment; • regular and ad hoc regulatory reporting; • securities registration statement filings; and • processing of fund manager licence applications. Investment Restrictions – Target Investment Assets In terms of target investment assets, private funds are allowed to invest in any assets that have monetary value. However, private funds making investments in real estate assets must not: • dispose of real estate assets located in South Korea within one year of acquisition, except where there is special urgent need for early disposal; nor • dispose of land without any building or other structure before starting a real estate development project on such land. Restrictions on Leverage Private funds are subject to certain limits on their borrowing, guaranteeing and investment in financial derivatives. Specifically, the ratio of the sum of the
• the GPF manager has the responsibility and discre - tion to manage and operate the fund in accordance with the fund’s investment objectives; and • the trustee is obligated, in its capacity as the trustee of the fund, to follow the GPF manager’s instructions regarding the acquisition and disposal of the fund assets, and to keep the fund assets in custody under the name of the trustee but segre - gated from the proprietary assets of the trustee. GPFs may also be established in various corporate forms, usually as an investment company or an invest - ment limited liability company, the major features of which are detailed below. Investment company • A GPF manager incorporates the fund in the form of a joint stock company in which investors are shareholders. • Investors invest in the fund by subscribing for the shares of the investment company at their base price (net asset value per share). • The fund is governed by articles of incorporation (AOI). • The GPF manager sits as a corporate director of the investment company, with the responsibility and discretion to manage and execute the invest - ment objectives of the company. • The investment company is required by law to appoint a trustee for custody of the fund’s assets. • The investment company is required by law to engage an administrator for fund administration services. Investment limited liability company • A GPF manager incorporates the fund in the form of a limited liability company in which investors are members. • Investors invest in the fund by subscribing for equity interests in the company at their base price (net asset value per equity interest). • The company is governed by the AOI. • The GPF manager sits as a corporate director of the limited liability company, with the responsibility and discretion to manage and execute the invest - ment objectives of the company. • The company is required by law to appoint a trus - tee for custody of the fund’s assets.
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