SOUTH KOREA Law and Practice Contributed by: Dongwook Kang, Chris Kim, Seung-Wan Chae and Jongwoo Kim, Bae, Kim & Lee LLC
3.5 Rules Concerning Permanent Establishments
The following activities require post-reporting to the FSC. • Change of the largest shareholder. • Number of stocks held by a major shareholder or its related persons has changed by not less than 1% of the total number of outstanding voting stock. • Transfer or acquisition of part of the financial investment business. • Discontinuation of part of financial investment busi - ness. 3.10 AI and Use of Data There is no specific regulation on the use of artifi - cial intelligence, predictive data or big data under the FSCMA. However, the FSCMA has a provision on the use of electronic investment advice devices appli - cable to GPF managers. Under the regulation, GPF managers are allowed to use an electronic investment advice device for their asset management services for GPFs to the extent certain operational requirements are satisfied, such as ensuring the electronic device provides investment advice consistent with the invest - ment purpose, strategies and guidelines of the private fund. 3.11 Anticipated Changes for Fund Managers There are no anticipated changes for fund managers. 4. Investors 4.1 Types of Investors in Alternative Funds Eligible investors for a GPF are: • professional investors including financial institu - tions, mutual aid business entities, listed com - panies and individuals who pass certain financial investment asset and income/asset thresholds; and • non-professional investors, including individuals, corporations, public pension funds and collective investment vehicles making investment in the fund in accordance with the distinctions below: (a) KRW300 million or more when the leverage ratio of the fund is less than 200%; or (b) KRW500 million or more when the leverage ratio of the fund is 200% or greater.
There are no exemptions or rules available in South Korea to ensure that alternative funds with a manager in South Korea do not have a taxable presence in the jurisdiction. 3.6 Taxation of Carried Interest There is no special tax treatment on carried interest; it is subject to corporate income tax at the regular tax rates applicable to South Korean corporations. 3.7 Outsourcing of Investment Functions/ Business Operations GPF managers are allowed to outsource their invest - ment functions or business operations in relation to the management of GPFs, subject to certain restrictions and a prior reporting obligation to the FSS. Specifi - cally, a GPF manager may outsource investment func - tions in relation to a GPF investing in assets located in other jurisdictions to an offshore investment manager if such offshore investment manager is licensed in its home jurisdiction to engage in collective investment management businesses. By contrast, IPF managers are not allowed to out - source their management functions to third parties. Generally, the parent company of a fund manager is not subject to regulatory and/or investor approv - als. Furthermore, the fund manager is not required to receive approval from the investors. However, for GPF managers, which are financial investment business entities in South Korea, the activ - ities listed below require a pre-approval from the FSC. • Merger, split-off, or split and merger. • Comprehensive exchange or transfer of stocks. • Dissolution. • Transfer or acquisition of all the financial invest - ment business. • Discontinuation of all financial investment busi - ness. 3.8 Local Substance Requirements See 3.3 Regulatory Regime for Managers . 3.9 Change of Control
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