SOUTH KOREA Law and Practice Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
Compliance with these conditions is required on an ongoing basis. Where the disposal of defence facilities is required, the investor may be restricted from partici - pating in management until the disposal is completed. Commitments also commonly arise where a foreign investor establishes operations in a Foreign Invest - ment Zone (“FIZ”) or seeks state or local investment incentives. These typically relate to: • the amount and timing of the investment; • the approved business activities; • employment or job-creation targets; and • maintenance of the minimum foreign shareholding required for the incentives. Preferential treatment, such as reduced rent for state- owned or public land within an FIZ, is generally condi - tional on implementing the approved investment sub - stantially in accordance with the submitted business plan. Failure to do so may result in: • the withdrawal of incentives; • the termination of occupancy or lease arrange - ments; or the recovery of previously granted benefits. Where an investment is reviewed from a national secu - rity or strategic technology perspective, the authorities may also require safeguards, including restrictions on access to sensitive facilities, technology or informa - tion, governance-related limitations or other measures to ring-fence strategic assets or know-how. 2.4 Right to Appeal If the Korean authorities refuse to authorise a foreign investment, the investor may, in principle, challenge the decision before the administrative courts. Under Korean law, a refusal to grant approval, a permit or a similar authorisation may be challenged by an administrative cancellation action, provided it constitutes an administrative disposition affecting the applicant’s legal interests. In the foreign invest - ment context, this includes refusals under the Foreign Investment Promotion Act (“FIPA”) or sector-specific legislation, including refusals to approve investments in defence industry companies.
The principal remedy is an action seeking cancellation of the refusal decision. The investor may argue that: • the statutory requirements for approval were satis - fied; • the authority misinterpreted or misapplied the law; • the decision was procedurally defective; • the authority failed to observe the required consul - tation or review procedures; or • in the case of a discretionary decision, the author - ity abused or exceeded its discretion. The scope of judicial review depends on the nature of the administrative act. Where approval is essentially non-discretionary, the court reviews compliance with the statutory requirements. Where broader adminis - trative discretion is involved (particularly in matters concerning defence, national security or strategic technology), the court generally reviews whether the authority acted within the lawful bounds of its discre - tion rather than substituting its own policy judgment. An action must generally be filed within 90 days after the investor becomes aware of the refusal and in any event within one year of the decision. Where an administrative appeal is pursued first, the limitation period runs from the date of notification of the appeal decision. If the court annuls the refusal, the investment is not automatically deemed approved. Instead, the author - ity must reconsider the application and issue a new decision in accordance with the court’s judgment. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity The Korean Commercial Code recognises several corporate forms. In practice, however, the principal vehicles for business operations and foreign invest - ment are: • chusik hoesa (joint-stock company); • yuhan hoesa (limited company); and • yuhan chaegim hoesa (limited liability company).
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