SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
In addition, if a developer engages in any con - duct in connection with a development project without obtaining the permits/approvals required under the relevant laws or does not satisfy a pre - scribed condition under the relevant laws, such developer may be subject to criminal sanctions (ie, imprisonment, penalty payment) or admin - istrative sanctions (ie, fine payment, business suspension). 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets There are two general forms of companies: • a stock corporation ( chusik hoesa ); and • a limited liability company ( yuhan hoesa ). Five special forms of investment vehicles, CR- REIT, general REIT, RETF, RECF and PFV, are also available (see 5.2 Main Features of the Constitution of Each Type of Entity ). 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Stock Corporation A stock corporation has the familiar corporate structure of shareholders, a board of directors and one or more executives, and is organised under the articles of incorporation. Shareholders of a stock corporation are liable only up to an amount equal to their capital contribution, and shares may be transferred freely. Limited Liability Company A limited liability company is comprised of “members” instead of shareholders. As in the case of a stock corporation, the liability of mem - bers is limited to the amount of their capital con - tribution to the entity. However, a board of direc -
tors is not required for a limited liability company, although one may optionally be created by the members. Unlike in some other jurisdictions, in Korea there is no material difference in tax treat - ment between a stock corporation and a limited liability company, as both are subject to two-tier taxation from the investor’s perspective (on cor - porate income and on dividends). Corporate Restructuring Real Estate Investment Trust A corporate restructuring real estate investment trust (CR-REIT) may be classified as a stock cor - poration; it is required to invest 70% or more of its assets in “CR-REITable” assets, as defined in the relevant regulations, and to manage its assets through an asset management company with net assets of KRW7 billion or more and with five or more professionals. Real Estate Investment Trust A general real estate investment trust (general REIT) may be classified as a stock corpora - tion, and it is required to invest 70% or more of its assets in real estate and manage its assets through an asset management company with net assets of KRW7 billion or more and with five
or more professionals. Real Estate Trust Fund
A real estate trust fund (RETF) may be classified as a trust; it is required to manage its assets through an asset management company with net assets of KRW1 billion or more and with
three or more professionals. Real Estate Corporate Fund
A real estate corporate fund (RECF) may be classified as a stock corporation; it is required to manage its assets through an asset manage - ment company with net assets of KRW1 billion or more and with three or more professionals.
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