As global capital flows into a wide range of sectors—including real estate, infrastructure, virtual assets, and private equity funds (PEFs)—the establishment of Special Purpose Companies (SPC) with foreign shareholders has been rapidly increasing.
This trend is not limited to foreign investors entering Korea. Korean investors are also actively establishing overseas SPCs to invest in foreign assets. As a result, SPC structures involving foreign investors have become a common feature in practice.
SPCs serve as an essential tool for isolating risks and structuring investment flows.
However, many focus solely on the incorporation process while overlooking the regulatory, tax, and dispute risks inherent in such structures.
When a foreign investor establishes an SPC in Korea, the primary legal framework governing the structure is the Foreign Investment Promotion Act (FIPA). The key points are as follows:
If a foreign investor acquires 10% or more of the voting shares of a Korean company—or even less than 10% but exercises substantial influence (e.g., appointing executives)—the investment is classified as a “foreign investment.” In such cases, the company must be registered as a Foreign-Invested Enterprise and becomes subject to reporting and ongoing compliance obligations.
Even if the entity is formally labeled as an SPC or project company, it will still fall under FIPA if foreign ownership meets the above criteria.
Furthermore, FIPA applies the concept of the Ultimate Controlling Parent (UCP), meaning authorities assess the actual ownership structure beyond nominal shareholders.
Accordingly, it is critical to determine at the structuring stage whether the SPC should be treated as a foreign-invested enterprise or maintained as a domestic entity.
If any of the following apply, there is a high likelihood of underlying legal risks:
- You are planning to establish a Korean SPC with foreign investors as shareholders
- You are designing an indirect investment structure using an overseas SPC
- You are uncertain whether FIPA reporting or registration requirements apply
- Your shareholding structure is based on verbal agreements or MOUs without formal contracts
- You have received document requests from tax authorities or regulatory agencies
Foreign-owned SPC structures often involve overlapping regulations across multiple jurisdictions—including Korea, the SPC’s place of incorporation, and the target investment country.
A proper structural review at the outset can prevent long-term disputes and significant costs.
The International Practice Group at Decent Law Firm has a deep understanding of complex global business structures.
✅ Tailored Structuring: Advisory on establishing and structuring Korean SPCs with foreign investors
✅ Compliance Support: Assistance with FIPA filings, registrations, and ongoing regulatory compliance
✅ Risk Management: Strategic support for tax issues and cross-border investment disputes
If you are planning to establish an SPC with foreign shareholders or are concerned about regulatory and tax risks in your existing structure, we encourage you to contact Decent Law Firm’s International Practice Group.
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