(continued from previous issue) CHAPTER IV FOREIGN INVESTMENT ZONE * Article 18 (Designation and Development of Foreign Investment Zone) (1) The Special Metropolitan City Mayor, any other Metropolitan City Mayor and a Do governor (hereinafter referred to as the "Mayor/Do governor") may, if necessary for the inducement of foreign investment which meets such standards as prescribed by the Presidential Decree, designate an area in which a foreign investor desires to make an investment as a foreign investment zone (hereinafter referred to as the "foreign investment zone"), after due deliberation of the foreign investment commission under Article 27. In this case, if the said foreign investment zone is intended to be developed into a local industrial complex (hereinafter referred to as the "local industrial complex") as prescribed in Articles 7 and 7-2 of the Industrial Sites and Development Act, a plan for such development shall be established. (2) Where two or more foreign investors intend to obtain the designation of the foreign investment zone from the Mayor/Do governor pursuant to the former part of paragraph (1), the business classification and zone in which they intend to make an investment shall satisfy the standards as prescribed by the Presidential Decree. (3) Where the Mayor/Do governor designates the foreign investment zone under paragraphs (1) and (2), he shall publicly announce the following matters: 1. Official title, location and area of said foreign investment zone; 2. Methods of development or management; 3. Matters subject to the public announcement under Article 7-3 of the Industrial Sites and Development Act (limited to any case in which the said foreign investment zone is developed into a local industrial complex); and 4. Other matters as prescribed by the Presidential Decree. (4) The foreign investment zone shall be developed and managed by the Mayor/Do governor having jurisdiction over such zone in accordance with the Presidential Decree: Provided, That where the foreign investment zone was designated from part or all of a national industrial complex managed by a certain agency, its management work shall be given to that agency. (5) Where any area which is designated as the foreign investment zone requires the formation of a new site for the establishment of a factory, the said foreign investment zone may be developed into a local industrial complex. (6) Where the foreign investment zone is developed into a local industrial complex under paragraph (5) above, any foreign investment zone which is designated under paragraphs (1) and (2) above shall be deemed to have been designated as the local industrial complex. In this case, a plan for development under the latter part of paragraph (1) above shall be deemed to be that which is prescribed in Articles 7 (2) and 7-2 (3) of the Industrial Sites and Development Act, and the public announcement under paragraph (3) above shall be deemed to be that which is prescribed in Article 7-3 of the said Act. (7) Where there is any such designation or public announcement as prescribed in paragraphs (1) through (3) above in developing the foreign investment zone into a local industrial complex under paragraph (5) above, any "area which is designated and publicly announced as an industrial complex" as referred to in Article 12 (1) of the Industrial Sites and Development Act shall be deemed to be any "area which is designated and publicly announced as the foreign investment zone," and the "time when a national or local industrial complex is designated and publicly announced" as referred to in Article 22 (2) of the said Act shall be deemed to be the "time when the foreign investment zone is designated and publicly announced." (8) The provisions of Article 19 (1) shall not apply where a part or all of a national industrial complex or local industrial complex, the development of which has already been completed, has been designated as a foreign investment zone. (9) Necessary matters concerning the procedures and methods of the designation of the foreign investment zone shall be prescribed by the Presidential Decree. ° Article 18-2 (Cancellation of Designation of Foreign Investment Zone) (1) If a foreign-capital invested company fails to satisfy the standards as prescribed by the Presidential Decree under Article 18 (1) and (2), the Mayor/Do governor shall cancel the designation of the foreign investment zone, after the deliberation of the foreign investment commission under Article 27. (2) Necessary matters concerning the procedures, etc. for the cancellation of the designation of the foreign investment zone under paragraph (1) shall be prescribed by the Presidential Decree. * Article 19 (Support Measures for Foreign Investment Zones) (1) With respect to responsibility for the costs of the development of a foreign investment zone and to support for harbors, roads, water-supply facilities, railways, communication facilities, and electric facilities that are needed for the efficient formation of a foreign investment zone, the provisions of Articles 28 and 29 of the Industrial Sites and Development Act shall apply mutatis mutandis. (2) With respect to the building of facilities in a foreign investment zone, the traffic generation charge as prescribed by the provisions of Article 18 of the Urban Traffic Readjustment Promotion Act shall be exempted. (3) Support measures concerning medical, educational, and housing facilities which are to be built in a foreign investment zone shall be determined by the foreign investment committee as prescribed by the provisions of Article 27. * Article 20 (Special Case with respect to Other Acts) (1) Any of the following shall not apply to the partition of land within the foreign investment zone: 1. Article 21-16 of the Act on the Utilization and Management of the National Territory; 2. Article 46 (1) 4 of the Urban Planning Act; 3. and 4. Deleted; and 5. Article 5 (1) 4 of the Act on Special Measures for Construction of the Provisional Administrative Capital. (2) With respect to a foreign-capital invested company which moves into the foreign investment zone, restrictions on the exportation or importation may be relaxed under the conditions as determined by the Minister of Commerce, Industry and Energy, notwithstanding the provisions of Article 14 of the Foreign Trade Act. (3) With respect to a foreign-capital invested company that moves into a foreign investment zone, the following subparagraphs shall not apply: 1. Articles 4 and 12 (2) and (3) of the Act on the Protection of the Business Sphere of Small and Medium Enterprises and Promotion of Their Cooperation; and 2. Article 31 (2) of the Act on the Honourable Treatment of and Support for Persons of Distinguished Services to the State. CHAPTER V EX POST FACTO MANAGEMENT OF FOREIGN INVESTMENT * Article 21 (Ex Post Facto Management of Foreign Investment) (1) In a case in which a foreign investor falls under any of the following subparagraphs (including a case in which he comes to fall under any of the following subparagraphs due to any capital increase), he shall register a foreign-capital invested company in accordance with the Presidential Decree: 1. Where he has completed the payment of the object of investment; 2. Where he has acquired the existing stocks (referring to having paid for the existing stocks) under Article 6; and 3. Where he has acquired stocks under Article 7 (1) 5. (2) A foreign investor may, even prior to the completion of the payment of the object of investment under paragraph (1) 1 above, register a foreign-capital invested company, if he makes a foreign investment falling under Article 2 (1) 4 (a). (3) Where a foreign investor or foreign-capital invested company falls under any of the following subparagraphs, the Minister of Commerce, Industry and Energy may revoke the permission or cancel the registration: 1. Where a foreign-capital invested company, which is registered under paragraph (1), ceases its business or fails to conduct its business activities for two consecutive years or more; 2. Where a foreign-capital invested company which is registered under paragraph (1) above or a foreign investor who is granted permission under Article 6 (3) fails to comply with a correction order or other necessary measures under Article 28 (4); 3. Where there is any reason for the dissolution of a foreign-capital invested company which is registered under paragraph (1); 4. Where a foreign investor makes an application for the cancellation of registration as prescribed by the Presidential Decree; 5. Where a registration certificate of a foreign-capital invested company is transferred or lent to any other person; and 6. Where the registration of a foreign-capital invested company is effected in disguise of the payment of the object of investment. * Article 22 (Restrictions on Disposal of Capital Goods) (1) A foreign investor or foreign-capital invested company shall, if intending to transfer or lend capital goods which are introduced with their customs duties, etc. exempted under Article 9, or use them for purposes other than those reported, make report to the Minister of Commerce, Industry and Energy in advance, except as prescribed by the Presidential Decree. (2) Where a report is made under paragraph (1), the Minister of Commerce, Industry and Energy shall, without delay, issue a certificate of acceptance of said report to the reporter. (3) Except for cases that meet the criteria prescribed by the Presidential Decree, a foreign-capital invested company that has been registered shall not conduct the following actions: 1. Conducting, beyond its allowed limit, business in which foreign investment is restricted in accordance with the provisions of Article 4 (3); and 2. Acquiring, beyond the allowed limit, stocks of a domestic company that conducts business in which foreign investment is restricted in accordance with the provisions of Article 4 (3). (4) A foreign investor or a foreign-capital invested company shall not use its investment funds for purposes other than those which the investor has already reported or gotten permission for. * Article 23 (Transfer of Stocks) (1) Where a foreign investor intends to transfer such stocks as acquired under Articles 5 through 7 to any other person, or intends to decrease the number of stocks he owns due to a decrease in his own capital, he shall, in advance, make report to the Minister of Commerce, Industry and Energy in accordance with the Presidential Decree. (2) Where the permission is revoked or the registration is cancelled under any subparagraph of Article 21 (2), a foreign investor shall transfer the stocks owned by him to a national or corporation of the Republic of Korea within six months after being so revoked or cancelled: Provided, That if there exists any unavoidable reason, the transfer period may be extended within six months, with the approval of the Minister of Commerce, Industry and Energy. (3) Where a foreign investor who fails to make such registration as prescribed in Article 21 (1) does not comply with a correction order as prescribed in Article 28 (4), he shall transfer the stocks owned by him to a national or corporation of the Republic of Korea within six months from the day on which the period of execution of that correction order expires: Provided, That if there exists any unavoidable reason, the transfer period may be extended within six months, with the approval of the Minister of Commerce, Industry and Energy. (Continued on next issue)