Acquiring a Korean business as a foreign buyer: structures, approvals and deal practice

Foreign acquisitions in Korea range from global groups buying listed companies to a European distributor buying out its Korean agent, or a founder selling a software company to a foreign strategic buyer. Whatever the size, the same questions come up: what exactly to buy, which approvals are needed, what Korean diligence typically finds, how to protect the buyer in the contract, how to keep the people, and how to take control on day one. This guide is about that practice. For the basic mechanics of a small share purchase — foreign investment reporting, securities transaction tax, the seller’s tax and the deemed acquisition tax — see buying an existing Korean company.

The legal framework is the Commercial Act for share transfers, business transfers, mergers and shareholder rights; the Monopoly Regulation and Fair Trade Act for merger control; the Foreign Investment Promotion Act for foreign investment reporting and security review; the Industrial Technology Protection Act for technology-sensitive targets; the Labor Standards Act for employees; and, for listed targets, the Financial Investment Services and Capital Markets Act.

Three ways to buy

Simplified. Combinations are common — for example a share purchase of a majority followed by a squeeze-out.

A foreign company cannot merge directly with a Korean company; Korean law has no cross-border merger procedure. Where a merger is wanted, the buyer forms a Korean acquisition company and merges it with the target, or uses a triangular merger (삼각합병, samgak hapbyeong) under Article 523-2 of the Commercial Act or a triangular share exchange, in which the Korean subsidiary of the foreign buyer pays the target’s shareholders with shares of its foreign parent.

Business transfers in practice

A business transfer (영업양수도, yeongeop yangsudo) moves an organised business — assets, contracts, know-how, customers and staff — as a going concern. If the seller transfers all or an important part of its business, it needs a special resolution (특별결의, teukbyeol gyeorui) of its shareholders under Article 374 of the Commercial Act — two-thirds of votes present and one-third of all shares — and dissenting shareholders can demand that the company buy their shares at fair value. The seller is barred from competing in the same and adjacent city or county for ten years unless agreed otherwise under Article 41, and a buyer that continues the seller’s trade name becomes liable for the seller’s business debts under Article 42 unless it registers or gives notice that it is not.

Employees are the point foreign buyers miss. Korean courts hold that, where a business is transferred as a whole, employment relationships transfer to the buyer with their terms and service period, unless the employee objects; dismissing staff because of the transfer is not in itself a valid reason. Permits and licences generally do not transfer and must be applied for again or approved; contracts need counterparty consent; real estate and vehicles bear acquisition tax; and the transfer of a whole business can be outside VAT as a business transfer if the conditions are met. See employing staff in Korea.

Approvals: merger control, foreign investment, technology

Merger control. The Korea Fair Trade Commission must be notified of a share acquisition of 20% or more of an unlisted company, or 15% of a listed one, a merger or a business transfer, if one party’s worldwide assets or sales, with affiliates, are KRW 300 billion or more and the other’s KRW 30 billion or more. A foreign buyer of a Korean target faces no separate Korean-sales test. A transaction-value threshold of KRW 600 billion catches acquisitions of smaller targets with significant Korean activity. If either party has KRW 2 trillion or more of assets or sales, the filing is suspensory and closing must wait for clearance; otherwise it is filed within 30 days after closing. Phase one takes 30 days, extendable by up to 90; failure to file or gun-jumping is fined up to KRW 100 million.

Foreign investment. Acquiring shares of a Korean company is foreign investment (외국인투자, oegugin tuja) notified under the Foreign Investment Promotion Act — for existing shares, normally within 30 days after acquisition through a foreign exchange bank or KOTRA — and the company is registered as a foreign-invested company. Investments that may threaten national security are reviewed by the trade ministry, which can prohibit or condition them. Defence contractors need prior approval for foreign acquisitions, and broadcasting, telecoms, aviation, shipping and some other sectors have foreign-ownership limits. See foreign investment registration.

Technology. Under the Industrial Technology Protection Act, a foreigner acquiring 50% or more of, or control over, a company holding national core technology (국가핵심기술, gukga haeksim gisul) — in semiconductors, displays, batteries, shipbuilding, automobiles, steel, biotech and other designated fields — needs prior approval from the trade ministry; other foreign acquisitions of such companies need prior reporting. Whether a target holds national core technology is not always obvious; it depends on the technology, not the company’s self-description. Map it in diligence and, if in doubt, ask the ministry. Closing without a required approval exposes the deal to orders to restore the original state.

Simplified; each regime has its own detail and exemptions.

What Korean due diligence finds

Korean diligence covers the usual ground — corporate records, contracts, assets, IP, litigation, tax, labour, regulatory — but some findings recur.

• Ordinary wage. On 19 December 2024 the Supreme Court abolished the “fixedness” test, so bonuses and allowances paid regularly and uniformly — even if conditional on being employed on the payment date — now count in ordinary wage (통상임금, tongsang imgeum), the base for overtime, night and holiday pay. The new rule applies from that date and to pending claims. Buyers should model the additional cost and any pending claims.
• Unpaid overtime and leave. Inclusive wage schemes (포괄임금제) that do not cover actual hours, unused annual leave and under-accrued severance are common liabilities in small and mid-sized companies.
• Four insurances and withholding. Unenrolled staff, contributions on base salary only, contractors who are employees in substance. See Korean social insurance.
• Related-party transactions. Payments to the founder’s family companies, loans to shareholders, use of company assets privately — tax and breach-of-trust issues, and a valuation question.
• Tax audits. The tax office can reassess five years back, longer for fraud; transfer pricing on dealings with foreign affiliates; VAT on exports and zero-rating evidence.
• Fair trade and subcontracting. Exposure under the subcontracting law for late or reduced payments to suppliers, and under the fair trade law for exclusive dealing.
• IP ownership. Employee inventions belong to the employee unless properly assigned under the Invention Promotion Act; software written by contractors may not belong to the company.
• Change of control. Bank loans, leases, licences and key customer contracts often terminate or require consent on a change of control.
• Personal data. Customer databases collected without proper consent cannot be used freely after closing; see PIPA.

Korean companies often keep two kinds of records: the formal ones filed with the registry and tax office, and the practical ones in the founder’s head. Interviews with management, a site visit and a review of bank statements against the books are worth more than another data-room index.

In a Korean target, the liabilities that matter most are rarely in the accounts. They are in the payroll and in the founder’s other companies.

Voixa Korea

The SPA: Korean practice

Korean share purchase agreements are usually in Korean or bilingual for domestic sellers, and in English under Korean or foreign law for international deals; Korean courts enforce foreign-law agreements, but registry and tax filings need Korean documents. The structure is international: price and adjustment, conditions precedent, representations and warranties, covenants between signing and closing, indemnities, termination. Points of Korean practice:

• Price mechanics: locked-box structures are increasingly common in competitive deals; completion accounts in founder sales. Escrow and holdbacks are standard where the seller is an individual who will take the money out of Korea or spend it.
• Specific indemnities for known issues — ordinary wage, tax audit years, a pending dispute — rather than relying on general warranties.
• Sandbagging: Korean courts have in some cases limited a buyer’s claim where it knew of the breach; address knowledge expressly.
• W&I insurance is now used in larger Korean deals, especially by private equity sellers.
• Seller withholding and securities transaction tax: where the seller is a non-resident, the buyer must withhold; build it into the price mechanics. See the tax section of our basic guide.
• Disputes: arbitration under KCAB, SIAC or ICC rules is common for cross-border deals; see arbitration and enforcement in Korea.

Buying a majority: governance and the path to 100%

Many foreign buyers take 51–80% and keep the founder for a period. Korean company law gives a holder of more than half the votes control of ordinary resolutions — board appointments, dividends, financial statements — but special resolutions (특별결의, teukbyeol gyeorui) for amendments to the articles, mergers, business transfers and capital reductions need two-thirds of votes present and one-third of issued shares, so a minority above one-third can block them. Minority shareholders holding 3% can call meetings and inspect books; 1% in an unlisted company can bring derivative suits.

A shareholders’ agreement (주주간계약, jujugan gyeyak) governs board composition, reserved matters, transfer restrictions, drag-along and tag-along rights, put and call options and deadlock. Korean courts enforce it between the parties, but it does not bind the company itself, and a vote cast in breach of it is generally still valid as a corporate act; remedies are damages, specific performance and injunctions obtained in time. Put what can be put into the articles of incorporation (정관, jeonggwan) — share transfer restrictions requiring board approval under Article 335, quorum rules within the Commercial Act’s limits — and price the options carefully: Korean tax law tests share transfers between related parties against fair value.

A holder of 95% or more can squeeze out (지배주주의 매도청구, jibaejuju-ui maedo cheonggu) the remaining shareholders under Article 360-24 of the Commercial Act, with shareholder approval and a legitimate business purpose, at a price agreed or set by the court. Below 95%, the routes to 100% are agreed purchases, a share exchange or a merger with cash consideration.

Listed targets

Acquiring 5% or more of a listed Korean company triggers public disclosure within five business days under the 5% rule, with further disclosure for each 1% change and a cooling-off period on voting where the purpose is control. Buying 5% or more off-market from ten or more holders within six months requires a tender offer (공개매수, gonggae maesu) under Article 133. A mandatory tender offer — requiring an offer to all shareholders when control is acquired — has been proposed repeatedly, most recently at a 25% trigger, but is not law as of 2026; buyers should watch for it.

The 2025 amendments to the Commercial Act extended directors’ duty of loyalty to shareholders as well as the company, made cumulative voting mandatory and expanded the separate election of audit committee members at large listed companies, and moved towards mandatory cancellation of treasury shares. In practice, boards of listed targets now scrutinise control transactions and related-party deals more carefully, and minority shareholders have more ground to challenge them.

Financing and leveraged structures

Equity from abroad is the simplest funding: the foreign buyer pays the seller directly, and the foreign investment notification records the purchase. Debt is more complex. A Korean acquisition company (인수목적회사, insu mokjeok hoesa) can borrow from Korean banks or from the foreign parent; interest is deductible within thin-capitalisation and interest-limitation rules, and if it owns 100% of the target it can join a consolidated tax return (연결납세, yeongyeol napse) so the target’s profits absorb the interest. Group loans into Korea must be reported under the foreign exchange rules; see Korea’s foreign exchange rules.

The trap is security. Korean courts have held that having the target provide its own assets as security for the buyer’s acquisition loan, without adequate consideration, is breach of trust (배임, baeim) by the target’s directors — a crime. Merger-type structures, in which the acquisition company merges with the target after closing and the debt then sits in the combined company, have been accepted where the merger had a business purpose and the combined company could bear the debt. Structure and sequence leveraged deals with Korean counsel.

People: keeping the team

A share purchase does not change employment contracts; the employer stays the same company. But Korean employees, especially in founder-led companies, read a foreign acquisition as a signal, and the people the buyer most needs are the ones with options elsewhere. Sign retention agreements with key managers before closing, decide early about the founder’s role, and communicate in Korean.

Restructuring after an acquisition is constrained: dismissal for managerial reasons requires an urgent managerial necessity, efforts to avoid dismissal, fair selection criteria and 50 days’ consultation with the union or employee representatives under Article 24 of the Labor Standards Act. Changes to rules of employment that disadvantage employees need the consent of a majority union or a majority of employees. Harmonising pay and benefits with the group therefore takes time and negotiation, not a policy memo.

The first hundred days

1. Registry: register new directors and representative director within two weeks; update the articles if the SPA requires.
2. Seals and banks: take custody of the corporate seal and seal certificate, change bank signatories and online banking credentials, and register the new representative’s seal.
3. Foreign investment: complete the notification and registration; update the foreign exchange bank file.
4. Tax and insurances: update tax registration, representative and address; check four-insurance filings.
5. Visas: managers sent from abroad apply for D-8 or D-7 visas; see D-8 visas.
6. Controls: approval limits, related-party policy, group reporting, transfer pricing for new intra-group flows.
7. Contracts and customers: consents for change of control; letters to key customers and suppliers.
8. Compliance: PIPA, fair trade, anti-corruption (the Improper Solicitation and Graft Act applies to dealings with public officials and journalists).

A worked example

A Dutch industrial-software group agrees to buy a Seoul company that writes manufacturing-execution software for Korean battery and display makers, with 60 staff. The founder holds 70%, two angel investors 10% each, and an employee share scheme 10%. The buyer wants 100% but the founder to stay for three years.

The structure: the buyer acquires 90% at signing — the founder’s 70% and the investors’ 20% — and the founder rolls over part of his proceeds into options over the group’s shares; the employee holdings are bought later under put and call options. Diligence flags three issues: some customer projects involve battery process technology that may be national core technology, so the buyer files for the ministry’s view before closing; the December 2024 ordinary-wage ruling adds about 4% to overtime costs, priced into a specific indemnity and an escrow; and two key modules were written by a freelancer without an assignment, fixed by a pre-closing assignment. The KFTC filing is post-closing, since neither party has KRW 2 trillion of assets or sales. After closing the buyer registers the foreign investment, changes the board and bank signatories, and signs retention agreements with eight engineers.

Mistakes we see

1. Treating a Korean deal as a template deal without mapping KFTC, FDI and technology approvals.
2. Business transfers that forget the employees move with the business.
3. Ignoring the December 2024 ordinary-wage ruling in labour diligence.
4. Relying on the shareholders’ agreement alone without articles that support it.
5. Target assets as security for the acquisition loan.
6. No seller withholding when buying from a foreign seller.
7. Losing the seal and bank access in the first weeks after closing.
8. Announcing integration in English to a Korean team that hears only uncertainty.

Korean terms you will meet

Questions readers ask

About the author

Alexander Baranov

Founder of the BCA Group · cross-border corporate and tax adviser since 2008

Alexander advises foreign founders and groups on company formation, tax structuring and corporate law in more than 40 jurisdictions across Europe, the Gulf, Asia and Latin America. He is the author of nine books on international business and tax and writes regularly for professional finance and tax journals. He works in English, German, Spanish and Russian.

This guide is based on the Korean statutes cited in the text and on our own filings. It is reviewed when the law or official rates change.

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