Investment regulation – South Korea


Legal Entity Identifier (LEI) and Investor Registration Certificate (IRC)

Effective 14 December 2023, the Financial Supervisory Service (FSS) stopped issuing new IRCs to foreign investors and the requirement to apply for an IRC was abolished. With this change, foreign investors entering the South Korean market for the first time will need a Legal Entity Identifier (LEI) before investing in securities. This is because the LEI is required for opening:

  • A cash account, for securities investments, with a local custodian bank;
  • A securities safekeeping account with a local custodian bank; and
  • A securities trading account with a broker.

In the case of foreign investors who already have an IRC, they must continue to use this number for the above account openings and cannot substitute it with the LEI.

Each holder of an LEI or IRC is recognised as a separate independent beneficial owner.

The LEI can be used simultaneously at any local custodian bank and/or securities company in South Korea. This also applies to the IRC. However, the foreign investor cannot use both an IRC and an LEI at the same time.

Both LEI and IRC contain a unique identification number for each foreign investor, including the investor’s name, date of birth or establishment, nationality and type of entity (that is, individual, bank, mutual fund etc.). The LEI number must be quoted whenever a foreign investor places a purchase or sell order via a broker, and the securities safekeeping account number, linked to it, must be quoted whenever a foreign investor conducts settlement at a local custodian bank. For the foreign investor who already has an IRC, this number must continue to be quoted when a purchase or sell order is placed via a broker, and the securities safekeeping account number, linked to it, must be quoted whenever a foreign investor conducts settlement at a local custodian bank.

Foreign direct investments

Under the Foreign Investment Promotion Law (FIPL), foreign investors, including foreign companies, foreign funds, etc., can acquire stakes in any listed or unlisted Korean company.

This type of investment is considered as a long-term investment. Usually, the deal is conducted directly between the foreign investor and the local company, under the guidance of a lawyer in accordance with the FIPL.

An IRC is not required for this type of investment.


With regards to the shares obtained under the FIPL:

  • Under the “Regulations on Financial Investment Business”, foreign investors are required to keep such shares, provided that they are KSD-eligible, with a local custodian at the KSD.
  • Physical non KSD-eligible shares can be held in safekeeping in the vaults of a local custodian bank.
  • A delivery of such shares outside Korea is not allowed. Exceptions to this are when the Financial Services Commission approves the delivery and the shares are bearer shares.

Disclosure rules

Foreign investors are obliged to file a disclosure report with the Ministry of Commerce, Industry and Energy (MOCIE) on any shares, whether listed or unlisted, obtained under the FIPL. In addition to that, the same disclosure rules as for IRC investments, also apply on listed shares obtained under the FIPL (see “Disclosure requirements - South Korea”).

IPO and Lock-up period

After an IPO, shareholders of pre-IPO shares under the FIPL can trade newly listed shares on the exchange or off-market.

A lock-up period is applied to prevent the largest shareholders and affiliated persons from making unfair capital gains once the shares are listed. The lock-up period lasts, as follows:

KOSDAQ Market:

Six months from the first listing date

KOSPI Market:

Six months from the first listing date

Holding restrictions

Foreign investors are allowed to invest in the Korean equity securities market without any restrictions. The only exceptions are a small number of companies of national importance and some industries (such as aviation, communication and broadcasting) where limits ranging from zero to 49.99% apply.

The list of stocks with foreign ownership limit can be enquired on the KRX website under Basic Data > Stock > Details > Foreign ownership by issue. Please select “Restricted foreign ownership” to see the list.

The Korean government and the FSC establish and monitor the aggregate and individual limits of equity securities owned by foreign investors through the Foreign Investment Management System.

Foreign Investment Management System (FIMS)

A foreign investor trading in shares subject to ownership limits must report trades in the above-listed securities to the FSS via the FIMS. The FIMS is a computer system connecting the FSS with licensed securities companies. Such trades are automatically reported via the FIMS by the securities companies on behalf of the foreign investor.

The main functions of the FIMS are:

  • Reporting all trades placed by foreign investors to the FSS;
  • Pre-monitoring trade orders of shares with foreign ownership limits.

Purchase orders in listed shares that are subject to foreign ownership limits and cause the aggregated and individual foreign ownership limits to be exceeded will be blocked automatically by the FIMS. Sales orders of shares that were not reported to the FSS when purchased will be blocked and cannot be placed in the market.

Exceptions to foreign ownership limits

Foreign investors are, as exceptions, allowed to acquire shares exceeding the aggregate foreign ownership limit when:

  • The acquisition is a direct foreign investment;
  • The acquisition is through the conversion of foreign depository receipts into ordinary shares;
  • A Korean investor changes nationality to a foreign nationality;
  • A foreign investor treated as a Korean national for investment purposes is no longer treated as a Korean national;
  • Such shares are acquired:
    • Through the exercise of rights from securities issued overseas;
    • Through the exercise of rights from convertible bonds, bonds with warrants and exchangeable bonds;
    • Through the exercise of rights as a shareholder;
    • As a gift or inheritance;
  • A foreign legal entity acquires the shares due to a merger;
  • The acquisition is allowed by the FSC.

Foreign investors that acquire shares and exceed the aggregate foreign ownership limits are required to sell the excess shares within three months of their acquisition and will be restricted in exercising their voting rights. Any other entitlements, such as dividend payments, corporate actions, bonus issues etc., remain valid.

Foreign investors that acquire shares and exceed the foreign ownership limit will be punished by a forced sale of the share, withdrawal of the IRC approval, or any other measure deemed appropriate by the FSS.

Conversion into shares with foreign ownership limits

The following instruments can be converted into shares with foreign ownership limits:

  • Depository receipts (DRs)
    DRs are included in the foreign ownership calculation and the foreign ownership level will not change if conversion to original shares occurs. No restriction is applied to the conversion of DRs to ordinary shares.
    Upon conversion of the DRs into shares and settlement of the conversion, the foreign investor is able to place a sell order for the shares. It is not possible to place the sell order before final settlement of the conversion as the FIMS blocks trades that would cause a breach of the foreign ownership limit.
  • Overseas convertible bonds, exchangeable bonds and bonds with warrants
    Foreign investors will only be allowed to exercise their rights to convert such provided that the conversion does not exceed the foreign ownership level.


Shares include:

  • Voting shares;
  • Certificates representing the right to subscribe for new voting shares;
  • Bonds convertible in voting shares;
  • Bonds with warrants with respect to voting shares;
  • Preference shares are normally excluded unless they have been connected with voting rights;
  • Exchangeable bonds;
  • Derivative instruments.

A holding of shares is defined as shares held on the investor's account and any rights to take delivery of such shares (that is, under the terms of a sale and purchase agreement, options, etc.).

Cooling-off period in relation to the obligation to report threshold crossings

The first time that an investment is reported as being for the purpose of exercising influence over the management, there is a cooling-off period that starts from the trade date and runs until five business days after the report date, during which the investor will be suspended temporarily from exercising voting rights and from acquiring further shares. The cooling-off period also applies to subsequent reports (for example, for changes of 1% or more to the holding) that are reported for the purpose of exercising influence over the management.

Neither initial reporting nor subsequent reporting that states the purpose as a simple portfolio investment is subject to the cooling off period. In light of the above, when an investor changes the purpose of the investment from exercising influence over the management to a simple portfolio investment and then back to exercising influence over the management, reporting the latter would result in a further five-day cooling-off period.

Overall, the cooling-off period excludes the day the investor files a report and non-business days in South Korea, which include public holidays, Saturdays and Sundays.

Failure to comply with the cooling-off period requirements may result in the suspension of the voting rights of the equity securities and an order for the disposition of the non-complying equity securities.

Disclosure requirements

For details of the local domestic disclosure requirements, please refer to the Disclosure requirements - South Korea.