Issuance of Overseas Securities

Under the regulations of the Financial Services Commission, even securities issued overseas are deemed equivalent to a public offering if the structure allows a domestic resident to acquire the securities or related rights, or to acquire them within one year of the issuance date.

In other words, where an overseas issuance carries the possibility of distribution to domestic investors, it may become subject to the public offering regulations.

A similar standard applies to a foreign corporation when certain requirements are met, such as whether it is listed domestically and the proportion of shares held by domestic investors, so these factors must be reviewed in advance when the issuance structure is designed.

In the cases below, where the structure effectively blocks access by domestic investors, the issuance is not treated as a public offering.

For overseas securities, whether the public offering regulations apply turns on the structure design, so the following matters must be considered together.

In particular, because reporting and disclosure obligations can differ significantly depending on whether the regulations apply, a review beforehand is necessary.

Even when securities are issued overseas, a recognized possibility of acquisition by domestic investors may cause the issuance to be assessed as a ‘solicitation’ or ‘sale’ under the Financial Investment Services and Capital Markets Act, which can trigger public offering requirements such as filing a securities registration statement and delivering an investment prospectus.

In particular, factors such as a structure that permits domestic distribution within one year after issuance, a structure for indirect acquisition by domestic investors, and the involvement of a domestic financial investment business operator may also lead the issuance to be deemed a public offering after the fact.

With foreign-currency-denominated bonds, the repayment burden in Korean won may grow as exchange rates fluctuate, and rising interest rates may reduce the market value of existing bonds while raising the cost of refinancing issuances.

In particular, when long-term instruments are issued, interest rate and exchange rate volatility may accumulate, and the financial burden may expand.

When securities are offered to foreign investors, international credit ratings and a corresponding level of disclosure are required, and any inaccuracy in the disclosure or omission of a material matter may escalate into a damages claim by investors or a violation of overseas securities regulations.

A downgrade in the credit rating may also raise financing costs and drive investors away.

Depending on matters such as withholding tax on interest income, whether a tax treaty applies, and whether a permanent establishment (PE) is recognized, a tax burden different from what was anticipated may arise.

In some cases, the issuance structure must be revised because domestic foreign exchange regulations conflict with overseas securities regulations.

In particular, regulatory differences from one country to another may call for additional reporting or licensing procedures.

The finance attorneys of Daeryun LLC review the legal risks that may arise across the entire process of issuing overseas securities and provide advisory tailored to the issuance structure.

At each stage of issuance, they provide systematic legal support, from determining whether the issuance constitutes a public offering, to reviewing contracts, designing resale restrictions and the investor structure, and responding to domestic and overseas regulations.

Drawing on their experience in financial regulation and international transactions, they also present practice-oriented response strategies through collaboration with domestic and overseas advisory networks.

To address the complex procedures for issuing overseas securities, you may request the assistance of a finance attorney.