CONTENTS
- 1. Corporate Law | The Introduction of Project REITs and Changes in Corporate Investment Structures
- - Amendment of the Real Estate Investment Company Act
- 2. Corporate Law | Changes in Company Establishment Structures and Capital-Raising Methods
- - Expansion of the Scope of Development Projects
- - Strengthening the Transparency of Corporate Governance
- - Expansion of Public Fund Investment
- 3. Corporate Law | Changes in Corporate Strategies Using REITs
- - Reviewing the Potential to Use a REIT Structure From the Early Stages of a Development Project
- - Diversification of Investment Recovery Strategies
- - Responding to REIT Governance and Major Shareholder Regulations
- - Reviewing Strategies for Using REITs and Public Fund Investment
- - Continuously Monitoring Regulatory Changes Related to the Establishment and Operation of REITs
- - Daeryun's Assistance
1. Corporate Law | The Introduction of Project REITs and Changes in Corporate Investment Structures
Corporate law refers to the legal framework that governs the establishment and operation of companies, their capital structure, and their governance, and in the Korean legal system it is set out primarily in the company provisions of the Commercial Act.
The Commercial Act establishes the basic legal framework for corporate activity, including company incorporation procedures, the issuance of shares, the operation of general shareholders' meetings, the powers of directors and auditors, and capital structure.
For companies established for a particular industry or investment purpose, however, a separate special act may apply on top of this basic framework of the Commercial Act.
A representative example is the real estate investment company (REIT) under the Real Estate Investment Company Act.
Because a REIT is also a corporation in the form of a stock company, its basic corporate structure, including company establishment, shareholder rights, and board operation, follows the rules of the Commercial Act. In view of the particular nature of conducting real estate investment and development projects, however, additional regulations such as investment ratios, asset management methods, public offering obligations, and dividend provisions are set out separately through the Real Estate Investment Company Act.
Amendment of the Real Estate Investment Company Act
One of the most notable regulatory changes in the recent real estate investment market is the introduction of the "Project REIT" following the amendment of the Real Estate Investment Company Act.
After the Real Estate Investment Company Act was amended in May 2025, the related authorization and registration guidelines were also revised, and the legal structure of REIT-based development projects has changed significantly.
This regulatory change is not limited to a change in real estate investment methods.
It includes important changes from a corporate-law perspective as well, including company establishment structure, capital-raising methods, and governance management.
In particular, the introduction of the Project REIT carries significant legal meaning for both companies and institutional investors conducting real estate development projects, as it provides new options for the design of corporate structures and investment methods at the development stage.
2. Corporate Law | Changes in Company Establishment Structures and Capital-Raising Methods
The core of this amendment is the introduction of the Project REIT system.
Under the existing REIT system, business activities such as real estate investment and operation were possible only after business authorization or registration had been completed.
Under the amended system, however, the structure has been changed so that development projects can be conducted upon a mere establishment report.
In other words, the REIT structure can now be used from the early stages of development.
The proposed amendment to the Enforcement Decree accordingly provides that the following matters be stated when filing an establishment report for a Project REIT.
- Company name and head office
- Capital structure
- Composition of promoters and officers
- Real estate subject to development and the project schedule
- Entrustment structure for the asset management company and the asset custody institution
These provisions are significant in that they serve as a mechanism for transparently managing the investment structure and governance at the company establishment stage.
In particular, a Project REIT must obtain business authorization or registration within a certain period after the development project is completed, and thereafter the regulations on public share offerings and share dispersion apply.
This means that the design of the corporate-law investment structure between the development project corporation and the investment company has become even more important.
Expansion of the Scope of Development Projects
This amendment to the Enforcement Decree also expanded the scope of real estate development projects that a REIT may conduct.
Previously, restrictions of a certain scale or greater existed for extension and reconstruction projects, but the amended Enforcement Decree abolished these restrictions and expressly included remodeling projects within the scope of development projects.
From a corporate-law perspective, this signifies the following changes.
First, the investment structures for urban redevelopment projects using REITs are likely to expand.
Second, as the forms of development projects diversify, the design of the business purposes and investment strategies of REIT corporations has become even more important.
Third, the design of corporate investment structures using REITs has become possible even for small and medium-sized development projects.
As a result, this amendment is significant in that it has established an institutional basis for using REITs as a corporate structure for development projects.
Strengthening the Transparency of Corporate Governance
This amendment also strengthened the governance management framework for REITs and asset management companies.
The principal changes are as follows.
- Strengthened eligibility review of major shareholders of asset management companies
- Prevention of governance circumvention through paper companies (SPCs)
- Introduction of an eligibility review of the actual controlling shareholder
In particular, the provision requiring that eligibility be reviewed on the basis of the actual controlling company in investment structures that use paper companies carries significant corporate-law meaning.
This has a structure similar to the governance regulations for financial companies, and it reflects a policy direction aimed at securing transparency in actual governance in the REIT market as well.
Expansion of Public Fund Investment
This amendment to the Enforcement Decree also expanded the scope of shareholders exempt from the public offering requirement.
Previously, the public offering obligation was exempted where a local government, pension fund, or the like held a certain shareholding or more, but the amended Enforcement Decree added the State to the shareholders exempt from the public offering requirement.
This carries the following significance.
- Promotion of policy REITs using public funds
- Expansion of regional development and public investment
- Expansion of investment in infrastructure and energy projects
In particular, the use of REIT structures may increase even in large-scale infrastructure investments such as data centers and renewable energy facilities.
3. Corporate Law | Changes in Corporate Strategies Using REITs
This regulatory change is significant in that it has created an environment in which a REIT can be used not merely as an investment product but as one corporate form within a corporate investment structure.
In future real estate development projects, various strategies are likely to be used, including equity investment structures, asset sale structures, and REIT listing structures that make use of Project REITs.
Accordingly, this is a point at which companies and institutional investors need to formulate legal strategies that comprehensively review REIT establishment structures, capital-raising methods, and governance regulations.
Reviewing the Potential to Use a REIT Structure From the Early Stages of a Development Project
Previously, a REIT structure was often introduced after a development project had progressed considerably, but with the introduction of the Project REIT system, development projects can now be conducted upon a mere establishment report.
Accordingly, there is a need to review the possibility of designing an investment structure through a REIT corporation from the early stages of a development project.
Diversification of Investment Recovery Strategies
Because a Project REIT goes through business authorization and public offering procedures after the development project is completed, the methods of recovering invested funds can also be designed in various ways.
The principal methods are as follows.
- Investment recovery through REIT listing
- Sale of REIT shares
- Sale of development assets
- Long-term investment recovery through dividend income
It is important for a company to design the optimal investment recovery strategy in advance according to its project structure.
Responding to REIT Governance and Major Shareholder Regulations
In this amendment, the eligibility review of the major shareholders of asset management companies was expanded to reach the actual controlling shareholder.
Accordingly, even when designing an investment structure that uses a paper company such as an SPC, the eligibility issues of the actual controlling shareholder must be reviewed in advance.
This is because it may lead to governance-related legal risks during the future process of establishing a REIT and obtaining authorization for an asset management company.
Reviewing Strategies for Using REITs and Public Fund Investment
As the State has been included among the shareholders exempt from the public offering requirement, the potential for using policy REITs has expanded.
Accordingly, the potential for using REITs is expected to increase in the following projects.
- Regional development projects
- Urban regeneration projects
- Development of data centers and logistics facilities
- Investment in renewable energy infrastructure
A company may review business models that use policy REIT structures through cooperation with public institutions and policy funds.
Continuously Monitoring Regulatory Changes Related to the Establishment and Operation of REITs
At present, the detailed regulations related to Project REITs are still being revised through amendments to the Enforcement Decree and guidelines.
In particular, additional regulations may be established in the following areas.
- Permitted scope of third-party allocation of new shares for consideration at the development stage
- Additional requirements for filing a Project REIT establishment report
- REIT supervision and inspection framework
Accordingly, companies need to design their investment structures while continuously monitoring related legislative trends.
Daeryun's Assistance
Daeryun Law Firm LLP can organize the changes to REIT establishment and operation structures and governance regulations brought about by the introduction of the Project REIT and the amendments to the Enforcement Decree and guidelines, and can provide advisory services.
In addition, it reviews key risks, such as the schedules for establishment reports and business authorization (registration), the procedures for amending the articles of incorporation, the potential application of the public offering exemption for shareholders, and the expanded scope of the eligibility review of the major shareholders of asset management companies, and it presents directions for investment structures and for capital-raising and recovery strategies tailored to the company's type of business.
If you need legal assistance regarding the Real Estate Investment Company Act, corporate law, or the Commercial Act, you are welcome to make a 🔗reservation for a legal consultation with a corporate attorney.
