Specific offerings

Specific offerings (특수한 증권발행/特殊發行) refer to such securities offerings beyond the regulation of the Capital Markets and Financial Investment Services Act (the "Capital Markets Act" 금융투자업 및 자본시장에 관한 법률) as private placement, offshore offerings and particular offerings.

Key words
securities offering, private placement, offshore offering, Capital Markets Act, KSD

Private placement
The Capital Markets Act does not specify what information must be provided to potential investors in connection with a private placement (사모발행/私募發行).

Meanwhile, with respect to small-scale offerings with an amount of less than one billion won, which fall under the category of public offerings but are exempted from filing a registration statement, the Capital Markets Act requires disclosure of the financial conditions of the issuer, solicitation methods for subscription and the contents of the solicitation documents with the Financial Services Commission (FSC 금융위원회) in lieu of a registration statement.

In this connection, the Capital Markets Act does not specify what information must be provided to potential investors. Meanwhile, with respect to small-scale offerings with an amount of less than 1 billion won, which fall under the category of public offerings but are exempted from filing a registration statement, the Capital Markets Act requires disclosure of the financial conditions of the issuer, solicitation methods for subscription and the contents of the solicitation documents with the FSC in lieu of a registration statement.

Transfer of Securities acquired in Private Placement
As explained above, transfer restrictions are required in order for an offer to be considered a private placement. Since securities with respect to which a registration statement has not been filed have limited transferability, their transferability is substantially restricted other than in negotiated transactions. Meanwhile, if debt securities are issued by an issuer with assets of less than 500 billion won and the initial purchasers from the issuer or underwriter are qualified institutional buyers (QIBs), the securities can be sold in the QIB market to ensure their liquidity.

Offshore offering
Securities offerings by domestic companies outside Korea are, in principle, not regulated by the Capital Markets Act.

However, even if the securities are offered outside Korea, if the offering affects the protection of domestic investors, for example, if Korean residents can buy the securities (including the rights attached to the securities, etc) at the time of the offering or within one year from the date of the offering, the offering is governed by the Capital Markets Act because such securities are deemed to be issued within Korea. In that case, the domestic issuer is required to file a registration statement.

In addition, the Capital Markets Act prescribes that if a listed company issues certain kinds of securities abroad, the FSC may determine the financial management standards for such a listed company. Accordingly, even if a domestic issuer issues securities abroad, it is subject to certain regulation including the calculation method of the issuing price of the securities, or the price to exercise of the conversion rights of convertible bonds, etc.

Particular financing
What special considerations apply to offerings of exchangeable or convertible securities, warrants or depositary shares or rights offerings?

In principle, the offerings of exchangeable bonds (EBs 교환사채/交換社債), convertible bonds (CBs 전환사채/轉換社債), warrants, or depositary shares are subject to the same regulation as other offerings.

However, due to the special characteristics of such securities, when new securities are issued or existing securities are exchanged as a result of the exercise of rights, information thereon must be included in the registration statement. Filing of a new registration statement is not required when new securities are issued or existing securities are sold as a result of the exercise of the rights included in such securities.

In case of depositary receipts, although the official issuer is the Korea Securities Depository (KSD 한국예탁결제원), with which the securities are deposited, the actual issuer, the company which issues the deposited securities, must file a registration statement. The Capital Markets Act does not have a specific provision on rights offerings. However, according to the definition of securities, even if securities are not issued and only rights exist, such rights are considered securities under the Capital Markets Act. Therefore, a registration statement may be required to be filed depending on the characteristics of the rights.