Securities offerings

Securities offerings (유가증권 발행/有價證券發行) refer to discrete rounds of investment, by which an enterprise raises fund to finance operations, expansion, a capital project, an acquisition, or some other business purpose. It is usually called as "direct financing" (직접금융/直接金融) other than financing through financial intermediaries like banks.

Key words
public offering, well-known seasoned issuer (WKSI), registration, private placement, qualified institutional buyer (QIB)

Components
In general, securities offerings include the following though none are an absolute requirement in every circumstance: Underwriters, brokers, finders, and/or agents who help sell and otherwise facilitate the investment transaction.
 * A prospectus, private placement memorandum, or other document used to advertise the availability and terms of the offering, and to provide disclosure of information investors will need for their due diligence efforts.
 * A securities filing with relevant state and/or federal regulators: Various contracts and documents by which the securities are sold such as a subscription agreement, a stock purchase agreement, and a convertible note (which documents a type of convertible security) or other loan document.
 * Various subsidiary or related agreements such as a buy-sell agreement, investor rights agreement, proxy agreements, and proposed amendments to a company's articles of incorporation
 * Financial projections, financial statements, and projections and promises regarding the use of funds.

Statutory ground
In Korea, securities offerings are governed by the Capital Markets and Financial Investment Services Act (the "Capital Markets Act" 금융투자업 및 자본시장에 관한 법률, formerly the Securities and Exchange Act), which came into effect on February 4, 2009, the Enforcement Decree of the Capital Markets Act, and the Regulation on Securities Issuance and Disclosures (유가증권의 발행 및 공시 등에 관한 규정) established by the Financial Services Commission (FSC 금융위원회). The regulatory authority which is primarily responsible for supervising the issuance and trade of securities is the FSC, and the Financial Supervisory Service (FSS 금융감독원) implements the matters deliberated and resolved by the FSC.

Although the Capital Markets Act prescribes that the registration statement for a public offering should be filed with the FSC, since the FSC delegates the authority to accept and examine registration statements to the FSS, the FSS is the actual regulatory body. In addition, since a person who intends to list securities issued through a public offering is required to comply with internal regulations of the Korea Exchange (KRX 한국거래소), the KRX also plays a role as a de facto regulatory body.

Public offering
An issuer that intends to issue securities through a public offering (공모발행/公募發行) is required to file a registration statement with the FSC, and can conduct the public offering after a certain period of time has passed after the acceptance of the registration statement.

There is no reporting obligation to the KRX with respect to a public offering. The registration statement should include:
 * an overview of the public offering;
 * a description of the securities;
 * information on the issuer; and
 * attachments.

The description of securities offered would vary depending on the kind of securities. Accordingly, the Capital Markets Act and the Enforcement Decree hereof provide for the different matters required to be set out in the registration statement in the case of equity securities, debt securities, collective investment securities or asset-backed securities.

When a registration statement is filed with the FSS, it is disclosed to the general public through the FSS’s electronic disclosure system, or the Data Analysis, Retrieval and Transfer (DART 전자공시) System.

Well-Known Seasoned Issuers
In addition, similarly to the United States, the FSS operates a shelf registration system and a special exception system for well-known seasoned issuers (WKSI 잘 알려진 기업) if certain conditions are met. Under the shelf registration system, an issuer may make a report in advance for the total issuing volume for a certain period and conduct public offerings without the obligation to file registration statements during the relevant period.

An ordinary corporation may use the shelf registration system for bonds (exclusive of bonds relating to stock certificates and participating bonds) or derivatives for a scheduled issuing period of not less than two months and less than one year, if:
 * it has conducted a public offering of the same kind of securities in the last year;
 * an auditor’s recent opinion was an unqualified opinion; and
 * it has not been subject to a disposition to restrict issuance of securities issued by the FSC for the last year.

An issuer that has filed a shelf registration statement must issue the relevant securities at least three times during the scheduled issuing period.

A WKSI refers to a company that: years; and
 * has been listed for not less than five years;
 * has a current market capitalisation of not less than 500 billion won;
 * recently received an unqualified opinion from an auditor;
 * has not been subject to certain sanctions issued by the FSC or the KRX due to violation of disclosure obligations in the last three
 * has not been subject to a fine or more severe punishment due to violation of the GAAP under the Act on External Audit of Stock Companies (주식회사의 외부감사에 관한 법률), or of the Capital Markets Act in the last three years.

A WKSI can use the shelf registration system for the issuance of stock certificates, bonds relating to stock certificates, participating bonds and other debentures for a scheduled issuing period of less than two years, and there is no requirement for minimum issuances.

Registration and Filing
A registration statement goes through the stages of filing, acceptance and examination before coming into effect. An issuer must not engage in any offering activities until it files a registration statement.

The issuer may conduct limited offering activities during the period after a registration statement is filed and before it comes into effect, and may conduct unlimited offering activities once the registration statement becomes effective. During this process, the FSS examines formalities after a registration statement is filed and before it is accepted, and then examines the substance of the registration statement during the period after acceptance and before it takes effect. If the registration statement contains omissions or misleading information, the FSS may order a correction of the registration statement before the date set for the subscription of securities.

The Capital Markets Act and the Enforcement Decree hereof provide for the periods (ranging from five to 15 days) that it usually takes for a registration statement to take effect, which depends on the issuer, the kind of securities and the type of issuance. Such periods may be shortened if certain conditions are met.

Equity securities
In the case of a public offering, if the issuer is a listed corporation it takes 10 days for a registration statement to take effect. In the case of a public offering where the issuer is a non-listed corporation, it usually takes 15 days for a registration statement to take effect. In the case of an allotment to shareholders or third parties, it usually takes seven days for a registration statement to take effect, whether the issuer is a listed corporation or a non-listed corporation.

Debt securities
In the case of a guaranteed and secured ABS it usually takes five days for a registration statement to take effect, whether the issuer is a listed corporation or a non-listed corporation. In the case of unsecured debt securities it usually takes seven days for a registration statement to take effect, whether the issuer is a listed corporation or a non-listed corporation.

Closed-end collective investment securities For closed-end collective investment securities it usually takes 10 days for a registration statement to take effect, whether the issuer is a listed corporation or a non-listed corporation.

Other securities
For other securities it usually takes 15 days for a registration statement to take effect, whether the issuer is a listed corporation or a non-listed corporation.

Specific offerings
With respect to the private placement, offshore offerings and particular offerings, see Specific offerings.