The Real Estate Investment Company Act (hereinafter, the “Act”) was amended on December 18, 2012 in an effort to mitigate both the shareholding limit in a Real Estate Investment Company (“REIC”) and the requirements for the establishment and management of REIC’s. The amended Act is scheduled to take effect on June 19, 2013.
Previously, the requirements for the establishment and management of a REIC were said to be unduly strict to the extent that the legislative purpose, to expand investment opportunities in the real estate market for the general public, had been thwarted. The amended Act provides for the following:
- The per capita shareholding limit in REIC has been increased from 30% to 40% of total issued shares to promote the stable management of REIC by inducing participation by blue-chip institutional investors.
- The requirement which limited the issuance of shares for in-kind contribution to a maximum of 50% of paid-in-capital has been removed placing a requirement that the value of the in-kind contribution be appraised by an appraisal business operator to allow for a seamless acquisition of large real estates by REIC’s.
- A system of corporate directors and supervisory directors to consigned-management and corporate restructuring REIC’s has been introduced to expand the shareholders’ choice of management structures and to promote efficiency in asset management.
- The minimum capital requirement for self-managed REIC’s at the time of establishment has been increased from KRW 500 million to KRW 1 billion to protect investors and to increase reliability by securing sufficient initial capital.
The amended Act is expected to promote indirect investment in real estate and to expand investment opportunities in the real estate development businesses.