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Newsletter | July 2016, Issue 2
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REAL ESTATE
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Amendments to Enforcement Decrees of “Industrial Cluster Development and Factory Establishment Act” Aim to Ease Restrictions on Industrial Land and Plant Dispositions
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On February 29, 2016, certain amendments to the enforcement decrees of the Industrial Cluster Development and Factory Establishment Act (the “Industrial Cluster Development Act”; and such amendments, the “Amended Enforcement Decrees”) came into effect.
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They are designed to ease restrictions on the disposition of industrial land and plants.
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The Amended Enforcement Decrees include, among others, the following:
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1. Expansion of Exceptions to Restrictions on Disposition of Industrial Land and Plans
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Prior to the Amended Enforcement Decrees, a legal entity which had purchased and owned industrial land was prohibited from disposing the land within 5 years from the date of purchase.
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Such prohibition against the disposition extended to the transfer of shares in the company that owned the land, whereby a shareholder of the company cannot transfer 50% or more of its shares in the company to a third party within the 5-year period (as such transfer was deemed disposition of the industrial land by the company).
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Violation of the transfer restriction would subject the company to transfer the industrial land and any facilities built thereon back to the relevant authority.
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However, under the Amended Enforcement Decrees, such transfer of shares is no longer deemed a disposition of the industrial land.
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Also, in the event an occupant of a non-legal entity industrial complex (an “Occupant”) converts the complex into a legal entity, by way of in-kind contribution or comprehensive business transfer of its industrial land and plants located thereon, such in-kind contribution or comprehensive transfer is not deemed a disposition of the industrial land and plants under the Industrial Cluster Development Act.
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2. Shortening of Period during which Disposition of Subdivided Industrial Land is Restricted
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Prior to the Amended Enforcement Decrees, in the event an Occupant intended to dispose of industrial land after any subdivision, such Occupant was prohibited from disposing of the subdivided land for 5 years after such subdivision.
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However, under the Amended Enforcement Decrees, regardless of any subsequent subdivision of the land, an Occupant can dispose of subdivided land after 5 years from the date of commencement of its business on such land.
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