Quick answer
Under Article 11-2 of Korea’s Industrial Technology Protection Act, a Korean company holding a National Core Technology (NCT) must obtain prior approval from the Minister of Trade, Industry and Resources before a foreign M&A, joint venture or similar foreign investment if the technology was developed with government R&D funding, and must file a prior notification otherwise (Act, law.go.kr). The statutory review period for approvals is 45 days, excluding time for separate technical review and information requests (Enforcement Decree Art. 18-4). An amendment effective July 22, 2025 raised fines for leaking NCT abroad to up to KRW 6.5 billion (alongside imprisonment of at least three years) and introduced daily enforcement fines for ignoring stop or unwind orders (Shin & Kim).
Table of Contents
Open Table of Contents
Introduction: Why NCT Rules Matter for Foreign Investors
South Korea protects technologies it considers vital to national security and the economy through the Industrial Technology Protection Act (산업기술의 유출방지 및 보호에 관한 법률, “ITPA”). For foreign investors eyeing M&A deals, joint ventures, or equity stakes in Korean tech companies, the ITPA’s foreign M&A rules can decide whether a deal closes, how long it takes, and on what conditions.
The ITPA was significantly amended in an act passed on December 27, 2024 and in force from July 22, 2025, which tightened penalties and strengthened the M&A review. The Act has since been amended again (the current version applies from June 3, 2026), so always check the current text on law.go.kr.
What Are National Core Technologies (NCT)?
National Core Technologies are industrial technologies designated by the Minister of Trade, Industry and Resources because their leakage abroad could significantly affect national security and the national economy. Designated technologies span fields such as:
- Semiconductors
- Displays
- Secondary batteries
- Shipbuilding
- Automobiles
- Steel
- Bio-health and other fields
The Ministry publishes and periodically revises the designation notice. Do not rely on a summary list: check the current notice and, if needed, apply for a formal determination of whether a specific technology is an NCT.
National Advanced Strategic Technologies are a separate category under the Act on Special Measures for Strengthening the Competitiveness and Protection of National Advanced Strategic Industries. Many strategic technologies are also NCTs, and their export is subject to approval under that Act.
The Foreign M&A Rules
Approval vs. Notification
| Situation | Requirement | Legal basis |
|---|---|---|
| Target holds an NCT developed with government R&D funding | Prior approval from the Minister | ITPA Art. 11-2(1) |
| Target holds any other NCT | Prior notification to the Minister | ITPA Art. 11-2(5) |
| Target learns that a foreigner is pursuing an M&A of it | Notify the Minister without delay | ITPA Art. 11-2(2), (6) |
Note that the filing obligation sits with the Korean target company (the NCT holder), not only the foreign buyer, although the Minister can ask the foreign investor to cooperate.
What Counts as a “Foreign M&A”
Under Article 18-3 of the Enforcement Decree (law.go.kr), the rules apply where a foreigner:
- Alone or together with related parties, will own 50% or more of the target’s shares (including rights convertible into shares), or less than 50% while becoming the largest shareholder and gaining dominant influence over appointing officers or management
- Takes over all or a major part of the target’s business by transfer, lease or management contract
- Lends funds to or contributes to the target while gaining dominant influence over appointing a majority of officers
“Related parties” include companies the foreigner controls through agreements with major shareholders, so indirect structures — such as investing through a Korean SPC or offshore vehicle that the foreigner controls — can be caught.
Review Process and Timing
- Approval cases: the Minister must notify the result within 45 days of receiving the application, after consulting relevant ministries and deliberation by the Industrial Technology Protection Committee. Time needed for a separate technical review is excluded (Enforcement Decree Art. 18-4).
- Cases notified by the target where the approval procedure is run: also 45 days, excluding time for technical review and for the foreign investor to submit requested materials (Art. 18-5).
- Notification cases: the Minister must accept the notification if the deal has no serious national-security effect and complies with the Act (Art. 11-2(7)).
- Conditions: approvals can be granted with conditions (Art. 11-2(4)).
- Pre-review: parties can ask the Minister in advance whether the technology relates to national security and whether the deal requires approval or notification (Art. 11-2(9)).
Because the statutory clock excludes technical review and information requests, actual timelines can be longer than 45 days. Build a buffer into your long-stop date and discuss timing with counsel early.
What the Minister Can Do
- Approve, with or without conditions, after reviewing the national-security impact and the national-economic effect of technology leakage (Art. 11-2(4))
- Order suspension, prohibition or restoration (unwinding) where an M&A could seriously affect national security, or where approval/notification was skipped or obtained by fraud (Art. 11-2(8), (10))
- Impose enforcement fines for failing to comply with such orders — according to Shin & Kim, up to KRW 10 million per day where the transaction exceeds KRW 1 trillion (Shin & Kim)
Penalties
Under Article 36 of the ITPA as amended:
- Leaking an NCT knowing it will be used abroad (including foreign M&A without approval or by fraudulent approval): imprisonment of at least 3 years, plus a fine of up to KRW 6.5 billion (raised from KRW 1.5 billion)
- Leaking other industrial technology knowing it will be used abroad: up to 15 years’ imprisonment or a fine of up to KRW 3 billion
- Other infringements: up to 10 years’ imprisonment or KRW 1 billion fine
The 2025 amendment also confirmed that the leakage and infringement provisions apply to acts committed outside Korea (Shin & Kim).
Step-by-Step for a Deal
Step 1: Screen the Target
- Does the target hold an NCT? (Check the current designation notice and ask the target directly)
- Was the NCT developed with government R&D funding? (Determines approval vs. notification)
- Will the transaction meet the “foreign M&A” definition (50%+, largest shareholder with dominant influence, business transfer, or loan with board control)?
- Is the investment direct or through an SPC, fund or offshore holding company?
If unsure, use the pre-review procedure under Article 11-2(9).
Step 2: Prepare the Filing
The application or notification form must attach, among other things (Enforcement Decree Art. 18-4):
- The transaction agreement or plan
- The foreign investor’s name, major shareholders, revenue, total assets and business
- The transaction details and relevant market information
- Technical materials on the use and performance of the NCT and the terms of its provision
- Market size and competitiveness of products using the NCT
- Details of government R&D funding received
Step 3: Negotiate Conditions
Approvals may carry conditions. In practice, conditions can address technology security, access to sensitive information and reporting. Negotiate them with the closing timeline in mind.
Step 4: Separate Foreign Investment Filings
The ITPA review is separate from the foreign investment notification and any national security review under the Foreign Investment Promotion Act, and from merger filing with the Korea Fair Trade Commission. Map all of them at the outset.
Practical Strategies for Foreign Investors
1. Early Due Diligence
Don’t wait until the LOI stage to assess NCT exposure. During initial target screening:
- Ask whether the target has received an NCT determination or is registered as an NCT holder
- Review government R&D grants (these decide approval vs. notification)
- Interview technical staff about proprietary technologies
2. Build Regulatory Buffers into Timelines
Include ITPA approval/notification as a condition precedent with a realistic long-stop date, and allocate the risk of conditions or a prohibition order in the SPA.
3. Engage Local Counsel Early
Korean counsel can pre-screen NCT exposure, use the pre-review procedure, prepare the target’s filing and coordinate with the other foreign investment filings.
4. Structure Around Restrictions
If full acquisition is not feasible, consider:
- Minority investments that stay outside the “foreign M&A” definition (below 50% and without becoming the largest shareholder with dominant influence)
- Joint ventures with Korean partners
- Technology licensing agreements (note that NCT exports, including licensing abroad, have their own approval/notification rules under Article 11)
5. Prepare for “No”
The Minister can block or unwind transactions that could seriously affect national security. Investor identity, government ties and the sensitivity of the technology all matter.
FAQ: Common Questions
Q1: Who files — the buyer or the Korean company?
The Korean NCT holder files the approval application or notification. If it learns that a foreigner is pursuing an M&A of it, it must notify the Minister without delay, and the Minister can ask the foreign investor to cooperate.
Q2: How long does review take?
The statutory period for approval is 45 days from the application, but time for separate technical review and information requests is excluded, so plan for longer.
Q3: Do venture capital minority stakes trigger the rules?
Generally not, if the investor stays below 50% and does not become the largest shareholder with dominant influence over management or appointments. Convertible instruments count toward the shareholding, and side agreements giving board control can change the analysis.
Q4: How do I know if a technology is an NCT?
Check the Ministry’s current NCT designation notice. Companies can apply for a determination, and the Ministry can also ask companies to apply for one (Article 9-2, introduced by the 2025 amendment).
Q5: What if we closed without filing?
The Minister can order suspension, prohibition or restoration, enforcement fines can apply for non-compliance with those orders, and criminal penalties may apply. Seek advice immediately.
Key Takeaways
- Approval or notification: NCTs developed with government R&D funding require prior approval; other NCTs require prior notification.
- Control-based test: 50%+ shareholding, or largest shareholder with dominant influence, business transfers, and loans with board control.
- Indirect structures can be caught through the related-party rules.
- Timing: 45-day statutory review for approvals, excluding technical review and information requests.
- Penalties are heavy: at least 3 years’ imprisonment and fines up to KRW 6.5 billion for leaking NCT abroad, plus stop/unwind orders and enforcement fines.
How SMA Lawfirm Can Help
- Pre-transaction NCT screening and use of the pre-review procedure
- Approval and notification filings with the Ministry
- Negotiating approval conditions
- Coordinating the FIPA notification, national security review and merger filings
📩 Contact us today: sma@saemunan.com
Conclusion
Korea’s NCT framework balances foreign investment with technology security, and the 2025 amendment made the consequences of getting it wrong more serious. Start NCT due diligence early, confirm whether approval or notification applies, and build the review into your deal timeline from day one.
Official Sources
For authoritative reference, consult the following Korean government portals: