Government legislation ministry says financial test applies at proposal stage

The government legislation ministry said that a financial-soundness standard must be met when an urban development zone is proposed, rather than only when applying to be designated project developers.

The case concerned a request from Cheongju, North Chungcheong Province, about the eligibility of registered housing businesses deemed capable of carrying out urban development projects to make zone-designation proposals.

A corporation cannot have a net loss in the income statement disclosed for the relevant year. If that statement has not been disclosed, the previous year's income statement is used. The ministry said the standard confines participation in urban development projects to corporations with a certain level of financial capacity.

The ministry rejected an argument that the standard need only be met when applying for developer designation because the rule refers to that application date, saying the language does not exclude review at the proposal stage.

Zone proposals and later developer designation share eligibility requirements. Proposers must submit plans covering the project's method, period, developer, financing, land use and expropriation, as well as basic land-survey materials, and can be given priority when authorities select a developer. Private businesses must obtain consent from landowners holding at least two-thirds of the relevant land area. Consent forms identify the proposer as the anticipated developer.

The ministry recommended revising relevant rules and forms to state that financial soundness must be assessed at the time of a zone-designation proposal.