Representative Kim Jong-min (National Assembly Committee on Industry, Trade, and Small and Medium Enterprises) noted on the 20th that he has proposed amendments to the Venture Investment Promotion Act and the Credit Finance Business Act, which resolve the joint liability clause for venture founders.
This amendment comes after an entrepreneur who received investments from a domestic financial institution faced joint liability after news of a housing lien emerged following a business failure. The entrepreneur's company, which received funding in 2017, entered corporate rehabilitation procedures due to failure to secure new funding amid the COVID-19 pandemic and a downturn in the investment market. Subsequently, the investor demanded the return of the investment with an annual interest of 15% added and placed a lien on the entrepreneur's dwelling.
Earlier, the government prohibited joint guarantees from founders when financial companies proceeded with loans from 2014 to activate the startup ecosystem. In 2018, policy finance institutions, including the Small and Medium Venture Business Corporation and the Technology Guarantee Fund under the Ministry of SMEs and Startups, also abolished joint guarantees.
Kim explained, “However, some financial companies and venture capital firms are still requiring founders to assume joint liability through investment contracts based on their internal regulations, blocking the possibility of the founders' resurgence by distorting the investment under the joint liability clause into loans.”
This amendment to the Venture Investment Promotion Act aimed to elevate the existing notices that regulate 'registration and management of venture investment companies' and 'registration and management of venture capital associations' into law, restricting joint liability from being imposed on private investment associations and startup planners.
The Credit Finance Business Act was also amended to exclude the liability that new technology business operators or new technology investment associations must bear when they violate investment contracts due to intentional or gross negligence, preventing them from imposing joint liability on third parties.
Kim stated, “Through the amendments to the Venture Investment Promotion Act and the Credit Finance Business Act, we aim to establish a safety net for entrepreneurs to escape joint liability and build a startup ecosystem where investors and founders grow together.”