This article was posted on July 23, 2025, at 4:17 p.m. on the ChosunBiz MoneyMove site.
The participation of investors in the board of directors of investee companies has become a 'hot potato' in the venture capital (VC) industry. Concerns have arisen that what was once a means of controlling investment risk could now lead to legal risks under the revised Commercial Act. On the 22nd, the revision of the Commercial Act, which includes the board members' duty of loyalty to shareholders, was proclaimed and implemented.
According to the VC industry on the 23rd, a recent practical training on the revised Commercial Act for VCs offered by the Korea Venture Capital Institute was fully booked as soon as the courses were opened. The course, which addresses the core contents of the revised Commercial Act and practical response strategies, was scheduled to be held three times from the 24th to the 29th, but all slots were filled.
A source in the VC industry noted, 'At the initial stages of the discussion on the amendment of the Commercial Act, many believed there was little connection to VCs investing in unlisted companies, but the atmosphere has completely changed recently.' He added, 'Some VCs are reportedly considering establishing principles to prohibit board membership in their operational regulations.'
VCs' concerns stem from Article 382-3 of the Commercial Act, which pertains to the 'duty of loyalty of board members.' The revision of the Commercial Act has expanded the duty of loyalty of company directors from the company to shareholders. Furthermore, a new obligation has been added and specified to protect the interests of all shareholders and treat them equitably.
When investing in promising venture companies, VCs typically specify the 'right to appoint one director' in the investment contract, thereby including a representative fund manager or key operating personnel on the board of directors of the investee company. This is based on the belief that it influences major decision-making in the company and enhances risk management and the possibility of recovering investment funds (exit).
Another source in the VC industry remarked, 'In the past, board members had responsibilities for breaches of duty; however, there is now a fear that even simple mistakes or merely approving decisions could easily lead to recognition of liability for shareholder losses. I believe that changes will inevitably occur in the way VCs participate in management.'
In some sectors of the industry, there are projections that the so-called 'observer attendance rights' clause will be included more frequently in VC investment contracts. Observer attendance rights refer to a method in which a person shares opinions without formally participating in the board of directors of the investee company.
A senior executive at a domestic VC stated, 'While it may seem that VCs are trying to speak up in board meetings while avoiding responsibility, they have no choice but to consider practical risks.' He predicted, 'There may be a trend toward a more conservative restructuring of contract structures and investment practices due to the changes in the Commercial Act.'