An amendment to the enforcement decree aimed at revitalizing venture investment has been approved at the Cabinet meeting. Accordingly, the registration and operation requirements for venture investment entities will be relaxed, and mergers and acquisitions (M&A) of startups and venture capital (VC) will be activated.
The Ministry of SMEs and Startups announced on the 31st that the draft amendment to the enforcement decree on the 'Act on Promotion of Venture Investment' was approved at the Cabinet meeting on the 29th. The amendment will take effect immediately upon announcement.
First, in order to expand venture investment and venture fund formation, the registration and operation requirements for venture investment companies and venture investment associations will be relaxed. Professional individual investors were required to pay a registration fee of 100 million won within the last three years, but in the future, they will only need to pay 50 million won. Additionally, a provision has been established to allow foreign investors to contribute in U.S. dollars without separate currency exchange.
The minimum formation size for private venture fund of funds will also be lowered from 100 billion won to 50 billion won. Moreover, when a private venture fund of funds invests in individual investment associations limited to 49 members, the method of calculating the number of members in the fund will be improved by considering the number of members in the fund as one.
In addition to early-stage startups directly selected or incubated by startup planners, investments aimed at management control will also be allowed for prospective entrepreneurs. Furthermore, a foundation has been established that can promote the establishment of subsidiaries by startup planners.
Moreover, regulations that restricted the retrospective and unintentional actions of venture investors will be relaxed. Previously, if companies invested by venture investment associations were subsequently included in groups restricted from mutual investment, there was an obligation to sell the companies within five years, which will be abolished. Additionally, if a startup planner with equity is registered as a venture investment company or a new technology business finance company, a grace period of nine months will be provided for disposing of the equity.
Finally, the burden of M&A for startups and VCs will be reduced. When calculating the mandatory investment ratio of M&A funds, not only the acquisition amount of the companies but also loans to the acquiring companies will be included. Furthermore, if a venture investment company acquires non-operational real estate due to mergers and acquisitions with venture capital, a grace period will be provided to resolve such restrictions and promote smooth mergers and acquisitions.
Minister Han Seong-suk noted, "This amendment to the enforcement decree will expand the inflow of investment funds into ventures and startups and serve as an opportunity for revitalizing the venture investment ecosystem," adding, "To achieve the goal of becoming a leading venture country, I will actively pursue necessary regulatory relaxations in investment while continuing to communicate with the industry."