The government moved ahead with follow-up legislation to the "comprehensive plan to leap to the world's top four in venture," including extending the duration of the mother fund, expanding participation by public funds such as pension funds in venture investment, limiting joint liability for venture capital companies, and easing stock option regulations.
The Ministry of SMEs and Startups (MSS) said on the 23rd that the Cabinet approved revisions to the Act on Special Measures for Fostering Venture Businesses (Venture Business Act) and the Act on the Promotion of Venture Investment (Venture Investment Act), as well as a partial revision to the Enforcement Decree of the Act on Special Measures for Fostering Venture Businesses (Enforcement Decree of the Venture Business Act).
This legal and institutional overhaul is follow-up legislation to the comprehensive plan to leap to the world's top four in venture, which the government released on the 18th, and it focuses on not only revitalizing venture investment and rationalizing regulations but also institutionally strengthening the growth base of venture companies. The revisions to the Venture Investment Act and the Venture Business Act are set to be promulgated on the 30th. Major provisions of the revisions, except for improvements to the joint liability system for venture investment, will take effect six months after promulgation. The revision to the Enforcement Decree of the Venture Business Act will take effect immediately upon promulgation on the 30th.
◇ Extension of the mother fund's duration… improvements to venture investment regulations
Through the revision of the Venture Investment Act, the government allowed the duration of the venture investment mother association (mother fund) to be extended in 10-year increments with the approval of the general meeting of partners. The aim is to create more stable investment conditions for strategic sectors such as AI and deep tech, where short-term exits are difficult. In addition, the mother fund will regularly report to the National Assembly on the status of investments of recovered resources and transfers between accounts, thereby strengthening transparency and accountability in fiscal management. The Ministry of SMEs and Startups (MSS) plans to further advance the management system by establishing a mother fund management committee together with relevant ministries.
The scope of statutory funds eligible to participate in venture investment will also be expanded. The legal basis for contributions, previously limited to certain funds, will be broadened to all funds under the National Finance Act, institutionally supporting participation in venture investment by various fiscal entities, including pension funds and public funds.
The revision bill to the Venture Investment Act also rationalizes investment obligation regulations to match changes in market conditions. It eases the period for fulfilling investment obligations for individual investment associations, startup accelerators, venture capital companies, and venture investment associations from the current three years to five years, and adjusts certain obligations that were excessively imposed by year and by association. This is expected to enable the establishment of more flexible investment strategies that reflect market conditions. In particular, individual investment associations and startup accelerators, which form the backbone of the early-stage investment ecosystem, are expected to see their scope of activity expand markedly.
Limits on joint liability were also codified. A rule restricting the imposition of excessive joint liability on third parties other than the investee company was elevated from a notice to statute. As a result, joint liability is limited for all entities under the jurisdiction of the Ministry of SMEs and Startups (MSS)—venture capital companies, venture investment associations, startup accelerators, and individual investment associations. This measure is intended to block the unreasonable shifting of responsibility that has been repeated in the investment process and to institutionally strengthen the trust base between ventures and startups and investors.
◇ "Venture Business Week" codified… easing of stock option regulations as well
Through the revision of the Venture Business Act, a legal basis was established to operate an annual "Venture Business Week." It allows the government and local governments to officially promote commemorative events and publicity programs, and it newly established a legal basis for awards to outstanding venture entrepreneurs and projects to promote venture achievements. This is expected to boost the pride of venture entrepreneurs while expanding social consensus that venture is a core growth engine of the Korean economy. Before the legal revision, the Ministry of SMEs and Startups (MSS) preemptively held the "1st Venture Week" last month.
Through the revision of the Enforcement Decree of the Venture Business Act, the venture stock option system was also refined. To help ventures and startups with limited capital ease cash compensation burdens while securing key talent, the cap for issuing stock options below fair market value was greatly expanded from the current 500 million won to up to 2 billion won. Reflecting changes such as the expansion of the venture ecosystem and intensifying competition for talent, the aim is to strengthen a long-term incentive structure that shares growth expectations with executives and employees before results become visible.
Minister Han Seong-sook of the Ministry of SMEs and Startups (MSS) said, "With this legal and institutional overhaul, the comprehensive plan to leap to the world's top four in venture has begun to operate in practice," adding, "We will accelerate efforts to ensure the new systems take root in the field through cooperation with the National Assembly and relevant ministries, and we will push ahead with follow-up legislative tasks without a hitch."