Venture Industry Urges Introduction of Multiple Voting Rights for Large-Scale Fundraising... Calls for Legislation

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] The venture and startup industry has called for the prompt enactment of legislation to introduce a multiple voting rights system. The amendment to the Special Act on the Promotion of Venture Businesses for the introduction of the multiple voting rights system is facing difficulties in the National Assembly's deliberation process. The industry insists that the passage of the amendment is urgent for high-growth venture companies to receive large-scale investments without threats to their management rights.

The Innovation Venture Organizations Council, composed of 17 organizations including the Korea Venture Business Association and the Innobiz Association, issued a statement on the 21st urging legislation for the introduction of the multiple voting rights system.

The Innovation Venture Organizations Council stated, "The multiple voting rights stock system is designed to support high-growth ventures in becoming unicorns by attracting large-scale investments without threats to their management rights," adding, "If successful venture companies like the second Naver or Kakao emerge, the utility and ripple effects on the national economy will be tremendous."

They continued, "The legislative process in the National Assembly is facing difficulties due to concerns from some quarters that the system could be abused as a means of inheritance by large conglomerates," and added, "The government's proposal for the system includes sufficient institutional measures to prevent such side effects."

The council criticized, "Opponents acknowledge that the current bill includes measures to prevent use by large corporations, but they dismiss the 'need' of venture companies based solely on 'concerns' that the conditions might be relaxed in the future."

The bill includes safeguards to prevent abuse as a means of illegitimate management succession by large conglomerates. Multiple voting rights stocks will automatically convert to common stocks upon inheritance, transfer, or when the founder resigns from the director position.

Regarding concerns that second- or third-generation heirs of conglomerates might start ventures, receive multiple voting rights, go public, and incorporate them into their affiliates, the bill stipulates that if a venture issuing multiple voting rights stocks is incorporated into a publicly disclosed business group, the stocks will immediately convert to common stocks.

The council stated, "The target companies for this system are high-growth companies that require large-scale investment, and their number is not large," adding, "It is not physically difficult to prevent abuse of the system in advance and to supervise these companies."

They also emphasized, "The rapidly changing environment brought about by the Fourth Industrial Revolution and digital transformation demands innovation and advancement of the system," and warned, "We must not make the mistake of abandoning discussions on multiple voting rights simply due to concerns that large corporations might abuse the system in the future without even attempting it."