As Restrictions Tighten on 'Multiple Voting Rights'... Venture Industry Says "Hard to Trust Government and Ruling Party"

National Assembly Judiciary Committee Plenary Meeting
(Seoul=Yonhap News) Reporter Lee Jeong-hoon = On the 17th, at the plenary meeting of the Legislation and Judiciary Committee held at the National Assembly, Chairman Park Kwang-on is striking the gavel. 2021.11.17 [National Assembly Press Photographers Group]
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[Asia Economy Reporter Junhyung Lee] When the revision bill of the Venture Business Act allowing unlisted venture company founders to issue multiple voting rights shares was stalled during the review by the National Assembly's Legislation and Judiciary Committee on the 9th, the venture and startup industry expressed regret and urged the prompt passage of the bill.

The Venture Business Association, Korea Startup Forum, Korea Venture Capital Association, Korea Women Venture Association, and other venture and startup organizations issued a statement on the day, saying, "The current bill submitted to the National Assembly to allow multiple voting rights blocks the use of the multiple voting rights share system as a means for chaebol conglomerates to illegitimately succeed management rights," adding, "There are sufficient safeguards to prevent side effects, such as issuance requirements through strict shareholder consent and restrictions on exercising multiple voting rights to protect minority shareholders and creditors." They added, "Nevertheless, we, the innovative venture and startup community, deeply regret the reality where the needs and aspirations of the venture industry are ignored due to concerns raised by some civic groups and ruling party members about the high possibility of future abuse."

Multiple voting rights is a system that grants founders or CEOs more voting rights per share than common stock. It is a management rights defense tool that supports venture and startup founders to make bold decisions without being swayed by external capital despite large-scale investments. The ‘Venture Business Act revision bill’ including the institutionalization of multiple voting rights passed the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises and Startups Committee on the 2nd of this month. However, it was stalled during the Legislation and Judiciary Committee review held on the 8th.

These organizations argued, "The claim that multiple voting rights are unnecessary because non-voting shares can already be issued under the Commercial Act does not align with market logic," stating, "In reality, venture investors who need to understand the management of the target company after capital investment do not agree to the issuance of non-voting shares, and non-voting shares are not actually issued due to lack of demand in the capital market."

Joint Press Conference Opposing Multiple Voting Rights by the National Assembly, Labor, and Civil Society
(Seoul=Yonhap News) On November 22, at the National Assembly Communication Hall, a joint press conference titled "Urging the Repeal of the Bill Allowing Multiple Voting Rights" was held, co-hosted by Justice Party lawmaker Ryu Ho-jeong, Economic Reform Solidarity, Economic Democracy 21, Citizens' Coalition for Economic Justice, Financial Justice Solidarity, Korean Confederation of Trade Unions, People's Solidarity for Participatory Democracy, Federation of Korean Trade Unions, and the National YMCA Federation of Korea. 2021.11.22
[Provided by Citizens' Coalition for Economic Justice. Resale and DB prohibited]
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They also rebutted concerns that allowing multiple voting rights could shrink venture investment, saying, "This is not true." They stated, "Even domestically, the venture capital industry supports the introduction of the multiple voting rights system as there is a need to establish systems and foundations that allow innovative venture companies with strong entrepreneurial spirit to actively attract investment and pursue growth strategies," adding, "If the bill allowing multiple voting rights is enacted, founders will be able to exercise entrepreneurship from a long-term perspective based on stable management rights, providing an opportunity for venture companies to receive large-scale investments and grow into unicorns (unlisted companies valued at over 1 trillion won)."

Furthermore, they expressed distrust toward the government and ruling party. They pointed out, "Despite the economic crisis caused by COVID-19, venture companies are creating new jobs and new growth engines," adding, "The President also emphasized that venture companies are the main actors in overcoming the COVID crisis and requested the passage of the multiple voting rights bill, which was also included in the Democratic Party's last general election pledge." They continued, "It is very disappointing that the Legislation and Judiciary Committee ignored the opinions of the standing committee, which had long reviewed and deliberated the results of stakeholder discussions, and followed the claims of some civic groups," adding, "Especially after witnessing the active opposition from some ruling party lawmakers, it is difficult to trust the government and ruling party any longer, and we cannot trust the Democratic Party's presidential election pledges."

They concluded, "The venture and startup industry urges the prompt passage of the multiple voting rights introduction plan in the National Assembly," emphasizing, "In an environment where the Fourth Industrial Revolution and digital transformation are rapidly progressing, we must not make the mistake of cutting off our nose to spite our face by failing to innovate domestic policies and falling behind in global competition."