Ministry of SMEs Supports Startups Even When Founded Overseas

Definition of Overseas Startup and Overseas Startup Company Concepts
Establishment of Support Basis

Companies founded overseas will now also receive government support. This is to enable more Korean-founded startups to succeed in the global market.

The Ministry of SMEs and Startups announced that on the 20th, the Cabinet approved a partial amendment to the Enforcement Decree of the "Small and Medium Enterprise Startup Support Act," which establishes the legal basis for supporting overseas startups. The main content is a shift in the startup policy paradigm, which had previously supported only domestic companies, to include overseas startups as eligible for support, allowing the government to actively assist in the establishment, settlement, and growth stages of corporations founded abroad.

The government explained that it has established a legal basis to support cases where Koreans or domestic companies start businesses overseas, establish foreign corporations, or convert overseas subsidiaries into foreign corporations newly established by domestic companies through such overseas expansion.

The newly defined term ‘overseas startup’ in this amendment refers to a corporation established abroad in which Koreans or domestic corporations own a certain minimum amount of total shares or investment equity, thereby having substantial control. An ‘overseas startup company’ is a corporation that has been established overseas and has not exceeded seven years since commencing business. The Ministry of SMEs and Startups expects that by separately defining ‘overseas startup companies,’ other laws such as the 'Act on Promotion of Venture Investment' and the 'Restriction of Special Taxation Act' will also reference this provision, enabling more diverse support for overseas startups in the future.

The government plans to add additional criteria in the amendment to the Enforcement Decree of the Startup Support Act to select and support overseas startups substantially controlled by Koreans and domestic corporations that create added value such as employment and sales domestically, thereby contributing to the Korean economy.

The amendment to the Startup Support Act also introduced provisions for canceling the designation of agencies responsible for diligent management evaluations and restricting re-designation of such agencies for two years after cancellation. The diligent management evaluation is a system used to verify whether failed companies have managed their businesses faithfully without engaging in fraudulent accounting, intentional bankruptcy, unfair dismissal, etc., and is utilized to select candidates for government re-startup support. Additionally, the amendment established a legal basis to request data related to export and overseas investment attraction performance of startups managed by other ministries, as well as activities of foreign entrepreneurs in domestic companies. Furthermore, the Cabinet also approved a partial amendment to the Enforcement Decree of the Startup Support Act to establish specific criteria for refunding startup support funds based on different reasons.

The amended Startup Support Act, approved by the Cabinet, will be promulgated on the 27th and take effect six months later, while the amendments to the Enforcement Decree of the Startup Support Act will be enforced starting March 15.