'Venture Business Act Enforcement Decree' Including Performance-Based Stock System Approved at Cabinet Meeting

Requirements for Venture Business Support Institutions
Regulations on Methods of Performance-Conditioned Stock Grant Contracts
Information Session to Be Held on July 16

The bill detailing the specifics of performance-based restricted stock units (RSUs), which will also be available to startups starting this July, has been approved at the Cabinet meeting.

The Ministry of SMEs and Startups announced that the amendment to the Enforcement Decree of the Special Measures for the Promotion of Venture Businesses Act, which includes details on venture business support specialized institutions and performance-based stock grant contracts, was approved at the Cabinet meeting on the 24th.

Oh Young-joo, Minister of SMEs and Startups, is delivering a greeting at the Small and Medium Venture R&D Future Strategy Roundtable Performance Sharing Forum held on the 26th at the Glad Hotel in Yeouido, Seoul. Photo by Jo Yong-jun jun21@

A venture business support specialized institution is an organization that systematically carries out projects to promote the growth of venture businesses. It refers to institutions, corporations, or organizations designated by the Ministry of SMEs and Startups that have specialized personnel with relevant experience, dedicated organizations, and facilities.

Institutions designated as venture business support specialized institutions will carry out various support projects together with the Ministry of SMEs and Startups in the future. The status of designated specialized institutions will be posted on the Venture Business Comprehensive Management System.

The method of RSU grant contracts for venture businesses is also specified in detail. RSUs are a compensation method that grants company shares free of charge to executives and employees who achieve certain performance targets. It is a more proactive compensation method than stock options, which give the right to purchase shares at a specific price. RSUs do not require cash expenditure for purchasing stock options and can generate profits even if the stock price falls.

Even startups in the early stages that are not yet profitable can have their corporate value recognized and, upon securing sufficient investment, can use RSUs to attract talented personnel. Additionally, RSUs can be linked to tenure or performance, encouraging long-term employment.

Through this amendment to the enforcement decree, RSU grant contracts have been concretized into two methods: an advance payment method where shares with transfer restrictions are granted first and the transfer restrictions are lifted upon achieving performance targets, and a post-payment method where shares are granted upon achieving performance.

With the RSU system being introduced domestically for the first time, to resolve utilization difficulties faced by venture businesses and support its establishment in the field, an RSU briefing session will be held on July 16 in cooperation with the Korea Venture Business Association. Detailed information about the briefing session and participation applications can be made through the Korea Venture Business Association website.

Minister Oh Young-joo stated, “The venture ecosystem is the main driver of South Korea’s economic growth through challenge and innovation,” and added, “We will not stop innovating the venture business support system so that venture businesses can leap further.”

The amended Special Measures for the Promotion of Venture Businesses Act will take effect from July 10.