Venture Industry Urges "CVC Regulation Eased... Calls for Passage of Fair Trade Act Amendment"

Venture Business Association Statement on the 17th
"CVC is Important to Expand Private Venture Capital Investment"

The venture industry has called for the swift passage of the amendment to the Monopoly Regulation and Fair Trade Act aimed at easing regulations on corporate venture capital (CVC) operated by general holding companies.

On the 17th, the Korea Venture Business Association stated in a press release, "The role of CVC is crucial for expanding private venture capital investments, including industrial capital."

The association emphasized, "Compared to major foreign countries, the domestic CVC ecosystem is significantly lacking. Last year, the total venture investment executed by domestic CVCs was 1.9 trillion won, accounting for only 19% of the total, whereas in the United States and Japan, it was approximately 49.5% and 45.0%, respectively, nearing half of the total venture investment scale."

It added, "With the amendment and enforcement of the Fair Trade Act in December 2021 allowing general holding companies to establish and operate CVCs, a path was opened for revitalizing domestic venture investment. However, some regulations stipulated in the current Fair Trade Act still limit the expansion of CVC investments by general holding companies."

The association further stated, "To promote active venture fund formation and revitalize the contracted private venture investment, it is necessary to ease the restrictions on CVCs, such as the 40% limit on external capital contributions?which is excessive compared to venture capital (VC)?and the regulation limiting CVC investments in overseas companies to within 20% of total assets. Increasing the proportion of external capital contributions will not only expand fund size but also strengthen the monitoring function of external investors, leading independent CVCs to focus on the growth of startups for financial gains as much as on the strategic performance of parent companies. Additionally, this could partially resolve issues such as large corporations' technology theft from startups."

In May, the association conducted a survey among venture companies regarding legislative tasks for the 22nd National Assembly, and the companies identified easing CVC regulations as a bill that must be addressed.

The government also announced in its "Advanced Venture Investment Market Leap Plan" that it would ease regulations on external capital raising and overseas investments by general holding company CVCs, setting a goal to increase the CVC share in the domestic venture investment market to 30%.

The association said, "Our country's venture investment market heavily depends on policy finance, and there are limits to the inflow of private capital and market liquidity into the venture investment market." It added, "We hope that the swift passage of the amendment proposed by People Power Party lawmakers Kim Sang-hoon and Park Soo-min will promote the inflow of private venture capital and establish a core driving force for innovation and sustainable growth of ventures and startups amid rapidly changing environments."