Enforcement of Administrative Rule Amendments Including "Interpretation Guidelines on Regulations Related to Holding Companies"
Investments by corporate venture capital (CVC) owned by general holding companies in 'overseas startups' will become easier. Korean entrepreneurs who have founded overseas startups will be recognized as 'domestic companies' and thus able to receive more venture capital investments.
The Korea Fair Trade Commission (KFTC) announced that the "Interpretation Guidelines on Regulations Related to Holding Companies" and the "Procedures for Reporting the Establishment, Conversion, and Business Details of Holding Companies, etc." have been revised and will take effect from the 25th.
According to the amendment, 'overseas startups' under the Small and Medium Enterprise Startup Support Act have been excluded from the definition of 'foreign companies' under the Fair Trade Act.
This relaxes investment restrictions on overseas startups founded by Koreans, allowing general holding company CVCs to actively invest in domestic startups expanding abroad.
Currently, the Fair Trade Act restricts general holding company CVCs to invest in foreign companies only up to 20% of their total assets (including all capital contributions to investment associations under management) to encourage investments in domestic small and venture companies.
Previously, foreign companies subject to overseas investment regulations for general holding company CVCs were simply defined as 'companies and organizations established under foreign laws,' which meant overseas startups were also subject to these investment restrictions.
Under the Small and Medium Enterprise Startup Support Act, overseas startups are companies established within 7 years of business commencement where Korean nationals hold substantial control. They must have business connections with domestic corporations or employ regular workers at domestic business sites or offices.
Additionally, general holding company CVCs are now required to indicate whether investee companies are overseas startups in the investment details submitted to the KFTC, facilitating easier tracking of investments in overseas startups.
Meanwhile, following the amendment of the "Act on the Promotion of Venture Investment," the former name 'Small and Medium Enterprise Startup Investment Company' has been changed to 'Venture Investment Company,' and this updated name has been reflected in all relevant regulations and forms.
The KFTC expressed expectations that "through the implementation of this amendment, investment restrictions on overseas startups by general holding company CVCs will be lifted, invigorating the overseas expansion and investment attraction of domestic startups."
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