Venture Business Association "Deep Concern Over Passage of Commercial Act Amendment in National Assembly... Innovation Hindered"

"Consideration of Diverse Shareholder Interests Hinders Swift Decision-Making"
"Concerns That Key Corporate Activities Such as M&A May Be Restrained"
"Innovation Investment May Be Delayed Due to Management Stability Concerns"

The Korea Venture Business Association expressed deep concerns about the amendment to the Commercial Act that passed the National Assembly plenary session.

On the 14th, the Korea Venture Business Association issued a statement saying, "Despite opposition and concerns from the industry, this amendment was pushed through, and it is highly likely to have a negative impact on the management environment of venture companies."

It added, "Currently, our venture companies are facing more difficult circumstances than ever due to the contraction of the venture investment market, stagnation of the exit market, and intensified domestic and international economic uncertainties. In this crisis, the amendment to the Commercial Act, which expands the duty of loyalty of directors from the company to shareholders, raises concerns that it will significantly dampen the innovative growth momentum of venture companies."

The association viewed that this amendment could negatively affect the quick decision-making structure unique to venture companies.

The association stated, "Venture companies achieve growth through investment attraction at each growth stage, but due to this amendment, the burden of considering the interests of various shareholders will increase, making swift investment decisions difficult,” and “there is a high possibility that important corporate activities such as mergers and acquisitions (M&A) or capital raising will be restrained, which will also have a negative impact on the overall national economy."

It also pointed out, "Venture companies should lead innovation through challenging research and development (R&D), but with this amendment, short-term shareholder dividends or management stability may be prioritized, pushing innovation investment to the back burner."

The venture business sector said, "We agree on the necessity of protecting shareholder rights," but added, "More in-depth discussions are needed to ensure that the amendment to the Commercial Act does not undermine the challenges and innovations of venture companies in the global market." It also requested additional review and supplementary discussions from the National Assembly and related institutions.

The association concluded, "We will do our best to overcome the current economic crisis and strengthen global competitiveness," and expressed hope that "institutional support will be established so that venture companies can continue to grow and innovate."