[Startup Must-Read Law] Amendment to the Venture Investment Act Enforcement Decree: New Opportunities for Investors

Five Key Changes in the Venture Investment Act
Company Builder Model Institutionalized
Greater Autonomy for Startup Planners, Startups, and VCs
Regulatory Easing Expected to Drive Qualitative Growth

Heecheol Ahn Attorney

The amendment to the Enforcement Decree of the Venture Investment Act in August 2025 focuses on revitalizing the venture investment ecosystem by easing regulations and expanding the autonomy of investment entities. There are five key changes.

First, company building by startup planners (accelerators) has been effectively permitted. Previously, investments for management control were only allowed in early-stage startups that had been directly selected and nurtured. Now, joint establishment of subsidiaries with prospective entrepreneurs is also allowed. This incorporates the 'company builder' model-which supports the entire process from planning and team formation to capital and infrastructure input during the startup preparation stage-into the regulatory framework. This is significant as it establishes a strategic platform to increase the success rate of high-risk, high-technology startups. However, the requirements for startup planners to hold subsidiary shares for six months and to sell them within seven years remain in place.

Second, registration and operation requirements for venture investors and funds have been relaxed. The investment performance requirement for professional individual investors has been lowered from "at least 100 million KRW over the past three years" to "at least 50 million KRW," which is expected to broaden the base for individual angel investments. In addition, both individual investment associations and venture investment associations can now make direct investments in U.S. dollars (USD), reducing the need for currency exchange and mitigating foreign exchange risk. The minimum size for private venture fund-of-funds has been reduced by half, from 100 billion KRW to 50 billion KRW, and the minimum initial capital contribution has also been halved from 20 billion KRW to 10 billion KRW. The method for counting the number of association members has been revised so that the fund-of-funds itself is counted as a single investor, which is expected to facilitate fund-of-funds investments.

Third, ex post facto and unintentional conduct restrictions have been eased. The obligation to sell shares within five years when a portfolio company is incorporated into a business group subject to cross-shareholding restrictions has been abolished. Additionally, if a financial company’s shares are acquired unintentionally, a nine-month grace period for disposal is now granted.

Fourth, regulations related to mergers and acquisitions (M&A) by venture capital (VC) and venture funds have been improved. When calculating the mandatory investment ratio for secondary funds, loan and credit provision amounts are now included, making the requirements more realistic. Venture investment companies are now temporarily allowed to acquire shares of new technology business finance companies. In addition, if non-business real estate is acquired or shares of a business group subject to cross-shareholding restrictions are held during a merger, grace periods of one year and nine months, respectively, are granted for compliance, reducing the burden of pursuing M&A. This is expected to stimulate the exit market and promote the scaling up of VCs.

Fifth, the scope of mandatory investment for secondary funds has been clearly defined to include shares in limited companies and limited liability companies, as well as the acquisition of Simple Agreement for Future Equity (SAFE) and convertible bonds. For investments by culture industry specialist companies, the permitted and prohibited scope has been clarified according to whether the target belongs to the same business group subject to cross-shareholding restrictions.

This amendment to the Enforcement Decree of the Venture Investment Act provides greater autonomy and more options for key players in the venture ecosystem-including startup planners, startups, and VCs. In particular, the legalization of the company builder model is expected to drive qualitative advancement in the startup ecosystem.